Laserfiche WebLink
CITY OF PEQUOT LAKES, MINNESOTA <br />NOTES TO THE BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2019 <br /> <br /> <br />25 <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br /> <br />In the fund financial statements, the current financial resources measurement focus or the economic resources measurement focus <br />is used as appropriate: <br /> <br /> All governmental funds utilize a current financial resources measurement focus. Only current financial assets and <br />liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available <br />spendable financial resources during a given period. These funds use fund balance as their measure of available <br />spendable financial resources at the end of the period. <br /> <br /> The government-wide financial statements and proprietary funds utilize an economic resources measurement focus. The <br />accounting objectives of this measurement focus are the determination of operating income, changes in net position (or <br />cost recovery), financial position, and cash flows. All assets, deferred outflows, liabilities and deferred inflows (whether <br />current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. <br /> <br />Basis of Accounting <br /> <br />In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-type activities are <br />presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and <br />expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and <br />liabilities and exchange-like transactions are recognized when the exchange takes place. <br /> <br />In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this <br />modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or <br />being able to reasonable estimate the amount. Available means collectible within the current period or within sixty days after year <br />end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation <br />bond principal and interest which are reported when due. <br /> <br />All proprietary funds utilize the accrual basis of accounting. <br /> <br />1.D. USE OF ESTIMATES <br /> <br />The preparation of financial statements in conformity with accounting principles generally accepted in the United States of <br />America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows, <br />liabilities, and deferred inflows, and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates <br />also affect reported amounts of revenues and expenses during the reporting period. Actual results could differ from those <br />estimates. <br /> <br />1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY <br /> <br />Cash and Cash Equivalents <br /> <br />For purposes of the Statement of Net Position, “cash and cash equivalents” includes all demand, savings, and money market <br />savings accounts for the City. For the purpose of the proprietary fund Statement of Cash Flows, “cash and cash equivalents” <br />include all demand, savings, and money market savings accounts. <br /> <br />Investments <br /> <br />Investments are stated at their fair value as determined in accordance with the fair value hierarchy. Short-term investments are <br />reported at amortized cost, provided that the fair value of those investments is not significantly affected by the impairment of the <br />credit standing of the issuer or by other factors. Securities traded on a national or international exchange are valued at the last <br />reported sales price at current exchange rates. Investments that do not have an established market are reported at estimated fair <br />value. Certificates of deposit are stated at cost, plus accrued interest, which approximates fair market value. Net appreciation <br />(depreciation) in fair value of investments includes net unrealized and realized gains and losses. Purchases and sales of securities <br />are recorded on a trade-date basis. See Note 2.A. for additional information related to Cash, Cash Equivalents, and Investments.