Form and Content of the Annual Comprehensive Financial Report Flashcards
What are the governmental reporting standards established by GASB 34?
they require presentation of basic financial statements and required supplementary information; basic financial statements are defined as government-wide financial statements, fund financial statements, and notes to the financial statements
required and other supplementary information covers a wide range of data and presentations, including management’s discussion and analysis, which precede the basic financial statements, and other schedules related to budget, pension, and infrastructure
Governmental reporting focuses on what two important types of accountability?
operational - the focus of government-wide financial statements is to report the extent to which the government 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
fiscal - the focus of the fund financial statements is to demonstrate that the government entity’s actions in the current period have complied with public decisions concerning the raising and spending of public funds in the short-term (usually one budgetary cycle or one year)
What is the integrated approach?
the integrated approach requires financial accounting and disclosure to show operational and fiscal accountability individually and to show the relationship between operational and fiscal accountability through a reconciliation
the integrated approach requires a reconciliation of the fund financial statements to the government-wide financial statements to link the accountability objectives of the two levels of reporting
major funds are the focus of the fund statements
What is the required reporting for general purpose governmental units?
management’s discussion and analysis (MD&A) - required supplementary information
government-wide financial statements - statement of net position and statement of activities
fund financial statements - major funds are shown individually while nonmajor funds are shown in total
governmental funds: balance sheet and statement of revenues, expenditures, and changes in fund balances
proprietary funds: statement of net position, statement of revenues, expenses, and changes in fund net position, and statement of cash flows
fiduciary funds: statement of fiduciary net position and statement of changes in fiduciary net position
notes to financial statements
required supplementary information (RSI) other than management’s discussion and analysis
pension: sources of changes in net pension liability (last ten years) and information about the components of the net pension liability and related ratios (last 10 years)
budget: budgetary comparison schedules
infrastructure: information about infrastructure and assets for entities using the modified approach
other supplementary information (optional) - combining statements for nonmajor funds, variance between originally adopted and final amended budget, and variance between final amended budget and accrual
What is the annual comprehensive financial report?
governments often present an annual comprehensive financial report (ACFR); an ACFR is not a GAAP requirement; it is a presentation designed by the Government Finance Officers Association that adds an introductory section and a statistical section to the beginning and end of a GASB 34 presentation as follows:
introductory section (unaudited): letter of transmittal, organizational chart, and list of principal officers
basic financial statements and required supplementary information (audited): management’s discussion and analysis, government-wide financial statements, fund financial statements, notes to the financial statements, and required supplementary information
statistical section (unaudited): ten years of selected financial data, ten years of economic data (ex. millage rates, appraised values), and other data
The financial reporting entity
generally, the financial reporting entity consists of the primary government (general purpose governmental units and certain special purpose governmental units) and organizations for which the primary government is financially accountable (component units)
the focus of the government-wide financial statements should be on the primary government
the primary government consists of all organizations that make up the legal government entity; the primary government is considered the nucleus of the financial reporting entity; primary government entities include:
statement governments, general purpose local governments (a city or a county), and special purpose governments (a hospital authority or a school district - a governmental unit that has a single or special purpose) that meet all of the following criteria: separately elected governing body, legally separate, and fiscally independent of other state and local governments (the SELF test)
special purpose governmental units that are financially accountable to a primary government are not primary governments; like any other government, they may be engaged in governmental activities, business-type activities, fiduciary activities, and governmental and business-type activities
What is a component unit?
a component unit of the primary government is usually an organization for which the elected officials of the primary government are financially accountable; it may also be an organization that by its nature and the significance of its relationship with the primary government cannot be excluded from the primary government’s financial statements without making the primary government’s financial statements misleading or incomplete
blended presentation - some component units are so intertwined with the primary government that they are, in substance, the same as the primary government
the blended method is used when any of the following circumstances is present (only one is required): 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, and the component unit is not a separate legal entity
blended presentation includes the following features: the blended presentation combines financial information with the primary government and financial information of the component units is not presented in separate columns
discrete (or separate) presentation - it is used when the criteria for blended presentation are not met; discrete presentation displays component units in separate columns, most component units should use discrete presentation, and financial statements of the reporting entity should provide an overview of the entity based on financial accountability
if a component unit does not meet the requirements for blended presentation, it will be presented discretely when working CPA exam questions regarding component units, assume discrete presentation unless the fact pattern specifically provides evidence that the blended presentation criteria have been met
