F8: Deferred Outflows & Inflows of Resources Flashcards
If not an asset or liability, then how do we account for?
As a deferred outflow/inflow
Deferred outflow definition:
Consumption of net assets that is applicable to a future reporting period
Deferred outflows have a ______ effect on net position
Positive
Deferred outflows are reported where?
Following assets but before liabilities
Deferred inflow definition:
An acquisition of net assets that is applicable to a future reporting period
Deferred inflows have a ______ effect on net position
Negative
Deferred inflows are reported where?
After liabilities but before equity
Types of transactions that are classified as deferred outflows/inflows:
- Service concessions arrangements
- Derivatives instruments and hedge accounting
- Imposed nonexchange revenue transactions
- Refunding of debt
- Sales and intra-equity transfers of future revenues
Definition of a service concession arrangement
Payments by an operator to a government for the right to operate and collect user fees from third parties
(example: toll road)
SCA is a deferred inflow/outflow IF:
- An upfront payment took place
- Operator collects and is compensated by fees from 3rd parties
- Transferor has ability to modify/approve what services operator can provide
- Transferor is entitled to significant residual interest
Government side (transferor) in a SCA
- Continues to show asset as capital asset
- Displays a liability for contractual obligations
- Upfront payments are shows as an asset at PV
- Deferred inflows recognized in a systematic manner
Derivative instruments definition
Used by state and local governments to manage specific risks or to make investments
Examples of commonly used derivative instruments
- Interest rate and commodity swaps
- Interest rate locks
- Options
- Swaptions
- Forward contracts
- Futures contracts
Derivatives are reported at what?
-Reported at fair value
Changes in value of derivatives used as investments are displayed where?
Within the investment revenue classification (in earnings)
Changes in value of derivatives used for hedging activities are displayed where?
As either deferred outflows or inflows
Effective versus Ineffective hedging derivatives:
If Effective = reported as if they were effective from inception
If Ineffective = evaluated as of the end of the prior reporting period
Termination of hedge accounting occurs when:
- Hedging instruments are no longer effective
- Expected transactions are no longer probable
- Hedged transactions are executed
Imposed nonexchange revenue transactions reported as a receivable before their formal levy (such as property taxes before fully levied) are reported as what?
Deferred inflows
Changes in government’s pension liability are accounted for in one of two ways:
1- expensed
2- deferred inflows/outflows
Changes in government’s pension liability are expensed if:
changes resulted from current service costs and interest
Changes in government’s pension liability are deferred if:
Changes resulted from changes in actuarial assumptions
