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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Gem Lake (the City), Minnesota have been prepared in conformity with U.S. gene rally 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 primarygovernment is financially accountable for component include whether or not the primary government appoints the: voting majority of the potential component units 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 Statements The .government -wide financial. statements (i.e., the statement of net: position and the statement of activities) display information about the. primary government and its component units. These. statements include the financial activities of the overall City government. Eliminations have been made to minimize the double-ccunting of internal. activities. Governmental 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. (15)