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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING .POLICIES .(CONTINUED) L. Net Position/Fund. Balance Net position represents the difference .between assets arid liabilities it! 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 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 classifications areas follows;. Nonspendable -- portion of fund Balances related to prepaid items, inventories, long- term receivables, and corpus on any permanent fund. Restricted funds are constrained from: o6tside parties (statute, grantors, bond agreements, etc.). Committed — funds are established, Arid modified by a .resolution approved by the City Council, Assigned consists of internally imposed constraints approved by the City Finance Director: Onassigned — is the residual o[ass f cat onJor the General Fund and also reflects the negative residual amounts ln. ot"kierfurids: When an expenditure is,,i;ncurred: for?purposes. for which both restricted and unrestricted fund balance is availableit is the City'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. ass and.finally unassigned amounts. M. Interfund Transactions Interfund 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 expenditures/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. (20)