Agenda - Council Work Session - 06/28/2016

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NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital assets are recorded in the government-wide and Proprietary Fund financial statements,but are not reported in the Governmental Fund financial statements. Interest incurred during the construction phase of capital assets for business-type activities is included as part of the capitalized value of the assets constructed. Capital assets are depreciated using the straight-line method over their estimated useful lives. Land and construction in progress are not depreciated. Useful lives vary from 15 to 50 years for buildings and improvements, 5 to 10 years for machinery,vehicles,and equipment,and 20 to 50 years for collection and distribution systems and other infrastructure. O. Compensated Absences Payable Certain city employees earn personal time off,vacation,compensation time,and sick leave at various rates based on longevity. These compensated absences are paid to an employee leaving in good standing,at their current rate of pay,with the exception of sick leave. A minimum of one third(based on longevity),is paid to the departing employee if they have completed 5 or more years of service prior to termination. Compensated absences payable are accounted for as long-term liabilities as described in the following section. P. Long-Term Liabilities In the government-wide and Proprietary Fund financial statements, long-term debt and other long-term obligations are reported as liabilities. If they are material,bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. In the Governmental Fund financial statements, long-term debt and other long-term obligations are not reported as liabilities until due. The face amount of debt issued is reported as other financing sources. Premiums or discounts on debt issuances are reported as other financing sources or uses,respectively. Q. Net Position In the government-wide and proprietary fund financial statements,net position represents the difference between assets,liabilities,deferred inflows/outflows as applicable. Net position is displayed in three components: • Net Investment in Capital Assets—Consists of capital assets,net of accumulated depreciation,reduced by any outstanding debt attributable to acquire capital assets. • Restricted Net Position—Consists of net position restricted when there are limitations imposed on their use through external restrictions imposed by creditors,grantors,or laws or regulations of other governments, or enabling legislation. • Unrestricted Net Position—All remaining net position that do not meet the definition of"restricted" or "net investment in capital assets." The City applies restricted resources first when an expense is incurred for which both restricted and unrestricted resources are available. 67