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CITY OF ORONO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2015 <br /> <br /> <br />(33) <br /> <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />M. Capital Assets <br />Capital assets, which include property, buildings, improvements, equipment, and <br />infrastructure assets are reported in the applicable governmental or business-type <br />activities columns in the government-wide financial statements. Such assets are <br />capitalized at historical cost, or estimated historical cost for assets where actual <br />historical cost is not available. Donated assets are recorded as capital assets at their <br />estimated fair market value at the date of donation. The City defines capital assets as <br />those with an initial, individual cost of $5,000 or more for government-wide and $5,000 <br />for proprietary funds with an estimated useful life in excess of one year. The cost of <br />normal maintenance and repairs that do not add to the value of the asset or materially <br />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 <br />capitalize the infrastructure of its governmental activities acquired prior to January 1, <br />2004. <br /> <br />Capital assets are recorded in the government-wide and proprietary fund financial <br />statements, but are not reported in the governmental fund financial statements. Interest <br />incurred during the construction phase of capital assets for business-type activities is <br />included as part of the capitalized value of the assets constructed. Capital assets are <br />depreciated using the straight-line method over their estimated useful lives. Land and <br />construction in progress are not depreciated. Useful lives vary from 15 to 50 years for <br />land improvements, buildings, and other improvements; 5 to 10 years for equipment; and <br />20 to 50 years for collection and distribution systems and other infrastructure. <br /> <br />N. Compensated Absences Payable <br />Certain city employees earn personal time off, vacation, compensation time, and sick <br />leave at various rates based on longevity. These compensated absences are paid to an <br />employee leaving in good standing, at their current rate of pay, with the exception of sick <br />leave in which one-half is paid to the departing employee. Compensated absences <br />payable are accounted for as long-term liabilities as described in the following section. <br /> <br />O. Long-Term Liabilities <br />In the government-wide and proprietary fund financial statements, long-term debt and <br />other long-term obligations are reported as liabilities. Bond premiums and discounts are <br />amortized over the life of the bonds using the straight-line method. <br /> <br />In the governmental fund financial statements, long-term debt and other long-term <br />obligations are not reported as liabilities. The face amount of debt issued is reported as <br />other financing sources. Premiums or discounts on debt issuances are reported as other <br />financing sources or uses, respectively. Issuance costs, whether or not withheld from the <br />actual debt proceeds received, are reported as debt service expenditures.