F6M5

Question 1

Which event(s) is(are) supportive of interperiod equity as a financial reporting objective of a governmental unit?

I.

A balanced budget is adopted.

II.

Residual equity transfers out equals residual equity transfers in.

Answer 1

only the first.

A balanced budget demonstrates interperiod equity. Interperiod equity is a significant part of accountability on behalf of a governmental entity. It helps users assess whether current year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided. Residual equity transfers is an obsolete term included as a distracter.