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NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (CONTINUED) L. Compensated Absences. Payable. The City recognizes a liability* or compensated absences, for leave tune that (I) has been earned 'for serviccs. previously rendered by employees, -(Z} accumulates and is :allowed to be carried beer to subsequent Mears; and: (3) is more likely than not to: be used as titrte offor settled during or ulson separation front einploymdrit. Based bn this criteria,- ontype of leave qualifes :for liability recognition fpr compensated absences — vacation. The liability for compensated absences is. reported as. incurred in the government -wide and proprietary finds I;nanciai statements, if significant. A liability for compensated absences is recorded in the governmental funds. only if.the liability has matured because of ernployee resignations.or retirements: The .liability for compensated absences in6ludes salary -related benefits., where applicable. M. Net Position I6.the government tivide and proprietary fund financial statements, net position represents the differences between assets, deferred outflows of resources, liabilities, and deferred inflow-d-resources: Net position is displayed- in three corfnponerits: • Net Westment-in Capital Assets.— Consists`of capital assets, het of accumulated depreciation, !educed by any datstanding.debt attributable to acquire:capital assets. + Restricted Net Position — Consists of iiet positionr restricted when there are -limitations- ir.gposed on their use.through external resrrictions:imposed by -creditors; grantors; or laws or it of other governments. • Unrestricted Net Position — All other net position that does not meet the definition of "restricted" or "net investment in capitai assets." The City applies restricted resources first when. an expense is incurred for which both resitric#ed and .unrestricmd-resources are available. N. Fund Balance Classifications In the fund financial statements. governrnentaI funds report fund balance in classifications that disclose constraints for which amounts in tbpse funds can be.spent. These classifications are as follows: Nonspendable — Consists of amounts that are not *in spendable form, such *as prepaid items, inventory: and other long-terjn assets. Restricted Consists of amounts related to externally imposed constraints established by creditors, grantors, or contributors;.or constraints. imposed by:state statutory provisions. • Committed — Consists of internally imposed constraints that are established by resolutiou..of. the City Council. Those committed amounts cannot be used for any either purpose unless -the, City .Council removes. or changes the specified use by taking the same. type of action it employed to previously committhose. amounts. L23,