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<br />NaTE 10 - NET ASSETS AND FUND BALANCES <br /> <br />GASB Statement No. 34 adds the concept of net assets, which is measured on the full accrual basis, to the <br />concept of fund balance, which is measured on the modified accrual basis. <br /> <br />A. <br /> <br />Net Assets <br /> <br />Net assets are the excess of all the City's assets over all its liabilities, regardless of fund. Net assets are <br />divided into three captions under GASB Statement No. 34. These captions apply only to net assets, <br />which is determined only at the government-wide level and are described below: <br /> <br />Invested in capital assets~ net of related debt describes the portion of net assets which is represented by the <br />current net book value of the City's capital assets, less the outstanding balance of any debt issued to finance <br />these assets. <br /> <br />Restricted describes the portion of net assets which is restricted as to use by the terms and conditions of <br />agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot <br />unilaterally alter. These principally include developer fees received for use on capital projects, debt service <br />requirements, and redevelopment funds restricted to low and moderate income purposes. <br /> <br />Unrestricted describes the portion of net assets which is not restricted as to use. <br /> <br />B. <br /> <br />Fund Balances~ Reserves and Designations <br /> <br />In the fund financial statements, fund balances represent the net current assets of each fund. Net current <br />assets generally represent a fund's cash and receivables, less its liabilities. Portions of a fund's balance may <br />be reserved or designated for future expenditure. <br /> <br />Reserves: <br /> <br />Portions of fund balance have been reserved for specific purposes as follows: <br /> <br />Encumbrances - A reservation is reported for encumbrances outstanding at year-end since they are <br />not considered an expenditure or liability and are reappropriated in the subsequent year. <br /> <br />Loans - An amount equal to the non-current portion of loans is reserved as it is not available to <br />finance current operations. The non-current portion is that principal portion of a loan which is not <br />expected to be repaid within 12 months. <br /> <br />Land Held for Redevelopment - Land held by governmental funds for redevelopment is reserved as it <br />is not available to finance current operations. <br /> <br />Low Income Housing - Pursuant to California Health and Safety Code, Division 24, Section 3334.2, <br />20% of all property tax increment revenues received by the Redevelopment Agency must be set aside <br />and used exclusively for projects related to low and moderate income housing. <br /> <br />Inventory - Inventory held within governmental funds is reserved as it is not available to finance <br />current operations. <br /> <br />Prepaid Expenditures - Expenditures that are paid in the current fiscal year for services or products to <br />be provided in the following fiscal year. <br /> <br />48 <br />