FAR - GASB - Specific Items, Transactions, Events Flashcards
Interfund Transaction Types
- Quasi-external
- Reimbursements
- Transfers
- Loans
Quasi-external transactions
Business-type transactions take place between funds
EX: Internal Service Fund & Enterprise Fund activities providing services for a fee to other units of a govt
Revenues, expenditures, and expenses recorded in funds affected
Reimbursements
Reimburse 1 fund for expenditures/expenses recorded that should have been recorded in another fund
Recorded as an expense/expenditure in fund, making reimbursement and as a REDUCTION in expense/expenditure (not revenue) in the fund that is reimbursed
Transfers
Nonreciprocal transfers between funds w/no repayment requirement
Kinds:
- operating transfers - usually budgeted/recurring
- residual equity transfers - typically to start/close fund
- not required to distinguish between 2 kinds of transfers in financial reports
Loans
Amounts transmitted between funds that are expected to be repaid
- record receivables/payables among funds
Terminology:
- short term loans: “due to” OR “due from”
- Long term loans: “advance from” OR “advance to” require a reserve from fund balance in govt fund types
Construction Projects
Accounting for construction projects for govt activities, involves several acct entries
At a minimum:
- capital projects fund
- debt service fund
- govt activities (govt wide)
Infrastructure Assets
Highways, bridges, streets, sidewalks, sewerage, drainage, lighting (buildings are not capital assets)
Accounting for Infrastructure Assets
- Cost Reported
- Depreciation
- Modified Approach
Modified Approach
Govt can elect NOT TO DEPRECIATE infrastructure if it PRESERVES INFRASTRUCTURE IN A CONDITION EQUAL TO OR ABOVE original condition
- expenditures to preserve condition = expensed in period incurred as substitute for depreciation
Modified Approach Rule
2 requirements
1) Record-keeping
2) documentation of condition status
Modified Approach Rule
1) Record-Keeping
Up-to-date inventory of infrastructure assets
- condition assessment
- estimates of costs to maintain/preserve infrastructure in its condition level
Modified Approach Rule
2) Documentation of Condition Status
- Complete condition assessments made @ least every 3 years
- 3 most recent assessment provide evidence that condition is being preserved
Breaking Modified Approach Rule
If govt fails to maintain infrastructure in its condition level it must:
- revert to reporting depreciation on infrastructure
- discontinue use of modified approach
bonds payable used to finance major construction projects reported?
Reported as a liability in the government-wide financial statements and as a other financing sources - bond proceeds in the capital projects fund.
account name for short-term interfund receivables?
Due From XXXX
account name for long-term interfund receivables?
Advances to XXXX
payments made to contractors of a major construction project reported?
Reported as an increase to long-term assets in government-wide financial statements and as an expenditure in the capital projects fund.
principal component of debt service payments on bonds payable reported?
Reported as a decrease in Bonds Payable in government-wide financial statements and as an expenditure in the debt service fund.
A reciprocal transaction
occurs from doing business with one another, such as the billing of services by an internal service fund to other funds/departments in the
True/False
Interfund Reimbursements are Nonreciprocal Transactions in which a government determines that an expenditure or expense was initially recorded in one fund and should be accounted for and reported as an expenditure or expense in another fund.
True
True/False
government that elects to use the modified approach in accounting for infrastructure (e.g., sewer systems, roads, lighting systems) will report expenses necessary to maintain the condition of infrastructure and will not depreciate infrastructure assets
True
True/False
government that elects to use the modified approach in accounting for infrastructure (e.g., sewer systems, roads, lighting systems) will report expenses necessary to maintain the condition of infrastructure and will not depreciate infrastructure assets
True
True/False
government-wide financial statements are used to account for all unmatured long-term indebtedness of the government, except for that debt belonging to Proprietary and similar Trust Fund
True
True/False
Capital Projects Fund is used to account for financial resources to be used for the construction or acquisition of capital assets, except for those to be financed by Proprietary Funds or Trust funds. The proceeds from the issuance of the bonds should be recorded in a Capital Projects Fund, but the liability for the bonds should not be recorded in a Capital Projects Fund
True
Other types of long-term debt other than bonded dent
- claims/judgments (contingencies)
- compensated absences
- pensions
- other post-employment benefits (OPEB)
- municipal landfill
- leases
Gov’t long term liab General Rule
Fund Level:
- recognize expenditures AND fund liabilities to extent that amounts are payable with EXPENDABLE AVAILABLE FINANCIAL RESOURCES
Gov’t Activities & Proprietary Fund Level:
- report full liability AND associated EXPENSE ACCORDING TO ACCRUAL ACCT
Claims & Judgments
Accrue if:
1) Probable asset has been impaired or liab has been incurred AND
2) loss reasonably estimable
when both criteria met, apply general rule:
Report full liab & associated expense in gov’t activities
EX: personal injury, property damage, worker compensation, improper arrest
Compensated Absences
Accrue vacation/sick leave when both conditions met:
1) employee’s right to receive compensation for future absences attributable to services rendered
2) probable that the employer will compensate employees for benefits through paid time off or other means such as lump-sum cash payments
Pensions
Annual Required Contribution (ARC) = replaced Net Pension Liab
Only entry-age actuarial cost method of a percentage of payroll used
Biennial actuarial valuations also used (exception - small govts)
Pension cost
Gov’t employer acct for pension cost depends on employing fund:
- Gov’t Funds
- Proprietary Funds
Pension - Gov’t Funds
Net Pension Liab - amount expected to be liquidated with expendable available financial resources (benefit payments due and pension plan’s fiduciary net position is insufficient to pay those benefits)
Pensions Expenditure:
1) amounts paid to pension plan
2) change in beginning and ending net pension liab
Pensions - Proprietary Funds
Net Pension Liab: total pension liab net of pension plan’s fiduciary net position
Pension Expense: changes in net pension liab
Contributions made to pension trust fund are NOT expense (reduction in fund net pension liab)
Other Post-Employment Benefits (OPEB)
EX: healtchare, vision, dental, life insurance
Acct similar to pensions
Capital Leases
Similar to for-profit acct
Capital lease:
1) transfer ownership to lessee @ end of lease
2) lease contains BPO
3) Lease term >/= 75% of asset’s life
4) PV of rents >/= 90% of asset’s FMV
Capital Lease Acct
Gov’t-wide & Propreitary funds:
Lease Asset Value: Net PV of min. lease payments + initial cash payment
Gov’t Funds: No Capital Assets, recognize payments on lease as they occur
Municipal Landfill
Proprietary Fund
- Estimate total closure & postclosure costs
- Allocate yearly using units of production method
Expenditure Classifications
6 common classification schemes:
1) Fund
2) Program/function - broad purpose
3) Activity under program
4) Organizational Unit
5) Character - period of time
6) Object
Character of Expenditure
Identifies expenditures based on period benefited
1) Current: current period
2) Capital outlay: benefit current/future periods
3) Debt service: payments on debt to acquire capital outlay items that benefit past, current, future periods
4) Intergovernmental - transfers of resources from 1 gov’t entity to another
Object of Expenditure
groups expenditures according to type of item purchased/service obtained, classifications:
- personal services
- supplies
- other services/charges
- land
- buildings
- improvements
- machinery/equipment
- debt principal
- interest
- debt service charges
- intergovt
Revenue Classification
By sources:
- taxes
- licenses/permits
- intergovt revenues
- charges for services
- fines/forfeits
- miscellaneous revenues
Identifying terminology
Gov’t Funds:
1) Expenditure
2) Fund Balance
Proprietary/Fiduciary:
1) Expenses
2) Net Position (not R/E or O/E)
Nonexchange Transactions
1) Derived tax revenues
2) imposed tax revenues
3) Govt - mandated
4) voluntary
Derived tax revenues
Taxes assessed on exchange transactions
EX: fuel, sales, cigarette tax
Recognition: when underlying exchange transaction occurs (fuel is purchased)
Imposed tax revenues
tax assessed or other levy on nongovt entity for an act committed or omitted, act is NOT an exchange transaction
EX: property taxes, parking fines
Recognition: when legally enforceable claim = established (establish tax levy) and can be objectively measured
Gov’t mandated
legislatively enabled grants mandates implementation of particular programs by recipient gov’t
EX: mandated environmental protection programs OR drugs/alcohol abuse programs
Recognition: when eligibility requirements are met and is both measurable and available
Voluntary transactions
Legislative/contractual agreements between willing parties
EX: special education cost programs OR state distribution of resources to cities for street improvements
Recognition: when eligibility requirements are met and is BOTH measurable/available
Grant Eligibility Requirements
Recipients specified by grant provider
1) Time requirements: time period in which grant must be used
2) Purpose requirements: specific program or purpose
Allowable costs (identifies what costs are allowed/costs not allowed)
“expenditure driven - usually grant monies are provided as reimbursement
Deferred Item
grant in which a time requirement has NOT been met to be reported as a DEFERRED INFLOW OF RESOURCES on B/S
causes - failure to meet:
1) time restrictions OR
2) eligibility requirements
Pollution Remediation
EX: asbestos contamination, hazardous spills, lead paint contamination, contaminated waterways, leaky underground storage tanks
Obligation are recognizable as liab when:
1) gov’t knows/reasonable believes that a site is polluted AND
2) obligating event occurs (5 types)
Pollution Remediation Obligations
5 obligating events
1) pollution poses as imminent danger to public/environment
2) gov’t violates pollution prevention related permit or license
3) regulator identifies gov’t as responsible for cleaning up pollution
4) govt named in lawsuit to compel it to address pollution
5) govt commences or legally obligates itself to clean up activities
Common types of intangibles
- right-of-way easements
- patents, copyrights, trademarks
- land use rights
- licenses/permits
- computer software: purchased/licensed, internally generated
Internally generated software
3 stages
1) preliminary project stage: conceptual stage (evaluate alternatives)
2) application development stage - design, code, install hardware, test
3) post-implementation/operation stage - train/maintenance
Classification based on nature of activity rather than timing of occurrence
Recognition of Internally generated software
1) preliminary project - expense
2) application development - capitalize
3) post-implementation/operation - expense
Software modification
Capitalized IF:
- increases functionality, efficiency, or extends U/L
Otherwise -> expensed
Land & Real Estate held as investments by endowments
land/other real estate held as investments by endowments reported @ FV @ reporting date
Changes in FV = investment income
Reporting Requirements
Report FV of derivatives in statement on net position
Report change in FV each period:
1) Investment derivatives - as income in statement of revenues, expenses, and changes in net position
2) Hedging derivatives - as deferrals in statement of net position
