2012 Comprehensive Annual Financial Report - the City of Tukwila

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CITY OF TUKWILA: 2012 CAFRNOTES TO THE FINANCIAL STATEMENTSAmounts due to and from Other Funds and Governments, Interfund Loans and advancesReceivableActivity between funds that is representative of lending/borrowing arrangements outstanding at the endof the fiscal year are referred to as either “interfund loans receivable/payable” or “advances to/fromother funds.” All other outstanding balances between funds are reported as “due to/from other funds”.Any residual balances outstanding between the governmental activities and business-type activities arereported in the government-wide financial statements as “internal balances.”Interfund loans and advances between funds, as reported in the fund financial statements, are offset bya fund balance reserve account in applicable governmental funds to indicate they are not available forappropriation and are not expendable available financial resources. See Note 5 on interfundtransactions.InventoriesInventories carried in proprietary funds are valued at average cost using the consumption method. Aphysical count is taken at year-end. Governmental funds use the purchase method whereby inventoryitems are considered expenditures when purchased.Deferred ChargesUnamortized debt issuance costs are those costs incurred for the issuance of long-term debt, such aslegal fees, printing costs and other costs. These costs are deferred and amortized over the lives of therelated issues.Capital Assets and DepreciationThe accounting and reporting treatment applied to the capital assets associated with a fund aredetermined by its measurement focus. Capital assets acquired in governmental funds are accounted foras expenditures in the fund when the asset is purchased. These assets are reported in thegovernmental activities column of the government-wide statement of net position but are not reported inthe fund financial statements. Capital assets utilized by the proprietary funds are reported both in thebusiness-type activities column of the government-wide statement of net position and in the respectivefunds.All capital assets are capitalized at cost (or estimated historical cost) and updated for additions andretirements during the year. Donated assets are valued at estimated fair market value at time ofacquisition. Where historical cost is not known, assets are recorded at estimated historical costs. TheCity maintains a capitalization threshold of five thousand dollars. The City’s infrastructure consists ofroads, bridges, storm sewers, water and sewer distribution and collection systems. Improvements arecapitalized; the costs of normal maintenance and repairs that do not add to the value of the asset ormaterially extend an asset’s life are not.58
CITY OF TUKWILA: 2012 CAFRNOTES TO THE FINANCIAL STATEMENTSDepreciation is computed using the straight line method over estimated service lives, as follows:AssetBuildingsNon-Building ImprovementsUtility PlantMachinery and EquipmentIntangiblesInfrastructureEstimated Service Life25 to 50 years25 to 50 years10 to 50 years2 to 50 years2 to 50 years25 to 50 yearsSee Note 7 for additional information on capital assets.Other Long-Term LiabilitiesThese liabilities are current obligations that are due within one year and include accounts payable,accrued liabilities, and other debts. The Self Insurance fund includes an incurred but not reported(IBNR) liability of $655,300 determined using actuarial methods. This liability is multiplied by a factor of2.5 to meet the City’s financial goal of maintaining reserves at 1 x IBR for claim fluctuations plus 1.5 xIBNR for the IBNR liability of $1,638,250.Compensated AbsencesCity policy and labor contracts with City of Tukwila employees call for the accumulation of vacation andsick leave. At termination of employment, employees with the required length of service may receivecash payments for all accumulated vacation leave to a maximum of 384 hours. Sick leave terminationbenefits are based on a percentage of accumulated sick leave up to a maximum of 180 hours. Thepayment is based on current wages at termination.The entire compensated absence liability is reported on the government-wide financial statements. Inthe enterprise funds, the entire amount of compensated absences is reported as a fund liability. Thisreporting format is in compliance with GASB Statement No. 16.The current portion reported on the schedule of long-term liabilities is calculated using the first-in-firstout(FIFO) approach.Long-Term ObligationsIn the government-wide financial statements, and proprietary fund types in the fund financialstatements, long-term debt and other long-term obligations are reported as liabilities in the applicablegovernmental activities, business-type activities, or proprietary fund type statement of net position.Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life ofthe bonds using the straight line method. Bonds payable are reported net of the applicable bondpremium or discount. Bond issuance costs are reported as deferred charges and amortized over theterm of the related debt.In the fund financial statements, governmental fund types recognize bond premiums and discounts, aswell as bond issuance costs, during the current period. The face amount of debt issued is reported asother financing sources. Premiums received on debt issuances are reported as other financing sourceswhile discounts on debt issuances are reported as other financing uses. Issuance costs, whether or notwithheld from the actual debt proceeds received, are reported as debt service expenditures. Long-termdebt outstanding at year-end is outlined in Note 11.59
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2012 Comprehensive Annual Financial Report - the City of Tukwila

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