VLAWMO Annual Financial Report 2007

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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION VADNAIS HEIGHTS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2007 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Capital Assets Capital assets, which include property, plant and equipment, are reported in the applicable governmental activities cobimns in the government -wide financial statements. Capital assets are defined by the Organization as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. Property, plant, and equipment of the Organization are depreciated using the straight-line method over the following estimated useful lives: Assets Infrastructure Compensated Absences Useful Lives in Years 20-30 It is the Organization's policy to permit employees to accumulate earned but unused vacation and sick benefits, which will be paid to the employee upon separation without the considerations of number of years of service. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Fund Equity Designations of fund balance represent tentative management plans that are subject to change. Net Assets Net assets represent the difference between assets and liabilities. Net assets are displayed in three components: a. Invested in capital assets - Consists of capital assets, net of accumulated depreciation. b. Unrestricted net assets - All other net assets that do not meet the definition of "invested in capital assets". c. Unrestricted net assets — All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." Comparative Data/Reclassifications Comparative total data for the prior year has been presented for the fund financial statements in order to provide an understanding of the change in financial position. Certain amounts presented in prior year data have been reclassified in order to be consistent with the current year's presentation. -13-