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CITY OF GEM LAKE, MINNESOTA . NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2015 NOTE %1 SUMMARY OF SIGNIFICANT ACCOUNTING .POLICIES The financial statements of the City of Gem hake (the City), Minnesota have been prepared in conformity with U.S.. generally accepted accounting.:principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting.policies. A. Financial Reporting Entity As required by U.S; generally accepted accounting principles, the financial statements of the reporting entity include those of the. City of Gem Lake and its component units, A. component unit is a legally separate entity for which the primary government is financially accountable, or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria. used to determine if the primary government is financially accountable fora component include whether or not the primary government appoints the voting. majority of the potential component .unit's board., is able to impose its will. on the. potential component unit, is in a, relationship of financial benefit or burden with -'the potential component unit, or is fiscally depended upon by the potential component'unit. Based on these criteria, there are no organizations.considered to be component units of the City. B. Basic Financial Statements 1. Government=Wide S,tateme'rits The government=wide financial statements (i.e., the statement of net position and the staterrient of a%ctivities) display information about the primary government and its component units. These statements include the financial activities of the overall City government. Ellminations have been made to minimize. the double -counting of internal activities. 'Governmerital activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities; which rely to a significant extent on fees and charges to external parties for support. (1 3)