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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ©ECEMBER 31, 20.1.2 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. Long -Terra 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, if material, are reported as. prepaid items and amort ized. over the term of the related debt using the straight-line method, 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 b6tween assets. and liabilities in the government wide. and proprietary fund financial statements..N.et investment in capital assets consists of capital `assets, net.of accumulated depreciation, reduced. by the out 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: classificatioris 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, band 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. (22)