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NOTE 1 CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC: FINANCIAL STATEMENTS DECEMBER 31, 2016 SUMMARY 0F SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e,.g„ roads, sidewalks, street lights, and similar items.) are reported in the applicable governmental or business type activities columns in the government -wide financial statements; Capital assets are. recorded at historical cost or estimated Historical cost if purchased. or constructed. The cost of normal maintenance and. repairs that do not add to the value of the asset or materially extend asset lives are. not capitalized. Major outlays for capital assets.:and improvements are capitalized as projects are constructed. The government reports. infrastructure assets on a network and subsystem basis. In the case of the initial capitalization of general infrastructure assets (i.e,, those. reported by governmental. activities) the City chose to include all such items regardless. of their acquisition date. or. amount. Depreciation on exhaustible .assets is. recorded as an allocated expense in the statement of activities with accumulated depreciation reflected in the statement of net position. Since surplus assets are sold for an immaterial amount when declared as no longer needed for City purposes, no salvage value is taken into consideration for depreciation purposes.. Capital assets not being depreciated include construction in progress.. Depreciation Estimated Assets Method Useful Life Buildings Straight -Line 40 Years Office Equipment Straight -Line. 5 - 10 Years Utility Systems Straight -Line 20 - 50 Years Infrastructure Straight -Line 20 - 50 Years 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 amortized over the life of the bonds using the straight-line method.. Bond issue. costs are expensed as a current period cost. In the governmental fund financial statements, bond premiums and dis.counts,. as well as. bond issue costs are recognized during the current period. The face amountof 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. (19)