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CITY OF ARDEN HILLS, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 n Interfund Receivables and Payables .w n Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Activity between fimds that are representative oflending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other fimds" (i.e., the current portion ofinterfimd loans) or "advances to/from other fimds" (i.e" the non-current portion ofinterfimd loans). All other outstanding balances between fimds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities aod business-type activities are reported in the government-wide financial statements as "internal balances." n Advances between fimds, as reported in the fund fmancial statements, are offset by a fimd balance reserve account in applicable governmental fimds to indicate that they are not available for appropriation aod are not expendable available fmancial resources. n o Inventories and Prepaid Items o All inventories are stated at the lower of cost or market on the first-in, frrst -out (FIFO) method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both goverrunent-wide and fimd fmancial statements. n Capital Assets fJI Capital assets, which include property, plant, equipment and infrastructure assets (e,g" roads, bridges, sidewalks, and l similar items) are, reported in the applicable governmental or business-type activities columns in the goverrunent- wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more mel $5,000 (amount not rounded) aod an estimated useful life in excess of one year. Such assets are recorded at ~ I historical cost or estinaated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. [l Major outlays fOT capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. II Property, plant and equipment are depreciated in the proprietary fimds of the City using the straight-line method over f] the following estimated useful lives: Assets Useful Lives in Years l: Buildings and improvements Infrastructure and improvements Machinery and equipment Office furniture and equipment Vehicles 7 -40 15 - 50 5 -15 5 - 10 7 -20 fl U fl II I' ee, ! l ~ -22-