2025 Annual Comprehensive Financial Report

CITY OF SHAKOPEE

NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2025

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position (Continued)

7. Deferred Outflows/Inflows of Resources (Continued)

The City presents deferred inflows of resources on the Statements of Net Position for deferred inflows of resources related to pensions and other postemployment benefit resources. Deferred inflows of resources related to pensions results from the net difference between projected and actual earnings on plan investments, changes in proportionate share and the differences between expected and actual economic experience.

8. Compensated Absences

Under the City's personnel policy and union contracts, City employees are granted vacation and sick in varying amounts based on their length of service. Certain employees are also granted compensatory time. Vacation accruals for full-time employees vary from 10-30 days per year based on years of service. Sick leave accrual is 12 days per year. The City compensates employees who leave municipal service in varying amounts based on their length of service. Vacation and sick leave benefits are recorded as expenditures in the Employee Benefits Internal Service Fund and governmental funds when the obligations have matured and are expected to be liquidated with expendable financial resources. The liability for compensated absences reported in the government-wide and proprietary fund statements consists of unpaid, accumulated annual vacation, sick and compensatory balances. The liability has been calculated using the vesting method, in which leave amounts for employees eligible to receive termination payments and used sick leave during the year are included and an additional liability for nonvested leave that the employer considers more likely than not that the nonvested leave will be used. The current portion of this liability is based on an estimate of the cost during the upcoming year. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures. In the government-wide financial statements and proprietary fund types in the fund financial statements, long term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type Statement of Net Position. Enterprise fund bond premiums and discounts, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. 9. Long-Term Obligations

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