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City of Orono, Minnesota <br />Notes to the Financial Statements <br />December 31, 2024 <br /> <br />Note 1: Summary of Significant Accounting Policies (Continued) <br />Interfund Receivables and Payables <br />Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal <br />-current portion of interfund loans). All other outstanding balances between funds are reported <br />-type <br />activities are reported in the government- <br />Inventories and Prepaid Items <br />All inventories are valued at cost using the first in/first out (FIFO) method. Inventories of governmental funds are recorded <br />as expenditures when consumed rather than when purchased. <br />Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in <br />both government-wide and fund financial statements. Prepaid items are reported using the consumption method and <br />recorded as expenditures/expenses at the time of consumption. <br />Capital Assets <br />Capital assets, which include property, buildings, improvements, equipment, and infrastructure assets are reported in the <br />applicable governmental or business-type activities columns in the government-wide financial statements. Such assets <br />are capitalized at historical cost, or estimated historical cost for assets where actual historical cost is not available. <br />Donated assets are recorded as capital assets at their acquisition value at the date of donation. The City defines capital <br />assets as those with an initial, individual cost of $10,000 or more for government-wide and $10,000 for proprietary funds <br />with an estimated useful life in excess of one year. The cost of normal maintenance and repairs that do not add to the <br />value of the asset or materially extend asset lives are not capitalized. As allowed by accounting principles generally <br />accepted in the United States of America, the City has elected not to retroactively capitalize the infrastructure of its <br />governmental activities acquired prior to January 1, 2004. <br />Capital assets are recorded in the government-wide and proprietary fund financial statements, but are not reported in the <br />governmental fund financial statements. Capital assets are depreciated using the straight-line method over their <br />estimated useful lives. Land and construction in progress are not depreciated. <br />Property, plant and equipment of the City is depreciated using the straight line method over the following estimated useful <br />lives: <br />Useful Life <br />Assets in Years <br />Infrastructure 20 - 50 <br />Buildings and Systems 15 - 50 <br />Improvements Other Than Buildings 20 - 50 <br />Machinery and Equipment 5 - 10 <br />Deferred Outflows of Resources <br />In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of <br />resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net <br />assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) <br />until then. The City has only one item that qualifies for reporting in this category. Accordingly, the item, deferred pension <br />resources, is reported only in the statements of net position. This item results from actuarial calculations and current <br />year pension contributions made subsequent to the measurement date. <br />58 85