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CITY OF ROSEVILLE MINNESOTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31. 1986 Note 1- Summarv of SlQnificant AccountinQ Policies (Continued) they do not affecG net current assets, such long-term amounts are not recognized as governmental fund type expendituces or fund liabilities, They are instead reported as liabilities in the General Long-term Debt Account Group. Proprietary funds are accounted for on a cost of services or "capital maintenance" measurement focus. This means that all assets, including fixed assets, and all 1labilities, including long-term 1ia611iLies associated with their activity, are included on their balance sheets, Their reported fund equity is segregated into contributed capital and retained earnings components. Proprietary fund types operating statements present increases (reve�ues) and decreases (expenses) !n net total assets. Fixed assets of the Enterprise funds are capitalized in these funds. Depreciation is charged as an expense aqainst operations, and is provided on Lhe straight-line method. The following table summarizes depreciable llves of types of property. Years Building and structures 25- 40 Furniture, equipment, vehicles 5- 20 Distributlon 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. Basis of accoUnting relates to the timing of the measurement made, regacdless of the measurement focus applied. Governmental Pu�ds and Agency funds are accounted for using the modlfied accrual basis of accounting. Under the modified accrual basis of accounting, revenues revenues are recorded when susceptible to accrual, S.e., both measurable and available. Available means collectible within the current period or soon enough thereafter to pay current liabillties. All primary sources of revenue are accrued except licenses and permits, charges for services and miscellaneous revenues, which are not qenerally measurable until actually received. Irtterest on special assessments is recognized as revenue when collecLed. Expenditures are generally recognized under the modified acerual basls of accounting when the related fund liability is incurred, except for principal and interest on general lo�g-term debt which is recognized when due, and accumulated unpaid vacation and compensatory Lime off which are recognized when paid. Proprietary Funds are accounted for using the acccual 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 e�d. D, 8udgets and Budgetary Accounting The City adopts an annuai budget for the General and SpecSal Revenue funds which are prepared on the modi£ied accrual basis of accounting. The adopted budget indicates the amount LhaC can be expended by each department and each fund based on detailed budget� estimates for individual expenditure acco�nts. All budyet revisions must be authorized by the City Council at the request of the City Manager, All suppiemental appropriations for 1986 were fi�anced by trans£ers from the Contingency Section of the General Fund hudget. All budget amounts lapse at the end of the year to the extent have �otthey 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 aG cost, whlch approximates market. (See note 13 for disclosures relating to cash management and SnvesLments.) Property Taxes - Property tax levies are set by the City Council in October each year and are certified Lo the County for collection the following year. -30-