03-22-21 Regular Meeting of the La Porte City Council

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CITY OF LA PORTE, TEXAS Exhibit A-10 NOTES TO FINANCIAL STATEMENTS (continued) Note 1 Î Summary of Significant Accounting Policies (continued) J. Net Position Flow Assumption Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted Î net position and unrestricted Î net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the CityÓs policy to consider restricted Î net position to have been depleted before unrestricted Î net position is applied. K. Fund Balance Flow Assumption Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the CityÓs policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. L. Net Position Classifications Classification of net position includes three components as follows: Net investment in capital assets Î This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes or other borrowings, premiums, discounts, and deferred outflows of resources or deferred inflows of resources from a refunding. Restricted Î This component of the net position consists of constraints placed on net asset use through external constraints imposed by creditors, grantors, contributors, or laws or regulations of other governments or constraints imposed by law through contractual provisions or enabling legislation. Unrestricted net position Î This component of net position consists of net position that does not meet the definition of ÐrestrictedÑ or Ðnet investment in capital assets.Ñ Draft 3-12-21 41 Fiscal Year 2020 Annual Report