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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2009 <br />Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />M. COMPENSATED ABSENCES <br />It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. <br />All vacation pay and the portion of sick pay allowable as severance pay is accrued as incurred in the <br />government -wide and proprietary fund financial statements. The current portion is calculated based on <br />historical trends. <br />N. LONG -TERM OBLIGATIONS <br />In the entity-wide financial statements, long -term debt and other long -term obligations are reported as <br />liabilities in the applicable governmental activities. Bond premiums and discounts are deferred and <br />amortized over the life of the bonds using the straight -line method. Bond issue costs, if material, are <br />amortized over the term of the related debt using the straight -line method. <br />In the governmental fund financial statements, bond premiums and discounts, as well as bond issue costs <br />are recognized during the current period. The face amount of the debt issue is reported as other financing <br />sources. Premiums received on debt issuances are reported as other financing sources while discounts are <br />reported as other financing uses. Issue costs are reported as debt service expenditures. <br />O. FUND EQUITY <br />In the governmental fund financial statements, reservations of fund balance represent those portions of <br />fund equity not appropriable for expenditure or legally restricted by outside parties for use for a specific <br />purpose. Designated fund balances represent tentative plans for future use of financial resources that are <br />subject to change. <br />P. INTERFUND TRANSACTIONS <br />Interfund services provided and used are accounted for as revenues, expenditures or expenses. <br />Transactions that constitute reimbursements to a fund for expenditures /expenses initially made from it that <br />are properly applicable to another fund, are recorded as expenditures /expenses in the reimbursing fund and <br />as reductions of expenditures or expenses in the fund that is reimbursed. All other interfund transactions <br />are reported as transfers. <br />All Interfund transactions are eliminated except for activity between governmental activities and business - <br />type activities for presentation in the entity-wide statements of net assets and statements of activities. <br />41 <br />