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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br />D. Assets, Liabilities and Net Assets or Equity (Continued) <br />Long -term Obligations <br />In the government -wide financial statements and proprietary fund types in the fund financial <br />statements, long -term debt and other long -term obligations are reported as liabilities in the <br />applicable governmental activities, business -type activities, or proprietary fund type <br />statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred <br />and amortized over the life of the bonds using the straight -line method. Bonds payable are <br />reported net of the applicable bond premium or discount. Bond issuance costs are reported as <br />deferred charges and amortized over the term of the related debt. <br />In the fund financial statements, governmental fund types recognize bond premiums and <br />discounts, as well as bond issuance costs, during the current period. The face amount of debt <br />issued is reported as other financing sources. Premiums received on debt issuances are <br />reported as other financing sources while discounts on debt issuances are reported as other <br />financing uses. Issuance costs, whether or not withheld from the actual debt proceeds <br />received, are reported as debt service expenditures. <br />Fund Equity <br />In the fund financial statements, governmental funds report reservations of fund balance for <br />amounts that are not available for appropriation or are legally restricted by outside parties for <br />use for a specific purpose. Designations of fund balance represent tentative management <br />plans that are subject to change. <br />Net Assets <br />Net assets represent the difference between assets and liabilities. Net assets invested in <br />capital assets, net of related debt consists of capital assets, net of accumulated depreciation, <br />reduced by the outstanding balances of any borrowing used for the acquisition, construction <br />or improvements of those assets, and adding back unspent proceeds. Net assets are reported <br />as restricted when there are limitations imposed on their use either through the enabling <br />legislations adopted by the City or through external restrictions imposed by creditors, <br />grantors or laws or regulations of other governments. <br />Estimates <br />The preparation of financial statements, in conformity with generally accepted accounting <br />principles, requires management to make estimates and assumptions that affect the reported <br />amounts of assets and liabilities and disclosures of contingent liabilities at the date of the <br />financial statements and the reported amounts of revenue and expenses during the reporting <br />period. Actual amounts could differ from those estimates. <br />(continued) <br />31 <br />