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CITY OF LAKE ELMO, MINNESOTA <br />NOTES TO THE BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2023 <br /> <br /> <br />40 <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br /> <br />1.B. BASIS OF PRESENTATION (Continued) <br /> <br />The City reports the following nonmajor governmental fund types: <br /> <br />The Special Revenue Funds account for funds received by the City with a specific purpose. <br /> <br />The Capital Project Funds account for financial resources to be used for the acquisition or construction of capital <br />projects (other than those financed by proprietary funds). <br /> <br />1.C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING <br /> <br />Measurement focus is a term used to describe “which” transactions are recorded within the various financial statements. Basis <br />of accounting refers to “when” transactions are recorded regardless of the measurement focus applied. <br /> <br />Measurement Focus <br /> <br />On the government-wide Statement of Net Position and the Statement of Activities, both governmental and business-type <br />activities are presented using the economic resources measurement focus as defined in the second bullet point below. In the <br />fund financial statements, the current financial resources measurement focus or the economic resources measurement focus is <br />used as appropriate: <br /> <br />• All governmental funds utilize a current financial resources measurement focus. Only current financial assets and <br />liabilities are generally included on their balance sheets. Their operating statements present sources and uses of <br />available financial resources during a given period. These funds use fund balance as their measure of available <br />financial resources at the end of the period. <br /> <br />• The government-wide financial statements and proprietary funds utilize an economic resources measurement focus. <br />The accounting objectives of this measurement focus are the determination of operating income, changes in net <br />position (or cost recovery), financial position, and cash flows. All assets, deferred outflows, liabilities, and deferred <br />inflows (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is <br />classified as net position. <br /> <br />Basis of Accounting <br /> <br />In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-type activities <br />are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when <br />earned and expenses are recorded when the liability is incurred, or economic asset used. Revenues, expenses, gains, losses, <br />assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. <br /> <br />In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this <br />modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing <br />or being able to reasonably estimate the amount. Available means collectible within the current period or within sixty days <br />after year end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general <br />obligation bond principal and interest which are reported when due. <br /> <br />All proprietary funds utilize the accrual basis of accounting.