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CITY OF ROSEVILLE, MINNESOTA NOTES TO TAE FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1985 Note 1- Summarv of SiQnificant Accounting Policies (Continued) B. Measurement Focus (Continued) Years Building and structures 25-40 Furniture, equipment, vehicles 5- 20 Distribution system 80-100 C. Basis of Accounting Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Sasis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. Governmental Funds, Expendable Trust funds and Agency funds are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough thereafter to pay current liabilities. All primary sources of revenue are accrued except licenses and permits, charges for services and miscellaneous revenues which are not generally measurable until actually received. Interest on special assessments is recognized as revenue when collected. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for principal and interest on general long-term debt which is recognized when due, and accumulated unpaid vacation and compensatory time off which are recognized when paid. Proprietary Funds are accounted for using the accrual basis of accounting. Revenues are recognized when they are earned, and expenses are recognized when they are incurred. Unbilled utility service receivables are recorded at year end. D. Budgets and Budgetary Accounting The City adopts an annual budget for the General and Special Revenue funds which are prepared on the modified accrual basis of accounting. The adopted budget indicates the amount that can be expended by each department and each fund based on detailed budget estimates for individual expenditure accounts. A11 budget revisions must be authorized by the City Council at the request of the City Manager. All supplemental appropriations for 1985 were financed by transfers from the Contingency Section of the General Rund. Al1 budget amounts lapse at the end of the year to the extent they have not been expended. The level which expenditures may not legally exceed appropriations is at the fund level. E. Assets, Liabilities and Fund Equity Investments - Investments are carried at cost, which approximates market. -30 -