19.2 Flashcards
A local government reports the following:
Deferred outflow of resources from an enterprise fund: $40,000
Due to debt service fund from general fund: 185,000
Total defined benefit pension liability of a pension trust fund: 860,000
Noncurrent liability of an enterprise fund for an operating lease: 10,000
Liability of an investment trust fund for the external portion of an external investment pool sponsored by the local government: 250,000
The amount reported as liabilities in the government-wide statement of net position is
$10,000.
A deferred outflow of resources from an enterprise fund is a consumption of net assets that applies to a future period, not a liability. The government-wide statements do not report transactions within activities (business-type or governmental). The debt service fund and general fund are governmental funds engaged in governmental activities. A pension trust fund and an investment trust fund are fiduciary funds. Fiduciary funds and similar component units are not reported in the government-wide statements. However, general long-term debt reported in the liabilities section of the government-wide statement of net position is not limited to liabilities from debt issuance. It also may include noncurrent liabilities for capital and operating leases. Thus, the noncurrent liability of an enterprise fund for an operating lease ($10,000) is the only listed item reported. Information about the activities of an enterprise fund (a proprietary fund) is reported in the business-type activities column of the government-wide statement of net position.
A government-wide statement of net position must include which of the following?
A distinction between governmental and business-type activities.
Government-wide financial statements report information about the government as a whole. Thus, they do not display funds or fund types. The governmental activities and business-type activities of the primary government are separately presented. Governmental activities normally are financed by nonexchange revenues (taxes, etc.). They are reported in governmental and internal service funds. Business-type activities are financed at least in part by fees charged to external parties for goods and services. They are reported in enterprise funds.
A local government reports the following:
Due to internal service fund from general fund data services: $450,000
Refunds payable from an agency fund: 110,000
Liability of a proprietary fund for compensated absences: 65,000
Accounts payable of governmental funds: 230,000
The amount of the items that is reported in the liabilities section of the government-wide statement of net position is
$265,000.
The government-wide statements do not report transactions within activities (business-type or governmental). An internal service fund’s provision of services to a governmental fund (the general fund) is a governmental activity. Although an internal service fund is a proprietary fund, most of its activities are governmental. Fiduciary funds and similar component units are not reported in the government-wide statements. An agency fund is a fiduciary fund. But accounts payable of governmental funds are reported in the governmental activities column of the government-wide statement of net position. The liability of a proprietary fund for compensated absences is reported in the business-type activities column. The amount reported in the liabilities section is $295,000 ($230,000 + $65,000).
Which of the following statements meet the measurement and recognition criteria for landfill closure and postclosure costs?
Equipment and facilities included in estimated total current cost of closure and postclosure care should not be reported as capital assets.
The estimated total current cost of landfill closure and postclosure care includes the cost of (1) equipment expected to be installed and (2) facilities expected to be constructed near or after the date that the landfill stops accepting waste and during the postclosure period. In a governmental fund, expenditures and fund liabilities for closure and postclosure care should be recognized using the modified accrual basis. The remainder of the liability is recognized as a general long-term liability. Facilities and equipment included in estimated total current cost are reported as expenditures, not as capital assets. In a proprietary fund, the equipment is reported as a reduction of the accrued liability for closure and postclosure care when it is acquired and not as capital assets.
The government-wide financial statements of the reporting entity of a state or local governmental unit include information about which of the following?
I. The primary government
II. Discretely presented component units
III. Blended component units
I, II, III.
The financial statements of the reporting entity should distinguish between the primary government and its component units in a way that does not suggest that they are one legal entity. For this purpose, the government-wide financial statements should report information about most discretely presented component units. Discrete presentation also includes reporting of major component unit information in the basic statements. Furthermore, some component units are, in substance, the same as the primary government and should be reported as a part of it. Blending is appropriate only if the component unit’s governing body is substantively the same as the primary government’s, or the component unit exclusively or almost exclusively benefits the primary government. Moreover, the primary government must have (1) a financial benefit or burden relationship with the component or (2) operational responsibility for its activities.
Which of the following statements about government-wide financial statements is true?
A distinction is made between the primary government and its discretely presented component units.
Two major distinctions are made in the government-wide financial statements: (1) between the primary government and its discretely presented component units and (2), within the primary government, between governmental activities and business-type activities.
A statement of cash flows for proprietary funds
Must be prepared using the direct method.
A statement of cash flows is required for proprietary funds, and the direct method (including a reconciliation of operating cash flows to operating income) is required. The direct method reports major classes of gross operating cash receipts and payments and their sum (net cash flow from operating activities). The minimum classes to be reported are cash receipts from customers, cash receipts from interfund services provided, other operating cash receipts, cash payments to employees for services, cash payments to other suppliers, cash payments for interfund services used, and other operating cash payments.
A state or local government’s statement of fiduciary net position is most likely to
Include the financial statement for a defined benefit pension plan in the notes.
The notes present financial statements for individual defined benefit plans and other postemployment benefit plans. But separate GAAP reports may be issued.
A state or local government’s statement of fiduciary net position is most likely to
Include the financial statement for a defined benefit pension plan in the notes.
The notes present financial statements for individual defined benefit plans and other postemployment benefit plans. But separate GAAP reports may be issued.
At the end of the fiscal year, a state government reported capital assets of $20 million, accumulated depreciation of $5 million, restricted assets of $3 million, and liabilities of $7 million. What amount should the government report as the total net position in its government-wide financial statements?
$11 million.
Total net position in the government-wide financial statements should be displayed as three components. Net investment in capital assets includes capital assets, net of accumulated depreciation, minus outstanding debt related to acquiring, constructing, or improving the assets. Related deferred inflows and outflows of resources also are included. (Unspent debt proceeds and deferred inflows of resources existing at period-end are excluded.) Restricted net position equals restricted assets minus related liabilities and deferred inflows of resources. Unrestricted net position is the net of (1) assets, (2) deferred outflows of resources, (3) liabilities, and (4) deferred inflows of revenue not included in the other components.
Total net position therefore is calculated as follows:
Capital assets net of accumulated depreciation ($20 million – $5 million): $15 million
Restricted assets: 3 million
Liabilities: (7 million)
Total net position: $11 million
The government-wide statement of activities of a state or local government does not
Include extraordinary items and special items in program revenues.
The following are reported separately at the bottom of the statement of activities: (1) contributions to endowments, (2) contributions to permanent fund principal, (3) transfers between governmental and business-type activities, and (4) special and extraordinary items. Extraordinary items are unusual in nature and infrequent in occurrence. Special items are reported separately before extraordinary items. They are (1) unusual or infrequent but not both and (2) within the control of management.
The following transactions were among those reported by Corfe City’s electric utility enterprise fund for the year just ended:
Capital contributed by subdividers: $900,000
Cash received from customer households: 2,700,000
Proceeds from sale of revenue bonds: 4,500,000
In the proprietary funds statement of cash flows for the year ended December 31, what amount should be reported as cash flows from the electric utility enterprise fund’s capital and related financing activities?
$5,400,000.
Cash flows should be classified as operating, noncapital financing, capital and related financing, or investing. Operating activities include producing and delivering goods and providing services. Thus, cash from customer households is a revenue item reported under cash flows from operating activities. Capital and related financing activities include acquiring and disposing of capital assets, borrowing and repaying money related to capital asset transactions, etc. Assuming the sale of revenue bonds and the capital contributions by subdividers are for the acquisition or improvement of capital assets, the amount to report under capital and related financing activities is $5,400,000 ($900,000 + $4,500,000).
The portion of capital improvement special assessment debt maturing in 5 years, to be repaid from general resources of the government, should be reported in the
Government-wide statement of net position.
If the government is obligated for capital improvement special assessment debt, it should be reported as a general long-term liability only in the governmental activities column of the government-wide statement of net position (except for any portion related to, and expected to be paid from, proprietary funds). The public benefit portion (the amount repayable from general resources of the government) is treated in the same manner as other general long-term liabilities.
Items reported only in the fund financial statements of the primary government are those arising from
Fiduciary activities.
The resources of fiduciary activities are not available to finance the government’s programs. Thus, they are reported only in the fund financial statements. Fiduciary activities are reported in or with the fiduciary funds of the primary government. Fiduciary component units are included only in the fund financial statements with the primary government’s fiduciary funds.
Flac City recorded a 20-year building rental agreement as a capital lease. The building lease asset was reported as a noncurrent asset in Flac’s government-wide financial statements. How should the lease liability be reported?
Capital Lease obligation.
If a capital lease results from acquiring or constructing a capital asset, that is, a capital asset not reported in the fund financial statements, the transaction is recognized by debiting expenditures and crediting other financing sources in the general fund. Furthermore, the accounting and reporting should be consistent with that for general obligation bonded debt. Consequently, the related liability is a noncurrent liability. It should be reported only in the governmental activities column of the government-wide statement of net position as a capital lease obligation in the noncurrent liabilities section.
