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li S111=1111i CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ❑ECEMBER 31, 2016 SUMMARY OF sIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 corp us 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. M. Interfund. Transactions Interfund services provided and used are accounted for as 'revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/ expenses initially made from it that are properly applicable to another fund, are recorded as expend itureslexpenses in. the reimbursing fund and as reductions of expenditures or expenses in the fund that is reimbursed. All other inter fund transactions are reported as transfers.. All iriterFund transactions. are eliminated except for activity between governmental activities and business -type activities for presentation in the entity -wide statements of net position and statements of activities.