Deriving Government-wide Financial Statements and Reconciliation Requirements

Question 1

Reconciliation requirements

Answer 1

financial statement presentation for governments requires a reconciliation of the equity presented on the balance sheet and the increase/decrease in equity presented in the operating statement from the governmental fund perspective to the government-wide financial statements

the difference between governmental fund and government-wide financial statements are the result of differences in the measurement focus and basis of accounting used by each presentation

Question 2

Measurement focus differences

Answer 2

reconciliation of governmental fund financial statements to the government-wide financial statements involves elimination of the effect of using the current financial resources measurement focus for governmental fund financial statements instead of the economic resources measurement focus used in government-wide financials; generally, this involves adjustment of capital asset and long-term debt accounts

Question 3

Basis of accounting differences

Answer 3

reconciliation of governmental fund financial statements to the government-wide financial statements involves elimination of the effect of using the modified accrual basis of accounting in governmental fund financial statements instead of the full accrual basis of accounting used in government-wide financial statements; generally, this involves increasing revenues to show revenues earned rather than only those measurable and available and recognizing expenses when incurred rathe than expenditures of current resources

Question 4

Reconciliation of the governmental funds balance sheet to the government-wide statement of net position

Answer 4

total fund balance presented in the governmental funds balance sheet must be reconciled to net position from governmental activities presented in the government-wide statement of net position; this reconciliation includes the following:

adjustments for the difference in measurement focus:

add capital (non-current) assets
subtract related accumulated depreciation
subtract non-current liabilities

adjustments for the difference in basis of accounting:

eliminate deferred inflows associated with recognized revenues (amount of eliminated deferred inflows added)

subtract accrued liability for interest payable

consolidation entries:

add internal service fund net position

Question 5

Reconciliation of governmental funds statement of revenues, expenditures, and changes in fund balance to the government-wide statement of activities

Answer 5

net change in fund balances presented in the governmental funds statement of revenues, expenditures, and changes in fund balances must be reconciled to the change in net position of governmental activities presented in the government-wide statement of activities; this reconciliation includes the following:

adjustments for the difference in measurement focus:

add capital outlay expenditures
add principal payment on debt
subtract NBVs of capital assets disposed of during the period
subtract debt proceeds shown as other financing sources

adjustments for the difference in basis of accounting:

add recognized revenues that are measurable but unavailable
accrue interest expense
record depreciation expense

consolidation entries:

add internal service fund change in net position