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i CITY OF ST. ANTHONY MINNESOTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1978 Note 1 - Summary of Significant Accounting Policies (Continued) Inventories - Inventories held by the proprietary funds (Liquor and Public Utility funds) are stated at cost based on the first -in, first -out valuation method, which is lower than market. The only other items of inventory would be a small quantity of supplies which are expensed as purchased. 45 Property, plant and equipment - The property, plant and equipment of the proprietary funds (Liquor and Public Utility funds) are stated at cost. Depreciation has been provided using the straight-line method over the estimated useful lives of the assets. The depreciation on Public Utility Fund property, plant and equipment which was financed by special assessments, grants and contributions is charged to current income but then redistributed as a charge to the contributions in aid to construction account. Budget - A plan of financial operation is set forth in the annual budget adopted by the City Council. The amounts shown in the financial statements represent the original budgeted amount and all revisions made during the year. Note 2 - General Fixed Assets General fixed assets owned by the City are not included in the financial statements since records thereof are not maintained. Generally accepted accounting principles require their inclusion in the financial statements. Note.3 - Contributions A substantial portion of the property, plant and equipment in the Public Utility Fund was acquired by contribution. When such assets are acquired they are credited to the contribution account and depreciation on contributed assets is charged to this account through the distribution of net income. The rates charged by the fund are not intended to generate sufficient revenue to recover the depreciation on contri- buted assets, and the replacement of these assets is expected to be financed primarily by future contributions. Note 4 - Metropolitan Waste Control Commission Under the terms of an agreement with the Metropolitan Waste Control Commission, the City will be repaid the reserve capacity charges advanced to the Commission in annual installments including interest through 1988. These advances were charged against net income of prior years and the repayment will be reflected as income when received. Another receivable and the corresponding deferred gain of the Public Utility Fund from the Metropolitan Waste Control Commission represents the City's share of equity in the City's sewer system which was acquired by the Commission January 1, 1971. i-. This receivable will be paid to the City by issuing credits annually through 1999, against future disposal charges from the Commission. These credits will be reflected in the statement of income as received.