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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC` FINANCIAL STATEMENTS DEC EMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Cap[tal.Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g.,. roads, sidewalks, street lights, and similar items) are reported in the .applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are recorded at historical cost or estimated historical cost; if purchased or constructed. The cost of normal maintenance and. repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets acid improvements are capitalized as projects are constructed.. The government reports Infrastructure assets on a network and subsystem basis. In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to. include all such items regardless of their. acquisition date or arnount, ❑epreciation on exhaustible assets is recorded as an allocated expense in the.statement of activities with .accumulated depreciation` reflected in the statement of net position. Since surplus assets are sold for an immaterial arnaunt when declared as no longer needed for City purposes, no salvage`vah.e is taken. into consideration for depreciation purposes, Capital. assets not being deprediated include cons. truction..in progress.. -.:.,,.Depreciation. Estimated Method Useful Life Buildings Straight -Line 44 Years Office Equipment Straight -Line 5 - 1.0 Years Utility Systems, Straight -Line 20 - 50 Years Infrastructure. `.. Straight -Line 20 - 50 Years K. Long -Term Obligations,,'` - In the entity -wide frriaricial statements, long-term debt and other long=term obligations are. reported as liabilities in the. applicable governmental activities; Bond premiums and discounts are amortized over the life of the bonds using. the straight-line method. Band issue costs are expensed as a current .period cost. In the governmental fund. financial statements, band 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. (19)