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City of Louisville <br />Notes to the Financial Statements <br />December 31, 2014 <br />Note 1: Summary of significant accounting policies (continued) <br />D. Assets, liabilities, and net position/fund balance (continued) <br />financial statements, is offset by a fund balance reserve account in applicable <br />governmental funds to indicate they are not available for appropriation and <br />are not expendable available financial resources. <br />4. Prepaid items <br />Payments made to vendors for services that will benefit periods beyond year- <br />end are recorded as prepaid items. The prepaid balances, as reported in the <br />fund financial statements, are offset by a fund balance reserve account in <br />applicable governmental funds to indicate they are not available for <br />appropriation and are not expendable available financial resources. <br />5. Restricted assets <br />Restricted assets in the enterprise funds are cash set aside for the repayment <br />of debt in compliance with bond covenants and cash restricted for future <br />operations in compliance with escrow reserve agreements. <br />6. Capital assets <br />Capital assets, which include property, plant, equipment, and infrastructure <br />assets (e.g., roads, sidewalks, traffic signals, trails, and similar items) <br />purchased or constructed since 1980, are reported in the applicable <br />governmental or business -type activities columns in the government -wide <br />financial statements and the proprietary fund types in the fund financial <br />statements. Capital assets are defined by the City as assets with an initial <br />individual cost of $5,000 or more and an estimated useful life in excess of two <br />years. Such assets are recorded at historical cost or estimated historical cost <br />if purchased or constructed. Donated capital assets are recorded at <br />estimated fair market value at the date of donation. <br />The costs of normal maintenance and repairs that do not add to the value of <br />the asset or materially extend asset lives are not capitalized. Improvements <br />are capitalized and depreciated over the remaining useful lives of the related <br />assets, as applicable. <br />Interest is capitalized on proprietary fund assets acquired with tax-exempt <br />debt. The amount of interest to be capitalized is calculated by offsetting <br />interest expense incurred from the date of the borrowing until completion of <br />the project with interest earned on invested proceeds over the same period. <br />In 2014, no interest was capitalized. <br />44 <br />