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<br />Redevelopment Agency of the City of Redwood City <br />Notes to Basic Financial Statements, Continued <br />For the year ended June 30,2006 <br /> <br />1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued <br /> <br />B. Basis of AccountinglMeasurement Focus, Continued <br /> <br />Governmental Fund Financial Statements - Governmental fund financial statements include a Balance Sheet <br />and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental <br />funds. An accompanying schedule is presented to reconcile and explain the differences in net assets as <br />presented in these statements to the net assets presented in the government-wide financial statements. The <br />Agency has presented all funds as major funds. <br /> <br />All governmental funds are accounted for on a spending or II current financial resources II measurement focus <br />and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are <br />included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances <br />present increases (revenues and other financing sources) and decreases (expenditures and other financing <br />uses) in net current assets. Under modified accrual basis of accounting, revenues are recognized in the <br />accounting period in which they become both measurable and available to finance expenditures of the <br />current period. <br /> <br />Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days <br />_ after year-end) are recognized when due. The primary revenue sources, which have been treated as <br />susceptible to accrual by the Agency, are property tax, sales tax, intergovernmental revenues and other <br />taxes and investment income. Expenditures are recorded in the accounting period in which the related <br />fund liability is incurred. <br /> <br />Deferred revenues arise when potential revenues do not meet both the "measurable" and "available" <br />criteria for recognition in the current period. Deferred revenues also arise when the government receives <br />resources before it has a legal claim to them, as when grant monies are received prior to incurring <br />qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when <br />the government has a legal claim to the resources, the deferred revenue is removed from the combined <br />balance sheet and revenue is recognized. <br /> <br />The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements 15 <br />provided to explain the differences created by the integrated approach of GASB Statement No. 34. <br /> <br />C. Cash and Investments <br /> <br />The Agency pools its available cash with the City for investment purposes. The City considers pooled cash <br />and investment amounts with original maturities of three months or less to be cash equivalents. <br /> <br />In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for <br />External Investment Pools, highly liquid market investments with maturities of one year or less at time of <br />purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used <br />as fair value for those securities for which market quotations are readily available. <br /> <br />23 <br />