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CITY OF PARIS, TEXAS <br />Notes to Financial Statements (Continued) <br />September 30, 2021 <br />I. Summary of Sianificant Accounting Policies (Continued) <br />E. Measurement Focus and Basis of Accounting <br />The accounting and financial reporting treatment is determined by the applicable measurement focus and basis <br />of accounting. Measurement focus indicates the type of resources being measured such as current financial <br />resources or economic resources. The basis of accounting indicates the timing of transactions or events for <br />recognition in the financial statements. <br />The government -wide financial statements are reported using the economic resources measurement focus and <br />the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability <br />is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year <br />for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility <br />requirements imposed by the provider have been met. <br />The accounts of the City are organized on the basis of funds. A fund is an independent fiscal and accounting <br />entity with a self -balancing set of accounts. Fund accounting segregates funds according to their intended <br />purpose and is used to aid management in demonstrating compliance with finance -related legal and contractual <br />provisions. The minimum number of funds is maintained consistent with legal and managerial requirements. <br />The governmental fund financial statements are reported using the current financial resources measurement <br />focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both <br />measurable and available. Revenues are considered to be available when they are collectible within the current <br />period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government <br />considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. <br />Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt <br />service expenditures, as well as expenditures related to compensated absences and claims and judgments, are <br />recorded only when payment is due. General capital asset acquisitions are reported as expenditures in <br />governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other <br />financing sources. <br />Property taxes, franchise taxes, licenses, interest, and special assessments are susceptible to accrual. Sales taxes <br />are recognized as revenue in the period when the exchange transaction on which the tax is imposed occurs. <br />Other receipts and taxes become measurable and available when cash is received by the City and are recognized <br />as revenue at that time. Entitlements and shared revenues are recorded at the time of receipt or earlier if the <br />susceptible to accrual criteria are met. Expenditure -driven grants are recognized as revenue when the qualifying <br />expenditures have been incurred and all other grant requirements have been met. <br />The proprietary funds are accounted for using the economic resources measurement focus and use the accrual <br />basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the <br />time liabilities are incurred. The proprietary fund is used to account for operations that are financed and <br />operated in a manner similar to private business enterprises, where the governing body has decided that the <br />determination of revenues earned, costs incurred, and/or net income is necessary for management <br />accountability. <br />F. Budgetary Information <br />Budgetary Basis of Accounting <br />Annual budgets are legally adopted on a basis consistent with generally accepted accounting principles for <br />all governmental funds except the capital projects fund, proprietary funds, and library trust fund. The <br />budget for the capital projects fund is legally adopted for specific projects and may exceed one year. <br />Formal budgetary integration is not employed for the proprietary funds. The City adopts an annual, <br />informal budget as a financial plan for all proprietary funds. The library trust fund includes nornbudgeted <br />29 <br />