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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ©ECEMBER 3'I, 2011 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Net AssetslFund Balance Net assets represent the difference between assets and liabilities in the government - wide acid proprietary fund. financial statements.. Net assets invested in capital assets net ofrelated debt,. consists of capital assets, riot of accumulated. depreciation, reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net assets are reported as restricted when there are limitations imposed on their use through external restrictions. imposed by creditors, grantors, or haws or regulations of other governments. At December 31, 2011, the City adopted GASB Statement No. 54, Fund Balance. Reporting and Governmental Fund Type Definitions.. 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 prepaids, 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 i.s 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 tte City's policy to use cornmitted first, then assigned, and finally unassigned. amounts. (21)