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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTEA SUMMARY OF SIGNIFICANT.ACCOUNTING.POL.ICIES (CONTINUED) L. Net PositionlFund 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 lirnitations imposed on. ;#heir 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 ir';those funds can be spent. These classifications are as follows: Nonspendable — portion of fund balances'reiated to prepaid items, inventories, long- term receivables, and corpus on any permanent fund, Restricted — funds are constrained.';€ram %out.sidd. parties (statute,. grantors,. bond agreements, etc.). Committed --- funds are established and`:..:rno; lified by a'resolution approved by the City Council. Assigned --- consists of internally`iiriposed constraints approved by the City Finance Director. Unassigned - is the residual;elassificafion`for'the. General Fund and also reflects the negative residual'amounts in other Ends. When an expenditure is`; r curved for purposes for which both restricted and unrestricted. fund balance` is availabj.e '`it is. the C.ity.'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. Interfund Trap$actions`:` Intertund 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 experditures/expenses in.the reimbursing fund and as .reductions. of expenditures or expenses -in the fund that is reimbursed. All other interfund transactions are reported as transfers. All interfund 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. (2Q)