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 Property, plant, and equipment of the City, as well as the component units, are depreciated using the straight line method over the following estimated useful lives: Assets Years Buildings and improvements 10 - 40 Other park improvements 10 - 20 Machinery and equipment 3 - 20 Public domain infrastructure 15 - 50 System infrastructure 4 - 50 6. Compensated Absences It is the government’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Unused vacation can be accrued by the employees up to a maximum of 240 hours, the limit of which is determined by years of service. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Employees can also accrue an unlimited amount of unused sick leave. Employees with five or more years of service are entitled to receive severance pay equal to a percentage of unused sick pay ranging from 15-25 percent based on years of service, up to a maximum of 240 hours. The liability for severance pay is accounted for the same as accrued vacation pay. 7. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 8. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 9. Net Assets In the government-wide financial statements, net assets represent the difference between assets and liabilities. Net assets are displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets, net of accumulated depreciation reduced by and outstanding debt attributable to acquire capital assets. b. Restricted net assets - Consist of net assets restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments. 40