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CITY OF LITTLE CANADA, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2017 <br /> <br /> <br /> <br />(54) <br />NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) <br />C. Investments (Continued) <br />Fair Value Measurements <br />The City uses fair value measurements to record fair value adjustments to certain asset and <br />liabilities and to determine fair value disclosures. <br /> <br />The City follows an accounting standard which defines fair value, establishes framework for <br />measuring fair value, establishes a fair value hierarchy based on the quality of inputs used <br />to measure fair value, and requires expanded disclosures about fair value measurements. In <br />accordance with this standard, the City has categorized its investments, based on the <br />priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair <br />value hierarchy gives the highest priority to quotes and prices in active markets for identical <br />assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the <br />inputs used to measure the financial instruments fall within different levels of the hierarchy, <br />the categorization is based on the lowest level input that is significant to the fair value <br />measurement of the instrument. <br /> <br />Financial assets and liabilities recorded on the combined statements of financial position are <br />categorized based on the inputs to the valuation techniques as follows: <br /> <br />Level 1 – Financial assets and liabilities are valued using inputs that are unadjusted quoted <br />prices in active markets accessible at the measurement date of identical financial assets <br />and liabilities. <br /> <br />Level 2 – Financial assets and liabilities are valued based on quoted prices for similar <br />assets or inputs that are observable, either directly or indirectly, for substantially the full term <br />through corroboration with observable market data. <br /> <br />Level 3 – Financial assets and liabilities are valued using pricing inputs which are <br />unobservable for the asset, inputs that reflect the reporting entity’s own assumptions about <br />the assumptions market participants would use in pricing the asset. <br /> <br />Investment Type Level 1 Level 2 Level 3 Total <br />Negotiable Certificates of Deposit with Maturities at Purchase <br />of Greater Than 1 Year 4,067,668$ -$ -$ 4,067,668$ <br />Federal Home Loan Mortgage Corporation 2,225,936 - - 2,225,936 <br />Municipal Bonds - 2,034,313 - 2,034,313 <br />Total Investments Measured at Fair Value 6,293,604$ 2,034,313$ -$ 8,327,917 <br />Investments Measured at Amortized Cost 6,485,045 <br />Total Investments 14,812,962$ <br />