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CITY OF ROSEVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, liabilities, and net assets or equity (Continued) 6. Long -term obligations In the government -wide financial statements, and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, and proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs if material, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 7. Fund equity a. Classification In the fund financial statements, governmental funds report fund classifications that comprise a hierarchy based primarily on the extent to which the City is bond to honor constraints on the specific purpose for which amounts in those funds can be spent. • Nonspendable Fund Balance — These are amounts that cannot be spent because they are not in spendable form. • Restricted Fund Balance — These are amounts that are restricted to specific purposes either by a) constraints placed on the use of resources by creditors, grantors, contributors, or laws or regulations of other governments or b) imposed by law through enabling legislation. • Committed Fund Balance — These are amounts that can only be used for specific purposes pursuant to constraints imposed by the City Council (highest level of decision making authority) through resolution. • Assigned Fund Balance — These are amounts that are constrained by the City's intent to be used for specific purposes but are neither restricted nor committed. Assignments are made by the City Manager based on the City Council's direction. • Unassigned Fund Balance — These are residual amounts in the General Fund not reported in any other classification. The General Fund is the only fund that can report a positive unassigned fund balance. Other funds would report a negative unassigned fund balance should the total of nonspendable, restricted and committed fund balances exceed the total net resources of that fund. 50