village of wellington, florida

NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Long-Term ObligationsIn the government-wide financial statements, and proprietary fund financial statements, long-term debt andother long-term obligations are reported as liabilities in the applicable governmental activities, business-typeactivities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well asissuance costs, are deferred and amortized over the life of the bonds using the effective interest method.Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs arereported as deferred charges and amortized over the term of the related debt.In the fund financial statements, governmental fund types recognize bond premiums and discounts, as wellas bond issuance costs, during the current period. The face amount of debt issued is reported as otherfinancing sources. Premiums received on debt issuances are reported as other financing sources, whilediscounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheldfrom the actual debt proceeds received, are reported as debt service expenditures.Net AssetsEquity in the government-wide statement of net assets is displayed in three categories: 1) invested in capitalassets, net of related debt, 2) restricted, and 3) unrestricted. Net assets invested in capital assets, net ofrelated debt consist of capital assets reduced by accumulated depreciation and by any outstanding debtincurred to acquire, construct, or improve those assets. Net assets are reported as restricted when there arelegal limitations imposed on their use by enabling legislation or external restrictions by other governments,creditors, or grantors. Unrestricted net assets consist of all net assets that do not meet the definition ofeither of the other two components. The government-wide statement of net assets reports $72,573,219 ofrestricted net assets, of which $26,080,602 is restricted by enabling legislation.Fund EquityIn the fund financial statements, governmental funds report reservations of fund balance for amounts thatare not available for appropriation or are legally restricted by outside parties for use for a specific purpose.Unreserved fund balance amounts that are reported as designations of fund balances represent tentativeplans for financial resource utilization in a future period. The following is a description of the reserves anddesignations used by the Village.Reserved for encumbrances – represents outstanding purchase orders and open contracts at year end whichwill be re-appropriated in the new year.Reserved for advances – represents funds set aside to indicate the long-term nature of certain interfundloans.Reserved for capital improvements – represents spendable resources restricted for construction projects.Reserved for prepaid expenditures – established to account for certain payments made in advance. Thisreserve indicates that funds are not “available spendable resources”.Reserved for inventory – indicates that a portion of fund balance is segregated since these items do notrepresent “available spendable resources”.Reserved for building department – represents spendable resources restricted solely for building departmentexpenditures.Reserved for debt service – represents spendable resources restricted to the payment of future debt serviceof general long-term debt.Designated for subsequent year expenditures – represents funds set aside for future expenditures.35