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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 1997 <br />All Proprietary Funds are accounted for on a flow of economic resources measurement focus. This <br />means that all assets and all liabilities (whether current or noncurrent) associated with this activity are <br />included on their balance sheets. Their reported fund equity (net total assets) is segregated into <br />contributed capital and retained earnings components. Proprietary fund type operating statements <br />present increases (revenues) and decreases (expenses) in net total assets. <br />The modified accrual basis of accounting is followed by the City for its Governmental Funds and <br />Fiduciary Funds. Under this method of accounting, revenues are recognized when they become <br />susceptible to accrual - that is, when they become both measurable and available to fmance <br />expenditures of the fiscal period. "Measurable" means the amount of the transaction can be <br />determined and "available" means collectible within the current period or soon enough thereafter to be <br />used to pay liabilities of the current period. Major revenue sources susceptible to accrual include <br />property taxes (excluding delinquent taxes received over 60 days after year end), special assessments, <br />intergovernmental revenues, charges for services and interest on investments. Major revenue sources <br />not susceptible to accrual include licenses and permits, fees, and miscellaneous revenues. Such <br />revenues are recorded as revenue when received because they are not measurable until collected. <br />Expenditures are generally recognized in the accounting period when the fund liability is incurred, <br />except for interest on general long -term debt which is recognized when due. <br />The accrual basis of accounting is followed for the Proprietary Funds. Under this method of <br />accounting, revenues are recognized during the accounting period in which they are earned and <br />become measurable and expenses are recognized in the accounting period in which they are incurred if <br />measurable. Governmental Accounting Standards Board (GASB) Statement #20, Accounting and <br />Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary <br />Funds, provides proprietary activities with a choice of authoritative guidance issued after November <br />30, 1989. The City of Lino Lakes has elected to follow GASB pronouncements exclusively after that <br />date. <br />The City reports deferred revenue on its combined balance sheet. Deferred revenues arise when a <br />potential revenue does not meet both the "measurable" and "available" criteria for recognition in the <br />current period. Deferred revenues also arise when resources are received by the government before it <br />has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying <br />expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the <br />government has a legal claim to the resources, the liability for deferred revenue is removed from the <br />combined balance sheet and revenue is recognized. <br />The City has reported as deferred revenues the amount of $5,544,900, which consists of the following: <br />Oakwilt Suppression/PERA Aid $5,880 <br />Property taxes receivable 35,323 <br />Special assessments receivable 5,503,697 <br />Total $5,544,900 <br />Iwo <br />IIMOV <br />33 <br />