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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31,.2009 DOTE 4 SUMMARY QF:SIGNIFICANT ACCOUNTING POLICIES The: financial statements of the City 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 I1.$, generally. accepted accounting principles, the financial �tatements- 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 tie. component unit -would render the financial statements of -the primary government misleading. The .criteria used to �fetermine if the primary goverrtinent is financially accountable for a..coraponent:.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 componert unit, is in a relationship of financial benefit orburden with the. potential component uriit,..,or is fiscally depended upon by the potential component unit. Based on these criteria, there are. -no organizations.corisidered-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 assets. and the statement of activities) -display. information about -the primary government and its component. units. These statements holudeAhe financial activities of the overall City government. Eliminations have been made. to minimize the double -counting 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 sxient -on fees and 'charges to.:external parties for support. In the government -wide statement of net assets, both the governmental and business -type. activities columns: (a) are presented on a consolidated basis by column; and (b) are. reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City's net assets are reported in three parts:. (1) invested in capital assets, netof. related debt; (2) restricted net assets; and (3) unrestricted net assets. The City first utilizes restricted resources to finance qualifying activities:. (14)