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<br />NOTE 1. <br /> <br />NORTH METRO TELECOMMUNICATIONS COMMISSION <br />NOTES TO FINANCIAL STATEMENTS <br /> <br />NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES <br /> <br />Nature of Activities: <br /> <br />The general purpose of North Metro Telecommunications Commission (the Commission) <br />is to administer and enforce a cable communications franchise in member municipalities <br />located in the North Central region of the Twin Cities in Minnesota. The Commission <br />also administers and operates the cable television access functions of the franchise. <br /> <br />Basis of Presentation: <br /> <br />The Commission has adopted Governmental Accounting Standards Board Statement No. <br />29, The Use of Not-for-Profit Accounting and Reporting Principles by Governmental <br />Entities. As sqch, the financial statements are presented on the basis of net assets rather <br />than fund balances or account groups. Also, long-term obligation accruals are included <br />in the net asset accounts and fixed assets are subject to depreCiation provisions. Current <br />operations reflect depreciation and amortization amounts for the years ended December <br />31,2003 and 2002, of$143,313 and $131,574, respectively. <br /> <br />Revenue and Expense Recognition: <br /> <br />The Commission reports gifts of cash and other assets as restricted support if they are <br />received with donor stipulations that limit the use of the donated assets. When a donor <br />restriction expires, temporarily restricted net assets are reclassified to unrestricted net <br />assets and reported in the statement of activities as net assets released from restrictions. <br />Donor restricted contributions whose restrictions are met in the same reporting period are <br />reported as unrestricted support. <br /> <br />Commission revenue consists primarily of contributions from member municipalities as <br />determined according to the joint powers agreement and public educational and <br />governmental access fees (pEG fees). Franchise fees are assessed to the cable operator <br />during the year end and are recognized as revenues in the following year. PEG fees are <br />based on a negotiated contract with the cable operator and are recognized as revenues in <br />the year concurrent with the contract. <br /> <br />Expenses are recorded when incurred in accordance with the accrual basis of accounting. <br /> <br />Income Tax Status: <br /> <br />The Commission, being established by the joint powers agreement, is considered a <br />govemnlental entity and as such is exempt from state and federal income taxes. <br /> <br />6 <br />