7.5. SR 06-04-2007 - Laserfiche WebLink

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CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Accounts Receivable Accounts receivable include amounts billed for services provided before year end. Accounts receivable include amounts billed for services provided before year end. It is the City’s policy to charge uncollectibles directly to operations as accounts become worthless. No substantial losses from present receivable balances are anticipated. Special Assessments Special assessments receivable include the following components: Delinquent - includes amounts billed to property owners but not paid. Deferred - includes assessment installments that will be billed to property owners in future years. Special assessments in the fund financial statements are recognized as receivable and deferred revenue when the levy against the benefited property is adopted by the City Council and certified to the County for collection. Deferred revenue for governmental activities is susceptible to full accrual on the government-wide statements. Notes Receivable The City received grant proceeds from the State of Minnesota to fund economic development projects. These funds have been loaned to several businesses and the terms of repayment vary with each loan. Under terms of the grant agreement, a portion of the original grant will be returned to the State of Minnesota and is reported as a due to other governments liability. The portion of the notes receivable loaned to businesses is offset by deferred revenue. Deferred revenue in governmental activities is susceptible to full accrual on the government-wide statements. 3. Inventories and Prepaid Items For proprietary funds, inventories are valued at cost, which approximates market, based on physical counts. Inventories are recorded as an expense when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Restricted Assets The amounts in the restricted cash account are set aside in accordance with the issuing resolution for specific bond issues. They will be used for future debt service. 5. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government- wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Donated capital assets are recorded at estimated fair market value at the date of donation. With the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities), the City chose to include all such items regardless of their acquisition date. The City was able to obtain historical costs for the initial reporting of these assets through public works project records. Major expenditures for improvements or capital asset projects are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, net of interest earned on the invested proceeds over the same period. 39