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CITY OF EUGENE, OREGON <br />Notes to Basic Financial Statements <br />(1) Summary of Significant Accounting Policies, continued <br />(J) Capital Assets, continued <br />Capital assets of proprietary funds are reported net of accumulated depreciation in the government-wide <br />Statement of Net Assets and the proprietary funds Statement of Fund Net Assets. Capital assets not <br />specifically related to activities reported in proprietary funds are reported net of accumulated depreciation in the <br />governmental activities column in the government-wide Statement of Net Assets. Depreciation expense on <br />proprietary fund capital assets is reported in the government-wide Statement of Activities and the proprietary <br />fund Statement of Revenues, Expenses, and Changes in Fund Net Assets. Depreciation expense on general <br />capital assets is reported in the government-wide Statement of Activities as a direct expense. <br />(K) Capitalized Interest <br />Interest is capitalized on constructed assets in proprietary funds. For the year ended June 30, 2007, no <br />interest was capitalized on proprietary fund capital assets. <br />(L) Compensated Absences <br />Liabilities for accumulated or vested vacation leave and compensation time benefits (compensated absences) <br />are recorded in the government-wide financial statements and proprietary fund financial statements. The <br />governmental fund financial statements do not report liabilities for compensated absences unless they are due <br />for payment. Sick leave does not vest and is recorded in all funds as taken. <br />(M) Noncurrent Obligations <br />Noncurrent obligations are reported in the government-wide and proprietary fund financial statements as <br />liabilities. The governmental fund financial statements do not report noncurrent obligations because they do <br />not require the use of current financial resources. Bond discounts, premiums, and issuance costs are deferred <br />and amortized over the term of the bonds using the bonds-outstanding method in the government-wide and <br />proprietary fund financial statements, but are recognized during the current period in the governmental fund <br />financial statements. The bonds-outstanding method does not differ significantly from the effective interest <br />method. <br />The limited tax pension obligations are deep discount bonds that increase in value based on the initial yield to <br />maturity. This increase in value is reflected as an increase in noncurrent liabilities on the Statement of Net <br />Assets and as interest expense on the Statement of Activities. <br />(N) Fund Balance <br />In the fund financial statements, governmental funds report reservations of fund balance for amounts that are <br />not available for appropriation or are legally restricted by outside parties for specific purposes. <br />(O) Indirect Expenses Allocation <br />In the fund financial statements, the City allocates certain indirect costs incurred by the central services function <br />of the General Fund to non-general funds in order to recover expenditures made on behalf of those other City <br />funds. This allocation has been removed from the direct expenses column in the government-wide Statement <br />of Activities and a separate column titled indirect expenses allocation has been presented. Indirect costs <br />allocated to business-type activities are equal to the amount actually paid by the function. The remaining <br />indirect costs are allocated to governmental activities based on personnel service costs. The remaining net <br />expense in the central services function represents direct program activity of that function including their share <br />of allocated indirect costs. <br />ìí <br />