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COUNTY OF HAWAII <br /> Notes to the Basic Financial Statements <br /> June 30,2005 <br /> Operating Revenues and Expenses <br /> Revenues and expenses are distinguished between operating and nonoperating items for the <br /> proprietary funds. Operating revenues generally result from providing services in connection <br /> with the proprietary funds'principal ongoing operations. The principal operating revenues of <br /> the proprietary funds are fees charged to residents for rent and rental subsidies received from <br /> the federal government. <br /> Operating expenses include the costs associated with providing housing for tenants,such as <br /> utilities, lease rent,and maintenance and repairs;administrative expenses,and depreciation <br /> on capital assets. All revenues and expenses not meeting these definitions are reported as <br /> nonoperating revenues and expenses. <br /> Use of Estimates <br /> The preparation of the basic financial statements in conformity with GAAP requires <br /> management to make estimates and assumptions that affect the reported amounts of assets and <br /> liabilities,as well as disclosure of contingent assets and liabilities at the date of the financial <br /> statements,and the reported amounts of revenues,expenditures,and other financing sources <br /> and uses during the reporting period. Actual results could differ from those estimates. <br /> Reclassifications <br /> Certain 2004 amounts have been reclassified to conform to the 2005 financial statement <br /> presentations. Such reclassifications had no effect on previously reported change in net <br /> assets. <br /> Recently Adopted Governmental Accounting Pronouncements <br /> For the fiscal year ended June 30,2005,the County implemented GASB Statement No.40, <br /> Deposit and Investment Risk Disclosures—an Amendment of GASB Statement No. 3. This <br /> statement addresses common deposit and investments risks related to credit risks, <br /> concentration of credit risk, interest rate risk,and foreign currency risk. As an element of <br /> interest rate risk,this statement requires certain disclosures of investments that have fair <br /> values that are highly sensitive to changes in interest rates. Deposit and investment policies <br /> related to the risks identified in this statement also are required to be disclosed. <br /> Implementation of GASB Statement No.40 did not have an impact on the County's financial <br /> statements as of and for the year ended June 30,2005 but required additional disclosures <br /> related to deposits and investment risks(see Note 3). <br /> - 53 - <br />