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CITY OF LITTLE CANADA, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2015 <br /> <br /> <br /> <br />(38) <br /> <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />C. Government-Wide and Fund Financial Statements <br />The government-wide financial statements (statement of net position and statement of <br />activities) display information about the reporting government as a whole. These <br />statements include all of the financial activities of the City, except fiduciary funds. Since, <br />by definition, fiduciary fund assets are held for the benefit of a third party and cannot be <br />used for activities or obligations of the City, these funds are excluded from the <br />government-wide financial statements. Governmental activities, which normally are <br />supported by taxes and intergovernmental revenues, are reported separately from <br />business-type activities, which rely to a significant extent on sales, fees, and charges for <br />support. <br /> <br />The statement of activities demonstrates the degree to which the direct expenses of a <br />given function or segment is offset by program revenues. Direct expenses are those that <br />are clearly identifiable with a specific function or segment. Program revenues include: <br />1) charges to customers or applicants who purchase, use, or directly benefit from goods, <br />services, or privileges provided by a given function or segment, 2) operating grants and <br />contributions, and 3) capital grants and contributions, including special assessments that <br />are restricted to meeting the operational or capital requirements of a particular function <br />or segment. Taxes and other internally directed revenues are reported as general <br />revenues. <br /> <br />The government-wide financial statements are reported using the economic resources <br />measurement focus and the accrual basis of accounting. Revenues are recorded when <br />earned and expenses are recorded when a liability is incurred, regardless of the timing <br />of related cash flows. Property taxes and special assessments are recognized as <br />revenues in the fiscal year for which they are levied. Grants and similar items are <br />recognized when all eligibility requirements imposed by the provider have been met. <br /> <br />As a general rule, the effect of interfund activity has been eliminated from the <br />government-wide financial statements. However, charges between the City's enterprise <br />funds and other functions are not eliminated, as that would distort the direct costs and <br />program revenues reported in those functions. The City applies restricted resources first <br />when an expense is incurred for which both restricted and unrestricted resources are <br />available. Depreciation expense can be specifically identified by function (see Note 4). <br />Interest on long-term debt is considered an indirect expense and is reported separately <br />on the statement of activities.