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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2014 (22) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. Long-Term Obligations In the entity-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bond issue costs, are expnesed as a current period cost with the adoption of Governmental Accounting Standards Board Statement No. 65. In the governmental fund financial statements, bond premiums and discounts, as well as bond issue costs are recognized during the current period. The face amount of the debt issue is reported as on other financing source. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issue costs are reported as debt service expenditures. L. Net Position/Fund Balance Net position represents the difference between assets and liabilities in the government- wide and proprietary fund financial statements. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net position is reported as restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. In the fund financial statements, governmental funds report fund balances in the classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable – portion of fund balances related to prepaid items, inventories, long- term receivables, and corpus on any permanent fund. Restricted – funds are constrained from outside parties (statute, grantors, bond agreements, etc.). Committed – funds are established and modified by a resolution approved by the City Council. Assigned – consists of internally imposed constraints approved by the City Finance Director. Unassigned – is the residual classification for the General Fund and also reflects the negative residual amounts in other funds. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, it is the City’s policy to use restricted first, then unrestricted fund balance. When an expenditure is incurred for purposes for which committed, assigned and unassigned amounts are available, it is the City’s policy to use committed first, then assigned, and finally unassigned amounts.