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Wm Imo <br />CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 1998 <br />Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (_CONTINUED) <br />K INVENTORIES <br />The original cost of materials and supplies has been recorded as expenditures/expenses at the time of <br />purchase of both the Governmental and Proprietary Funds. These funds do not maintain material <br />amounts of materials and supplies. <br />L. LAND HELD FOR RESALE <br />These assets are recorded in the governmental fund which purchased them at the lower of cost or <br />market. <br />M. 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 -50 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 <br />sewage collection system. These systems have been wholly (or substantially) financed by non- <br />operating funds (special assessments, general taxes, federal and state grants, and other sources) and <br />contributed to the sewer and water operating funds. City policy is to finance these assets by the <br />sources indicated rather than by user charges. Accordingly, the water and sewer user rates are not <br />established at levels 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 <br />with generally accepted accounting principles. Consequently, the contribution account reflects the net <br />book value of contributed assets rather than the original cost of such assets. <br />39 <br />