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Vmw <br />Ilmow <br />Mawr <br />CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 1995 <br />L. FIXED ASSETS <br />GENERAL FIXED ASSETS <br />General fixed assets are recorded as expenditures of the Governmental Funds at the time of purchase. <br />Such assets are capitalized at historical cost or estimated historical cost in the General Fixed Asset <br />Account Group. Public Domain ( "infrastructure ") general fixed assets consisting of roads, bridges, <br />curbs, gutters, streets, sidewalks, drainage systems and lighting systems are excluded from general <br />fixed assets as these assets are immovable and of value only to the City. Gifts or contributions are <br />recorded in general fixed assets at fair market value at the time received. No depreciation has been <br />provided on general fixed assets. <br />PROPRIETARY FUNDS <br />Fixed assets of the Proprietary Funds are stated at historical cost, estimated historical cost, or in the <br />case of contributions, at fair market value at the time received. Depreciation has been provided using <br />the straight -line method over the estimated useful lives of assets, as follows: <br />Purchased assets: <br />Water 5 - 50 years <br />Sewer 5 - 25 years <br />Contributed assets: <br />Water 20 - 50 years <br />Sewer 20 - 50 years <br />Fixed assets of the water and sewer utility operations include the water distribution system and sewage <br />collection system. These systems have been wholly (or substantially) financed by non - operating funds <br />(special assessments, general taxes, federal and state grants, and other sources) and contributed to the <br />sewer and water operating funds. City policy is to finance these assets by the sources indicated rather <br />than by user charges. Accordingly, the water and sewer user rates are not established at levels <br />sufficient to cover depreciation on these assets. <br />Depreciation on these assets is shown in the operating statements; however, the depreciation is <br />eventually transferred against the contribution account rather than retained earnings in accordance with <br />generally accepted accounting principles. Consequently, the contribution account reflects the net book <br />value of contributed assets rather than the original cost of such assets. <br />M. COMPENSATED ABSENCES <br />It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay <br />benefits. Amounts that are expected to be liquidated with expendable available financial resources is <br />reported as an expenditure and a fund liability of the governmental fund that will pay it. Amounts that <br />are not expected to be liquidated with expendable available financial resources are reported in the <br />General Long -Term Debt Account Group. No expenditure is reported for these amounts. An unpaid <br />vacation and severance pay is payable when used or upon termination of employment. In accordance <br />with the provisions of Statement of Government Accounting Standards No. 16, Accounting for <br />Compensated Absences, no liability is recorded for nonvesting accumulating rights to receive sick pay <br />benefits. Sick leave is payable when used and in some cases upon termination of employment. For <br />several employees, sick leave is payable upon retirement or termination in accordance with the terms <br />of their employment contracts. The remaining sick leave amounts are not recorded as liabilities <br />because payment is not probable. <br />33 <br />