5.2. SR 06-19-2006 - Laserfiche WebLink

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ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FrnANCIAL STATEMENTS DECEMBER 31, 2005 AND 2004 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PLAN ASSET MATTERS A. Measurement Focus, Basis of Accounting and Basis of Presentation The fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. B. Description of Fund The resources of the Association are accounted for in one fund. Each fund is accounted for as an independent entity. Descriptions of the funds included in this report are: The Fiduciary fund accounts for assets held by the Association in a trustee capacity for its members. The fund is a special pension trust fund for the accumulation of resources to be used for retirement, dependency and disability annuity payments of appropriate amounts and at appropriate times in the future. Resources are contributed by the City at amounts determined by law (taxes), and from the two-percent insurance premium tax and amortization aid from the State of Minnesota (the State). C. Comparative Data Comparative data for the prior year have been presented in the accompanying financial statements to provide an understanding of changes in the Association's financial position and operations. Note 3: DETAILED NOTES ON ACCOUNTS Deposits and Investments Deposits Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Association's deposits may not be returned or the Association will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the Board of Trustees, the Association maintains deposits at those depository banks which are members of the Federal Reserve System. Minnesota statutes require that all Association deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 11 0 percent of the deposits not covered by insurance or bonds (140 percent in the case of mortgage notes pledged). Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and certain other State or local government obligations. Minnesota statutes require that securities pledged as collateral be held in safekeeping by the Association or in a financial institution other than that furnishing the collateral. -5-