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. Note 1: . . CITY OF ARDEN HILLS, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31 2005 SUMMARY OF SIGNIFICANT ACCOUNTING POLIC S - CONTINUED c. M~=,_' '"'0' B,.;o"' 'tt.O"", m' -"",-, ft' F I The government-WIde fmanclaJ statements are reported ul 0 rc easureme ""-us d the accrual basis of accounting, as are the proprietary fund t:d=~~ fmanciaJ statements, Revenues lre recorded when earned and expenses are recorded when a. ill. __". .ed.~rp.o-51r-dJess"ofjhF Jimim:r "of.r..e1lted cash flov.rs. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible vritbin the elUTent period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the cmrent fiscal period, Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However) debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses and interest associated 'With the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due 'Within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the year in which the resources are measurable and become available. Non-exchange transactions, in which the City receives value without directly giving equal value in return, include property taxes, grants, entitlement and donations. On an accrual basis, revenue from property taxes is recognized in the year for which the tax 1S levied. Revenue from grants, entitlements and donations is recognized in the year in wIllch all eligibility requirements have been satisfied, Eligibility requirements include timing requirements, wIllch specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as deferred revenue. On the modified accrual basis, receivables that will not be collected within the available period have also been reported as deferred revenue in the fund financial statements. The preparation offmancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures, Accordingly, actual results could differ from those estimates, -24-