Agenda - Council Work Session - 06/10/2025

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NOTE 1— SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. Compensated Absences Payable The City recognizes a liability for compensated absences for leave time that (1) has been earned for services previously rendered by employees, (2) accumulates and is allowed to be carried over to subsequent years, and (3) is more likely than not to be used as time off or paid in cash to the employee or payment to a health care savings account during or upon separation from employment. Based on the criteria listed, three types of leave qualify for liability recognition for compensated absences — compensatory time, vacation and sick leave. The liability for compensated absences is reported as incurred in the government -wide financial statements. The liability for compensated absences includes salary -related benefits, where applicable. Compensatory Time The City's personnel policy and union contracts permits employees to accumulate earned but unused compensatory time, which are eligible for payment at the employee's current pay rate upon separation from employment. Vacation The City's personnel policy permits employees to accumulate earned but unused vacation time, which are eligible for payment at the employee's current pay rate upon separation from employment. Sick The City's personnel policy permits employees to accumulate earned but unused sick leave. A minimum of one third of unused sick leave (based on longevity), is paid to the departing employee if they have completed 5 or more years of service prior to separation. A liability for estimated value of sick leave that will be used by employees as time off is included in the liability for compensated absences. 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 as they accrue. Bond premiums and discounts that are material are amortized over the life of the bond issue. Bond issuance costs are expensed in the period incurred. 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, proprietary fund, and fiduciary 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. 68