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NOTE 1— SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 teiniination. Compensated absences payable are accounted for as long-teini liabilities as described in the following section. P. Long -Term Liabilities In the government -wide and Proprietary Fund financial statements, long-teini debt and other long-teini obligations are reported as liabilities. Bond premiums and discounts are immaterial and are recognized in the year of bond issuance. Bond issuance costs are expensed in the period incurred. In the Governmental Fund financial statements, long-teini debt and other long-teini 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. R. Fund Balance Classifications In the fund financial statements, governmental funds report fund balance in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: • Nonspendable — Consists of amounts that are not in spendable form, such as prepaid items, inventory, and other long-term assets. • Restricted — Consists of amounts where there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments, or enabling legislation. 68