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<br />City of Paris, Texas <br />Notes to Financial Statements <br />September 30, 2006 <br /> <br />1. Summary of Significant Accounting Policies (Continued) <br /> <br />D, Assets, Liabilities and Equity (Continued) <br /> <br />5. Capital Assets (Continued) <br /> <br />estimated historical cost if purchased or constructed. Donated capital assets are recorded at <br />estimated fair market value at the date of donation. Infrastructure acquired prior to the <br />implementation of GASB 34 are included in the fmancial statements. <br /> <br />The cost of normal maintenance and repairs that do not add to the value of the asset or <br />materially extend assets lives are not capitalized. <br /> <br />Major outlays for capital assets and improvements are capitalized as projects are constructed. <br />Interest incurred during the construction phase of capital assets of business-type activities is <br />included as part of the capitalized value of the assets constructed. The total interest expense <br />incurred by business-type activities during the current fiscal year was $1,322,300. Of this <br />amount, none was included as part of the cost of capital assets under construction in connection <br />with water line and sewer line construction projects. <br /> <br />Property, plant, and equipment of the primary government, as well as the component unit, is <br />depreciated using the straight line method over the following estimated useful lives: <br /> <br />Buildings and Improvements <br />Furniture, Fixtures and Equipment <br />Vehicles <br />Public Domain Infrastructure <br />System Infrastructure <br /> <br />20-40 years <br />5-10 years <br />5 years <br />25-45 years <br />25-30 years <br /> <br />6. Compensated Absences <br /> <br />Vacation and sick leave benefits are accumulated by City employees in accordance with <br />guidelines suggested in the City's personnel policies. <br /> <br />7. Long-Term Obligations <br /> <br />In the government-wide financial statements and proprietary fund types in the fund fmancial <br />statements, long-term debt and other long-term obligations are reported as liabilities in the <br />applicable governmental activities, business-type activities, or proprietary fund type statement <br />of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and <br />amortized over the life of the bonds using the effective interest method. Bonds payable are <br />reported net of the applicable bond premium or discount. Bond issuance costs are reported as <br />deferred charges and amortized over the term of the related debt. <br /> <br />31 <br />