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I <br />I <br />I <br />r <br />r <br />r <br />c <br />c <br />c <br />t: <br />i: <br />L <br />i; <br />u <br />CITY OF ORONO, MINNESOTA <br />Notes to Financial Statements (continued) <br />December 31,1998 <br />NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />H. Inventories <br />Inventories are stated at the lower of cost or market on the first-in, first-out basis and are accounted for using <br />the consumption method. Inventory in the Golf Course Operating Fund consists of resale items. <br />I. Property*, Plant, and Equipment <br />Fixed assets are stated at cost, estimated historical cost, or in the case of contributions, at fair market value <br />at the time received. <br />1. General Fixed Assets Account Group - No depreciation has been provided on general fixed assets. <br />The costs of property, plan*, and equipment are accounted for as current expenditures of the <br />governmental fund t> pes in the year purchased. The City has elected not to record infrastructure <br />fixed assets in its accounting records. Interest incurred during construction of general fixed assets <br />is not capitalized. <br />2. Proprietary Fund Type - Fixed assets of the Proprietary Funds are depreciated using the straight- <br />line method over the estimated useful lives of the assets, as follows: <br />Buildings and improvements <br />Equipment <br />Distribution/collection system <br />25-75 years <br />3-20 years <br />10-75 years <br />E>epreciation on contributed assets charged to operations is closed to the contributed equity account. <br />J. Liability for Compensated Absences <br />Vacation and sick leave expected to be liquidated with expendable available financial resources is reported <br />as an expenditure and a fund liability of the governmental fund type that will pay it. The remaining portion <br />of such obligations is recorded in the General Long-Term Debt Account Group. The unused vacation of the <br />Proprietary Funds is included in accrued liabilities of the respective fiind. <br />K. Bond Discounts/Issuance Costs <br />In the governmental fund types, bond discounts and issuance costs are recognized in the current period. <br />Bond discounts and issuance costs in the Enterprise Funds are deferred and amortized over the term of the <br />bonds using the bonds outstanding method which approximates the effective interest rate method. <br />-30-