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CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2014 <br /> <br /> <br /> <br />(15) <br /> <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br />The financial statements of the City of Gem Lake (the City), Minnesota have been prepared <br />in conformity with U.S. generally accepted accounting principles as applied to governmental <br />units by the Governmental Accounting Standards Board (GASB). The following is a <br />summary of the significant accounting policies. <br /> <br />A. Financial Reporting Entity <br /> <br />As required by U.S. generally accepted accounting principles, the financial statements of <br />the reporting entity include those of the City of Gem Lake and its component units. A <br />component unit is a legally separate entity for which the primary government is <br />financially accountable, or for which the exclusion of the component unit would render <br />the financial statements of the primary government misleading. The criteria used to <br />determine if the primary government is financially accountable for a component include <br />whether or not the primary government appoints the voting majority of the potential <br />component unit’s board, is able to impose its will on the potential component unit, is in a <br />relationship of financial benefit or burden with the potential component unit, or is fiscally <br />depended upon by the potential component unit. <br /> <br />Based on these criteria, there are no organizations considered to be component units of <br />the City. <br /> <br />B. Basic Financial Statements <br /> <br />1. Government-Wide Statements <br /> <br />The government-wide financial statements (i.e., the statement of net position and the <br />statement of activities) display information about the primary government and its <br />component units. These statements include the financial activities of the overall City <br />government. Eliminations have been made to minimize the double-counting of <br />internal activities. Governmental activities, which normally are supported by taxes <br />and intergovernmental revenues, are reported separately from business-type <br />activities, which rely to a significant extent on fees and charges to external parties for <br />support.