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Becker FAR Cards > FAR Chapter# 9 > Flashcards

FAR Chapter# 9 Flashcards

1
Q

FAR 9-1 - GOVERNMENTAL ACCOUNTING | What are the basic sections of external financial reports for governmental entities using the integrated reporting model established by GASB #34?

A

Management’s discussion and analysis (required supplementary information)

Government-wide financial statements

Fund financial statements (reconciled to government-wide financials)

Notes to the financial statements

Required supplementary information (RSI)

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2
Q

FAR 9-2 - GOVERNMENTAL ACCOUNTING | What sections of the external financial reporting model represent the basic financial statements?

A

Governement-wide financial statements

Fund financial statements

Notes to the financial statements

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3
Q

FAR 9-3 - GOVERNMENTAL ACCOUNTING | For governmental entities, what are the detailed external financial reporting requirements?

A

Government-wide statements

  • Statement of net assets
  • Statement of activities

Government fund statements

  • Balance sheet
  • Statement of revenues, expenditures, and changes in fund balances
  • Reconciliation to the government-wide statements

Proprietary fund statements

  • Balance sheet/ statement of net assets
  • Statement of revenues, expenses, and changes in fund net assets
  • Statement of cashflows, direct format

Fiduciary fund financial statements

  • Statement of fiduciary net assets
  • Statement of changes in fiduciary net assets

Notes to the financial statementsx

  • Schedule of changes in capital assets
  • Schedule of changes in long term liabilities

Required supplementary information

  • MD&A
  • Budgetary comparision statements
  • Pension and infrastructure info
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4
Q

FAR 9-4 - GOVERNMENTAL ACCOUNTING | What is CAFR? What does it include?

A

CAFR: Comprehensive Annual Financial Report

Introductory Section

  • Letter of transmittal
  • Organizational chart
  • List of principal officers

Basic finanical statements and required supplementary info (GASB #34)

  • MD&A
  • Government-wide financial statements
  • Fund financial statements
  • Notes to the financials
  • Required supplementary info

Statistical section

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5
Q

FAR 9-5 - GOVERNMENTAL ACCOUNTING | What are the minimum disclosure requirements on the government-wide statements of net assets?

A

Primary government

  • Government activities
  • Business-type activities
  • Total primary government activities

Discretely presented component units

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6
Q

FAR 9-6 - GOVERNMENTAL ACCOUNTING | What are some of the major topics included in Managements Discussion & Analysis (MD&A)?

A

Description of the basic financial statements

Identity of the primary government and discrete component units

Economic conditions and outlook

Major initiatives

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7
Q

FAR 9-7 - GOVERNMENTAL ACCOUNTING | Indentify the three components of net assets displayed on government-wide financial statements.

A

Invested in capital assets, net of related debt

Restricted

Unrestricted

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8
Q

FAR 9-8 - GOVERNMENTAL ACCOUNTING | Define infrastructure assets, and describe where they are reported.

A

Infrastructure assets refer to streets, bridges, gutters, water systems, and other assets of the government.

They are reported as assets in the government-wide statements, at historical cost and depreciated unless certain conditions are met for reporting using the modified approach.

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9
Q

FAR 9-9 - GOVERNMENTAL ACCOUNTING | What is the appropriate reporting treatment of donanted works of art and historical treasures held by a governmental organization?

A

Governments may elect not to capitalize donated works of art if works are protected and displayed and proceeds from any future sales are going to be reinvested in other works.

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10
Q

FAR 9-10 - GOVERNMENTAL ACCOUNTING | When are eliminating entries made as part of preparing government-wide financial statements?

A

Interfund activities between funds that are consolidated within governmental or business-type activity reporting categories are eliminated when preparing government-wide financial statements.

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11
Q

FAR 9-11 - GOVERNMENTAL ACCOUNTING | List the components of program revenues in the statement of activities. SOC.

A

S - service charges
O - operating grants and contributions
C - capital grants and contributions

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12
Q

FAR 9-12 - GOVERNMENTAL ACCOUNTING | State the reporting treatment of internal service funds.

A

Activity resulting from internal service funds are reported in proprietary funds but should be reported in governmental activities column of the government-wide financial statements unless the government’s enterprise funds are the primary recipient of the internal service fund services.

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13
Q

FAR 9-13 - GOVERNMENTAL ACCOUNTING | What is the format of the government-wide statement of activities?

A

The government-wide statement of activities is presented in a net cost format defined as follows:

  • Revenues separated into program revenues (SOC) and general revenues.
  • Expenses are reduced by program revenues resulting in net (expense) revenue and changes net assets.
  • General revenues, extraordinary items, and special items are reported separately.
  • Results is change in net assets.
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14
Q

FAR 9-14 - GOVERNMENTAL ACCOUNTING | What is the threshold for identification as a major fund?

A

Total assets, liabilities, revenues, or expenditures/expenses of the individual fund are:

  • at least 10% of the corresponding total for fund category to which the major fund belongs, and
  • at least 5% of the corresponding total for all governmental and enterprise funds combined
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15
Q

FAR 9-15 - GOVERNMENTAL ACCOUNTING | Name some significant potential reconciling items between fund balance accounts displayed on the balance sheet of the governmental funds’ financial statements and net assets displyed in the government-wide balance sheet.

A

Reconciling items may result from differences in measurement focus or basis of accounting. (GALS BARE)
G - governmental fund equity (fund balances)+
A - assets (noncurrent) -
L - long term debt +
S - service (internal) fund net assets

B - basis of accounting
A - accrual differences
R - revenue converted from modified to full accrual
E - expenses

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16
Q

FAR 9-16 - GOVERNMENTAL ACCOUNTING | Name some significant potential reconciling items between changes in fund balance displayed on the statement of revenues and expenditures and changes in fund balance in the governmental funds’ financial statements and the change in net assets displayed in the governement-wide statement of activities.

A

Reconciling items may result from differences in measurement focus or basis of accounting. (GOES BARE)
G - governmental fund changes in fund balance +
O - other financing sources (debt proceeds)
E - expenditure - capital outlay (net of depreciation)
principal payments on debt
S - service (internal) fund change in net assets

B - basis of accounting
A - accrual differences
R - revenue converted from modified to full accrual
E - expenditures converted to expenses

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17
Q

FAR 9-17 - GOVERNMENTAL ACCOUNTING | The statement of cash flows is prepared for which funds? What are the sections of the statement of cash flows?

A

A statement of cash flows is prepared for proprietary funds.

Cash flows from operating activities
Cash flows from noncapital financancing activities
Cash flows from capital and related financing activities
Cash flows from investing activities

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18
Q

FAR 9-18 - GOVERNMENTAL ACCOUNTING | List the types of interfund transactions.

A

Reciprocal interfund activity:

  • Interfund loans
  • Interfund services provided and used

Nonreciprocal interfund activity:

  • Interfund transfers
  • Interfund reimbursements
19
Q

FAR 9-19 - GOVERNMENTAL ACCOUNTING | Define a primary government. SELF

A

Primary governments are usually represented by a general-purpose government, such as a state, county, city, or other jurisdiction that can stand by itSELF:

S - separately
E - elected boards
L - legally separate entity
Financially self-sufficient

20
Q

FAR 9-20 - GOVERNMENTAL ACCOUNTING | Define a component unit.

A

Component units are those governmental or not-for-profit organizations that either do not meet the primary government or are so intertwined with the primary government that exclusion from the primary government’s financial statements would cause the primary government’s financial statements to be misleading.

21
Q

FAR 9-21 - GOVERNMENTAL ACCOUNTING | What two methods are available for reporting component units of a primary government in the primary government’s financial statements?

A

Blended: Consolidated with the primary government

Discrete: Shown in a separate column as a component unit

22
Q

FAR 9-22 - GOVERNMENTAL ACCOUNTING | Define the criteria for discrete and blended presentations of component units.

A

Blended: When the component unit is, in substance, the same as the primary government:

  • A board of the component unit is “substantively the same as that of the primary government.”
  • The component unit serves the primary government exclusively or almost exclusively.
  • The component unit is not a legal entity.

Discrete: When the critera for blended presentation are not met.

23
Q

FAR 9-23 - NOT-FOR-PROFIT ORGANIZATIONS | Identify the basis of accounting for not-for-profit organizations.

A

Accrual basis of accounting

24
Q

FAR 9-24 - NOT-FOR-PROFIT ORGANIZATIONS | Name the primary authoritative source for GAAP for not-for-profit organizations.

A

Financial Accounting Standards Board

25
Q

FAR 9-25 - NOT-FOR-PROFIT ORGANIZATIONS | What financial statements are prepared for nongovernmental not-for-profit entitites?

A

Statement of financial position

Statement of activities

Statement of cash flows

Statement of functional expenses (voluntary health and welfare organizations)

26
Q

FAR 9-26 - NOT-FOR-PROFIT ORGANIZATIONS | Name the classificiation of net assets.

A

Unrestricted
Temporarily restricted
Permanently restricted

27
Q

FAR 9-27 - NOT-FOR-PROFIT ORGANIZATIONS | Identify the four required elements in the statement of activities for not-for-profit organizations.

A

Change in total net assests
Change in unrestricted net assets
Change in temporarily restricted net assets
Change in permanently restricted net assets

28
Q

FAR 9-28 - NOT-FOR-PROFIT ORGANIZATIONS | Name the classifications of the statement of cash flows for not-for-profit organizations.

A

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

29
Q

FAR 9-29 - NOT-FOR-PROFIT ORGANIZATIONS | Name the functional classification of expenses commonly used in not-for-profit organizations.

A

Program Expenses

Support Expenses

  • Fundraising expenses
  • Management and general
30
Q

FAR 9-30 - NOT-FOR-PROFIT ORGANIZATIONS | What are the recognition criteria for: Cash contributions, Unconditional promises, Conditional promises, Multi-year pledges?

A

Cash contributions:
As revenues or gains in the period in which they are received, measured at fair value at the date of gift

Unconditional promises (pledges):
Recorded at its fair value when received
Conditional promises (pledges):
Recognition occurs when future event occurs (conditions met)

Multi-year pledges:
Recorded at net present value at the date the pledge is made, with future collections considered temporarily restricted (by time)

31
Q

FAR 9-31 - NOT-FOR-PROFIT ORGANIZATIONS | How are pledges accounted for?

A

Unconditional promises to contribute in the future (pledges) are reported as restricted support (time restriction), at the present value of the estimated future cash flows using the discount rate commensurate with the risks involved.

32
Q

FAR 9-32 - NOT-FOR-PROFIT ORGANIZATIONS | When are donated services displayed as a revenue and expense (or capital improvement) on financial statements of not-for-profit organizations? SOME

A

Donated services are recognized as revenue of the financial statements of not-for-profit organizations SOME of the time. Recognized donated services must meet the following criteria:

The service creates or enhances nonfinancial assets or:
S - specialized skill was required
O - otherwise needed service, would have been purchased by the organization anyway
ME - measured easlily (accurate valuation of the service is easy)

33
Q

FAR 9-33 - NOT-FOR-PROFIT ORGANIZATIONS | How are donated materials accounted for?

A

Donated materials are recoreded as revenue at fair value on date of receipt, if the fair value can be objectively determined.

Contributions of works of art, historical treasures, etc., need not be recognized as revenue if they are protected by the organization, held by the organization for display and, if sold, the proceeds of the sale are designated for the acquisitions of other works.

34
Q

FAR 9-34 - NOT-FOR-PROFIT ORGANIZATIONS | What does the term variance power mean in the context of not-for-profit accounting and reporting?

A

Variance power defines the extent to which an organization has desretion over the use of resources it receives. The presence or absence of variance power govers the recognition of the asset received as revenue or a liability.

35
Q

FAR 9-35 - NOT-FOR-PROFIT ORGANIZATIONS | In considering transferring assets from a recipient organization to a beneficiary organization, when are the assets received recognized as liabilities by the recipient organization?

A

When assets are transferred without variance power, so that the recipient organization does nto hav ethe unilateral authority to redirect assets to another beneficiary, those transfers are recognized as liabilities.

36
Q

FAR 9-36 - NOT-FOR-PROFIT ORGANIZATIONS | In considering transfering assets from a recipient organization, when are the assets received recognized as revenue by the recipient organization?

A

When assets are transferred with variance power, which gives the recipient organization the unilateral authority to redirect assets to another beneficiary, the transfer is recognized as revenue.

37
Q

FAR 9-37 - NOT-FOR-PROFIT ORGANIZATIONS | How are marketable securities reported?

A

All debt securities and those equity securities that have readily determinable fair values are measured at fair value.

38
Q

FAR 9-38 - NOT-FOR-PROFIT ORGANIZATIONS | Where are gains and losses on investments reported?

A

Gains and losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets, unless the use of the investment is restricted by explicit donor stipulations or by law.

39
Q

FAR 9-39 - NOT-FOR-PROFIT ORGANIZATIONS | is depreciation expense recoreded in the financial statements of a not-for-profit organization?

A

Depresciation expense and accumulated depreciation are recorded.

40
Q

FAR 9-40 - NOT-FOR-PROFIT ORGANIZATIONS | For a university, identify common unrestricted revenues.

A

Student tuition and fees, at gross

Government aid, grants, and contracts

Gifts and private grants

Endowment income

Sales and services of educational departments

Revenues of auxiliary enterprises

41
Q

FAR 9-41 - NOT-FOR-PROFIT ORGANIZATIONS | If student tuition and fees are displayed at gross amount, what happens to scholarships and tuition waivers?

A

Scholarships and tuition waivers may be displayed as expenditures or as a contra reveune line item.

42
Q

FAR 9-42 - NOT-FOR-PROFIT ORGANIZATIONS | For health care entities, identify the revenue accounts.

A

Patient service revenue, including patient services and other operating revenue.

Other operating revenue, including tuition from schools, educational programs, donated supplies and equipment, and specific purposes grants.

Nonoperating revenue, gains and/or losses, including unrestricted interest and dividend income from investment activities, unrestriced grants, donated services, etc.

43
Q

FAR 9-43 - NOT-FOR-PROFIT ORGANIZATIONS | Describe how patient service revenue is recorded.

A

Patient service revenue is recorded on the gross basis using established rates. Note that charity care does not qualify for recognition as revenue.

Provisions for contratual adjustments and discounts are then deducted to arrive at net service revenue.

The allowance for uncollectibles is treated as an expense for the period during which the services are provided.

44
Q

FAR 9-44 - NOT-FOR-PROFIT ORGANIZATIONS | Describe the treatment of charity care in a health care organization.

A

Charity care is not recognized as either revenue or expense on the financial statements of a healthcare organization.

Charity care represents services for which the healthcare organization does not anticipate any cash flows.

Becker FAR Cards (10 decks)

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