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CITY OF FALCON HEIGHTS, MINNESOTA <br />NOTES TO THE FINANCL~L STATEMENTS • <br />For the Year Ended December 31, 2003 <br />NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br />D. Assets, Liabilities and Net Assets or Equity (Continued) <br />4. Capital Assets (Continued) <br />Property, plant and equipment of the City is depreciated using the straight line method <br />over the following estimated useful lives: <br />Assets Years <br />Buildings 40 <br />Park Buildings 30 <br />Building Improvements 15 <br />Furniture and Equipment S <br />Light Vehicles 5 <br />Machinery and Equipment 5-7 <br />Fire Trucks 20 <br />Utility Distribution System 50 <br />Th <br />Ci • <br />e <br />ty uses the modified approach in accounting for its Street and Alley Infrastructure <br />assets. Under this method, depreciation expense is not recognized. A pavement condition <br />policy has been established and all costs of maintaining the assets at this level are expensed. <br />5. Compensated Absences <br />City employees earn vacation time based on years of City service with a maximum at <br />twice their annual vacation leave. At least one week of vacation must be used per calendar <br />year. Upon termination, employees will receive compensation for unused vacation time. <br />Sick leave is accumulated for all regular full-time employees at the rate of one day per <br />calendar month to a maximum of 120 days. The City compensates employees who leave <br />municipal service at the rate of 50% of unused leave. Vacation and sick leave benefits are <br />recorded as expenditures in governmental funds when the obligations are expected to be <br />liquidated with expendable financial resources. Vacation and sick benefits are recorded as <br />expenses in proprietary funds when earned. <br />6. Long-term Obligations <br />In the government-wide financial statements, and proprietary fund types in the fluid <br />financial statements, long-term debt and other long-term obligations are reported as <br />liabilities in the applicable governmental activities, business-type activities, or proprietary <br />fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, <br />are deferred and amortized over the life of the bonds using the effective interest method. <br />Bonds payable are reported net of the applicable bond premium or discount. Bond issuance • <br />costs are reported as deferred charges and amortized over the term of the related debt. <br />49 <br />