F10 - Governmental Accounting: Part 3 Flashcards
M1 - Form and Content of the ACFR
The focus of government-wide financial statements
is the government’s responsibility to report the extent to it has met its operating objectives efficiently and effectively, using all resources available for that purpose, and the extent to which it can continue to meet its objectives for the future.
Government-wide financial statements focus on operational accountability
M1 - Form and Content of the ACFR
An Annual Comprehensive Financial lReport (ACFR) is divided into three sections:
- an introductory section,
- the basic financial statements along with other required supplementary informations mandated by GASB 34
- statistical section, which by definition, is NOT part of the basic financial statements.
M1 - Form and Content of the ACFR
The Integrated Approach
Is the presentation of government-wide financial statements prepared using a uniform method of accounting and measurement focus in combination with both fund based financial statements that use the method of accounting and measurement focus appropriate to the particular fund type along with appropriate reconciliation.
M1 - Form and Content of the ACFR
The government-wide financial statements are presented using the
economic resources measurement focus using the accrual basis of accounting, similar to commercial enterprises.
M1 - Form and Content of the ACFR
Fund financial statements
are a component of the basic financial statements that, along with the government-wide financial statements and notes to the financial statements, comprise the basic financial statements of a government.
M1 - Form and Content of the ACFR
Operational accountability
takes an economic view that reports on the long-term efficient and effective use of resources.
M1 - Form and Content of the ACFR
A municipality preparing its basic financial statements and required supplementary information in accordance with GASB 34 would introduce the basic financial statements and provide analytical overview of the government’s financial statements in:
A section title Management’s Discussion and Analysis as part of the city’s required supplementary information before the basic financial statements.
M1 - Form and Content of the ACFR
Which of the following statements are required to be presented for special-purpose governments engaged only in business-type activities (such as utilities)?
The financial statements required for enterprise funds, including MD&A and RSI.
M1 - Form and Content of the ACFR
Basic financial statements
established by GASB 34
- Government-wide Financial Statements,
- Fund Financial Statements
- Notes to the Financial Statements
M1 - Form and Content of the ACFR
Requires Supplementary Information (RSI)
established by GASB 34
Supplementary information covers a wide range of information including Management’s Discussion and Analysis and supporting schedules, such as combining financial statements by fund type and budget versus actual presentations.
M1 - Form and Content of the ACFR
An ACFR includes a statistical section and is divided into three sections:
- Introductory
- Financial (which includes both basic FS and RSI as required by GASB 34)
- Statistical
Neither the introductory section nor the statistical section is audited
M1 - Form and Content of the ACFR
The introductory section of a local government’s ACFR would include a
letter of transmittal along with an organization chart and a list of principal officers.
M1 - Form and Content of the ACFR
The statistical section of a government’s ACFR is distinguisehd from the information contained in the financial statements by both the character of data presented, including
data covering financial trends, and the number of fiscal years presented.
- The statistical section is likely to include 10 years of both financial and nonfinancial data relevant to financial statement users.
M1 - Form and Content of the ACFR
Fiduciary activities
should be excluded from government-wide measures of operational accountability since fiduciary resources cannot be used to support the government’s programs or other services.
- Transactions with fiduciary funds are treated as if those transactions were conducted with an independent trustee for purposes of display in the government-wide financial statements.
M1 - Form and Content of the ACFR
What is the basic criterion used to determine the reporting entity for a governmental unit?
Financial accountability
An acountability perspective provides the basis for defining the financial reporting entity.
M1 - Form and Content of the ACFR
The reporting status of a governmental unit is determined by whether it can stand alone by ““it SELF”” based on the following organizational characteristics:
-
Separately
- Elected governning body
- Legally separate entity
- Financially independent status
Governments that meet all three criteria are reported as primary governments, while those that fail any of the criteria are considered component units.
M1 - Form and Content of the ACFR
Component units
may be presented using either the discrete or blended method within the financial statements of the primary reporting entity.
- Discrete presentation is an acceptable method to present component units.
M1 - Form and Content of the ACFR
The failure of a legal entity component of the SELF test results in using
the blended method to report.
M1 - Form and Content of the ACFR
Blending
is used when the component unit is so intertwined with the primary government that it is in substance the same as the primary government.
- One indication of a component unit’s blending with the primary government is its failure of the “legal entity” test.
- Entities that are NOT legally separate entities are blended with the primary government.
M2 - Government-wide Financial Statements
The government-wide financial statements (statement of net position and statement of activities) are reported using..
economic resources measurement focus and the full accrual basis of accounting.
M2 - Government-wide Financial Statements
The statement of activities is the government-wide financial statement used to report
revenues and expenses for governmental and business-type activities.
M2 - Government-wide Financial Statements
Proprietary funds, such as enterprise funds, carry their own debt.
Amounts associated with “enterprise fund” debt is statement of net position.
M2 - Government-wide Financial Statements
When special assessment debt is to be repaid from general resources of the government,
the debt should be recorded as general long-term liabilities in the governmental activities column of the government-wide statement of net position.
M2 - Government-wide Financial Statements
Government-wide financial statements should classify net assets as:
- Net investment in capital assets
- Restricted
- Unrestricted
M2 - Government-wide Financial Statements
The government-wide statement of net position must include a
A distinction between governmental and business-type activities
- Transactions from the governmental (GRaSPP) funds and (usually) the internal service funds (the “S”) are displayed as governmental activities, and enterprise funds are displayed as business-type activities.
M2 - Government-wide Financial Statements
When government-wide financial statements are prepared for a governmental entity, interfund receivables and payables that occur between funds categorized as governmental activities and funds classified as business-type activities should be
reported as internal balances and aligned so thaat they sum to zero on the financial statements.
M2 - Government-wide Financial Statements
For purposes of government-wide financial statement
internal service funds are normally reported in the governmental activities column of the government-wide Statement of Net Position and the Statement of Activities since they are generally established to service the governmental funds.
M2 - Government-wide Financial Statements
Under the modified approach
Infrastructure expenditures are reported as expenses except for outlays that result in additions or improvments, which would be capitalized.
M2 - Government-wide Financial Statements
Donated works of art meeting certain criteria are eligible for optional capitalization at the election of the government receiving the works of art and depreciation is NOT required even if the government elects to capitalize.
To qualify for this treatment, the works of art must be held for public exhibition, be protected/unencumbered and the proceeds from the sale of any of the works must be reinvested in more works of art.
M2 - Government-wide Financial Statements
The modified approach allows governments to not report depreciation expense for eligible infrastructure asets if
- the government manages the eligible infrastructure assets using an asset management system that possesses certain characteristics
- documents that the eligible infrastructure assets are being preserved ar (or above) a condition level established by the government.
M2 - Government-wide Financial Statements
Lease obligations representing contracts that transfer ownership associated with general governmental activities are recorded as an asset and as a liability on the full accrual government-wide financial statements.
Governmental fund financial statements would record the asset financed by agreements of this type as an expenditure and the lease financing as other financing sources under modified accrual accounting.
M2 - Government-wide Financial Statements
Capital assets donated to a governmental unit should be recorded
at their estimated fair value at time of acquisition, plus ancilarry charges, if any.
M2 - Government-wide Financial Statements
The Statement of Activities in the government-wide financial statements includes
Separate columns for governmental activities, business-type activities, and discretely presented component units.
M2 - Government-wide Financial Statements
A local government would report expenses in its government-wide statement of activities by function on the full accrual basis representing the expenses directly associated with each of the functions or programs listed.
Special and extraordinary items would be displayed in a separate section of the statement beneath separate computations of net (expenses) and revenues for governmental and business-type activities.
M2 - Government-wide Financial Statements
Compensated absence liability should be calculated based uppon the pay or salary rates in effect at the balance sheet date.
The valuation of the non-current liability on the government-wide statement of net position will be equal to the number of hours employees are entitled to receive upon termination times the rate of pay earned at the balance sheet date, a point in time.
M2 - Government-wide Financial Statements
Program revenues include earnings classified as
- charges for Services,
- Operating grants and contributions, and
- Capital grants and contributions.
SOC
M2 - Government-wide Financial Statements
Nonexchange revenues in support of governmental activities, such as taxes for improvements to roads, are classified as
“general revenues” on the government-wide statement of activities.
M2 - Government-wide Financial Statements
Program revenue
is revenue directly associated with a program or function.
M2 - Government-wide Financial Statements
Franchise fees
are displayed after computation of net program (expenses) revenues for all programs by function.
M3 - Fund Financial Statements
Major fund treatment
for purposes of fund financial statement presentation requires that a fund be both 10% of its fund category’s assets, revenues, or expenditures/expenses and 5% of the combined governmental and enterprise assets, revenues and expenditures/expenses.
The general fund, regardless of if it meets the criteria, is ALWAYS treated as a major fund.
M3 - Fund Financial Statements
Governmental funds must persent their statement of financial position in a balance sheet rather than net position format.
A balance sheet formate sets:
- Assets and deferred outflows of resources equals Liabilities and deferred inflows of resources plus fund balance.
M3 - Fund Financial Statements
Depreciation
is recognized as a component of operating expenses in proprietary funds such as internal services funds.
M3 - Fund Financial Statements
Statement of Cash Flows
should be issued for all Proprietary funds (enterprise and internal service funds).
NO statement of cash flows should be issued for either governmental funds (GRaSPP) or Fiduciary funds (CIPPOE).
M3 - Fund Financial Statements
Cash equivalents
include highly liquid items that mature within 3 months of acquisition.
M3 - Fund Financial Statements
In a governmental entity’s statement of cash flows
Cash flows from capital financing activities are reported separately from cash flows from non-capital financing activities.
M3 - Fund Financial Statements
Capital financing activities
include acquiring and disposing of capital assets and any related debt.
M3 - Fund Financial Statements
Non-capital financing activities
include borrowing money for other than capital expenditures, such as tax anticipation notes.
Includes:
- Proceeds or payments related to borrowing not attributable to the acquisition, construction or improvement of capital assets.
- Cash receipts or payments related to grants or subsidies not attributable to capital purposes.
- Property taxes not designated for capital purposes.
- Cash paid to other funds (other than for interfund services)
M3 - Fund Financial Statements
Investing activities
include making and collecting loans and acquiring and disposing of debt or equity instruments including interest and dividend income.
M3 - Fund Financial Statements
Operating income is used to reconcile to cash flows from operations.
Non operating income items (such as revolving debt financing and gains on the sale of assets) are excluded from the reconciliation.
M3 - Fund Financial Statements
Cash flows from capital and related financing activities
include contributions from subdividers and proceeds from sale of revenue bonds.
M3 - Fund Financial Statements
Capital and related financing activities
include acquiring and disposing of capital assets, borrowing money for capital acquisitions and repaying amounts borrowed (including interest) as well as capital grants, special assessments levied for capital acquisitions, etc.
M3 - Fund Financial Statements
Payment of services to other funds, including payments in lieu of taxes
are treated as operating
M3 - Fund Financial Statements
Fiduciary funds must present their statement of financial position in a net position format.
Assets and deferred outflows of resources minus liabilities and deferred inflows of resources equals net position
M4 - Deriving Government-wide Financial Statements and Reconciliation Re
Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Government-wide Statement of Activities
Net change in fund balance–total governmental funds
’ + Capital outlay
‘ + Principal payments on non-current debt
‘ - Asset disposals (net book value)
‘ - Sources (other financing sources-debt proceeds)
‘ + Revenue (measurable but unavailable)
‘ - Interest expense (accrued)
‘ - Depreciation Expense
‘ + Internal Service fund net revenue
= Change in net position of governmental activities
CPAS RIDES mnemonic
M4 - Deriving Government-wide Financial Statements and Reconciliation Re
Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position
Total govenrmental fund balance
‘ + Capital assets (existing and current)
‘ - Accumulated depreciation
‘ - Non-current liabilities (existing)
‘ + Eliminate/reverse deferred inflows (add the reduction of deferred inflows associated with revenue recognized and closed to net position as an addition to net position)
‘ - Accrued interest payable
‘ + Internal Service fund net position
= Net position from governmental activities
CANS mnemonic
M4 - Deriving Government-wide Financial Statements and Reconciliation Re
The entries to convert the acquisition of a long-lived asset acquired through a lease transaction from the current financial resources measurement focus to the economic resources measurement focus would eliminate the capital outlay expenditure and related other financing sources and create a capital asset and lease liability.
DR Capital assets
CR Capital outlay expenditure
DR Other financing sources
CR Lease Liability”
M4 - Deriving Government-wide Financial Statements and Reconciliation Re
Workpaper entry to establish non-current debt
DR Net position, governmental activities
CR Non-current debt
M5 - Notes and Supplementary Information
One of the major components of the MD&A
is the description of the financial statements, which includes an analysis of the government’s overall financial position and the results of operations, including reasons for changes from the prior year.
M5 - Notes and Supplementary Information
BUdgetary comparison schedules should be prepared for the general fund each major special revenue fund qhich requires a budget.
Budgetary comparison schedules should display A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis.
M5 - Notes and Supplementary Information
Management’s Discussion and Analysis
is a required component of the required supplementary information preceding(before) the basic financial statements for general-purpose governments.
M5 - Notes and Supplementary Information
RSI is reported BEFORE (MD&A) or after (budget, infrastructure, pension) the basic financial statements.
The notes to the financial statements are integral to the financial statements and include important disclosures about the basic financial statements, not required supplementary information.
- Separate note disclosures may accompany the schedules that comprise the RSI. These disclosures (and related RSI) would follow the basic financial statements.
M5 - Notes and Supplementary Information
As part of their generic disclosures,
governments would report a description of the modified approach for reporting infrastructure, if used.
M5 - Notes and Supplementary Information
Variances between the final budget and actual amounts are
NOT a part of the budgetary copmarison schedule presented by a state or local government as part of RSI.
Variances may be presented at the option of the government but are NOT required.
M5 - Notes and Supplementary Information
Financial statements prepared in accordance with the provisions of GASB34 will include:
- Government-wide financial statements prepared using accrual basis accounting,
- fund financial statements,
- notes to the financial statements
- RSI that encompasses a letter titled “MD&A”, and budget versus actual comparisons inclusing display of the originally adopted budget and the changes that resulted in the final amended budget.
M5 - Notes and Supplementary Information
The original budget is needed to prepare the budgetary comparison schedules for alocal government.
Budgetary comparison schedules must show the original budget, the final amended budget, and actual amounts.
Variance computations and process descriptions are optional.
M5 - Notes and Supplementary Information
On what accounting basis does GASB recommend that governmental fund budgets be prepared
Modified accrual
M5 - Notes and Supplementary Information
Budgetary comparison schedules should be presented
as RSI or in the Basic Financial Statements for the general fund and for each major special revenue fund that has a legally adopted annual budget.
M5 - Notes and Supplementary Information
Budgetary comparisons must be presented on the
same basis of accounting as the adopted budget.
Example:
- modified accrual with modified accrual
- cash basis with cash basis, etc
M5 - Notes and Supplementary Information
Reporting the combining fund financial statements is
OPTIONAL
M5 - Notes and Supplementary Information
