Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Notes to Basic Financial Statements, Continued
For the fiscal year ended June 30, 2008
Long-Term Liabilities
In the government-wide financial statements and proprietary funds financial statements, long-term
debt and other long-term obligations are reported as liabilities in the applicable governmental
activities, business-type activities, or proprietary fund type statement of net assets. Initial-issue
bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of
the bonds using the straight-line method. The difference between the reacquisition price of
refunding bonds and the net carrying amount of refunded debt (deferred amount on refunding) is
amortized over the shorter of the lives of the refunding debt or remaining life of the refunded debt.
Bonds payable are reported net of the unamortized portion of applicable premium, discount or
deferred amount on refunding. Bond issuance costs, including underwriters' discount, are reported
as deferred bond issuance costs. Amortization of bond premiums or discounts, issuance costs and
deferred amounts on refunding are included in interest expense when due.
In the governmental funds financial statements, bond premiums, discounts and issuance costs are
recognized during the period issued. The face amount of debt issued is reported as other financing
sources. Premiums received are reported as other financing sources, while discounts are reported as
other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds
received, are reported as debt service expenditures. Interest and principal payments are reported as
debt service expenditures.
Net Assets and Fund Equity
In the government-wide financial statements and proprietary funds financial statements, net assets
are reported in three categories: net assets invested in capital assets, net of related debt, restricted
net assets and unrestricted net assets. Net assets invested in capital assets, net of related debt
represents capital assets less accumulated depreciation less outstanding principal of related debt.
Net assets invested in capital assets, net of related debt does not include the unspent proceeds of
capital debt. Restricted net assets represent net assets restricted by parties outside of the City (such
as creditors, grantors, contributors, laws and regulations of other governments) and include unspent
proceeds of bonds issued to acquire or construct capital assets. The nonexpendable portion of
permanent funds is reported as a component of restricted net assets. The City's other restricted net
assets are temporarily restricted (ultimately expendable) assets. All other net assets are considered
unrestricted.
In the fund financial statements, governmental funds report reservations of fund balance for
amounts that are not available for appropriation or are legally restricted by outside parties for use
for a specific purpose. Designations of fund balance represent tentative management plans that are
subject to change.
Self-Insurance Program
The City has self-insurance programs to provide for general liability, bus and automobile liability,
and workers' compensation claims. These activities are accounted for in self-insurance internal
service funds.
Premiums are charged to individual funds and are designed to cover future expenses. The City's
Risk Manager oversees the self-insurance programs. It is his or her duty to ensure that programs are
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