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CITY OF GEM LAKE, MINNESOTA. NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE 7. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED] B. Basic Financial Statements. (Continued) 2. Fund Financial Statements (Continued) The City reports the.following major proprietary fund; Sewer Fund -- The sewer fund accounts for customer sewer service charges that are used to finance sewer operating expenses. C. Measurement Focus and Basis of Accounting The government -wide, proprietary fund, and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned; and expenses are recorded when a liability is incurred, regardless of the timing. of related cash. flows. Property taxes. are recognized as revenues in the year for which they are levied. Grants. and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have. been met. Private -sector standards of accounting and financial reporting issued on or before November 30, 1989,. genera[ly are followed in both the goVe rn ment-wid e and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments. also have the option of following subsequent private -sector guidance for their business type. activities and enterprise funds., subject to this same limitation. The City has elected not to follow subsequent private -sector guidance. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified .accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. The City considers all revenues to be available if they are collected. within 53 days after the end. of the current period. Property and other taxes, licenses, and interest are all considered to be .susceptible to accrual. Expenditures are recorded when the related fund. liability is .incurred, except for principal `and interest on general long-term debt, compensated absences, and claims and judgments, which are recognized. as expenditures to the extent that they have matured. Proceeds of general fang -term debt and acquisitions under capital leasesare. reported as otherfnancing sources. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering.goods. in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the City's enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost.of sales and services, administrative expenses, and.depreciation on capital assets. All revenues. and expenses not meeting this definition are reported as nonoperating revenues and expenses.