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.0Ie1: . . CITY OF ARDEN HILLS, MINf-,lJiSOT A NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31 2005 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED C. Measurement Focus, Basis of Accounting and Financt S~te~enRla ' F I" The government-wide [mancial statements are reported ln ~nomic f~rc '1l1camr-emen oem a d the accrual basis of accounting, as are the proprietary fund J..d fiduciary flUld fmancial statements. Revenues Ire recorded when earned and expenses are recorded when a kabililM.,isdncmre<LJ~.ar<lies""'LthpJi'lli!>g,",f-IeThted cash flows. 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 aTe reported using the curren! financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they arc both measurable and available. Revenues are cOl4">ldered to be available when they are collectible vvithin the current 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 current 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 nment 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 v.ritbin the current fiscal period is considered to be susceptible to accrual as revenue of the current period. A]] 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 essentialJy equal value, is recorded on the accrual bas-is 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 tl-:::e year for \'vmch the tax is k\li.~d. Revenue from gr3..,.'115, entitlements ano donations is reeognizcd in the year in whkh all eligibility requirements bave been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources aTe 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 expendimre requircments, in which the resources are provided to the City on a reimbursement basis. On a modified accmal basis, revenue from non-exchange transactions must also be available before it can be Tecognized. Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements reccived before eligibility requirements are met are also recorded as deferred revenue. On the modified accrual basis, receivables that .will not be co1Jccted \vitmn the avallable period have also been rep0l1ed as deferred revenue :in the fund financial statements. The preparation offmancial statements in confonnlty Vlrith accounting principles generally accepted in the United States of A.merica requ.ires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. -24-