Government-wide Financial Statements Flashcards
Government-wide financial statements
two statements are included in a set of government-wide financial statements: the statement of net position and the statement of activities; these statements aggregate information for all governmental and all business-type activities
GASB 34 requires the use of the economic resources measurement focus and the full accrual basis of accounting for both statements; government-wide financial statements include all assets and liabilities over which a government has control or responsibility; therefore, fiduciary funds are excluded and the component units are included
Statement of net position
governments are encouraged to report net position as the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources
net position is divided into each of three components, as applicable:
net investment in capital assets, restricted, and unrestricted
interfund receivables and payables should be eliminated except for the net residual balances of amounts due and payable between governmental activities and business-type activities
receivables and payables to fiduciary funds should be treated like assets and liabilities derived from external sources
internal service funds generally should be reported in the governmental activities column
the government-wide financial statement includes all assets and liabilities over which a government has control or responsibility; it is important to note that fiduciary funds (CIPPOE) are not included and component units are included
Capital assets: capitalization and depreciation
the GASB 34 reporting model requires that capital assets, including infrastructure assets, be included in the government-wide financial statements
the cost of capital assets should include all ancillary charges necessary to place the asset into its intended location and condition of intended use
the term “infrastructure asset” refers to streets, bridges, gutters, and other assets of the government; infrastructure assets should be recorded as general capital assets; they are only reported on the government-wide financial statements
required approach - all assets meeting capitalization requirements should be recorded and depreciated; depreciation expense that can be specifically identified with a functional category should be included in the direct expenses of that function
modified approach - infrastructure assets that are part of a network or subsystem of a network are not required to be depreciated, provided the features of its two requirements (described below) are met; under the modified approach, ongoing infrastructure expenditures are typically reported as expenses unless the outlays result in additions or improvements, in which case, they would be capitalized
governments may use the modified approach if they meet the following two requirements:
1) the asset management system meets certain conditions - the government maintains an up-to-date inventory of eligible infrastructure assets; a summarized condition assessment (good, poor, etc.) of the eligible infrastructure assets is performed and the results use a measurement scale; each year, an estimate is made of the amount necessary to maintain and preserve the eligible infrastructure assets at the condition level established and disclosed by the government
2) documentation includes data on asset preservation - a complete condition assessment of eligible infrastructure assets must be performed in a consistent manner at least every 3 years; reasonable assurance that the results of the 3 most recently completed condition assessments support assertions that the eligible infrastructure assets are being presented at (or above) the condition level established and disclosed by the government
modified approach reporting requirements - two schedules must be presented as required supplementary information as derived from the asset management system and documentation: a schedule reporting the condition of the government’s infrastructure & a comparison schedule of needed and actual expenditures to maintain the government’s infrastructure
a change from the required approach to the modified approach should be treated as a change in accounting estimate (and vice versa)
Impairment
governments are required to determine whether impairment of an asset has occurred; different types of impairment use different measurement techniques; insurance recoveries are netted against the loss
physical damage - measured using the restoration cost approach; loss is equal to the estimated cost to restore the asset; the loss value is used to write down historical cost
enactment of laws or obsolescence - measured using the service units approach; the loss is estimated based on the productive units available before and after the impairment; unit values are used to quantify the impairment write-off
asset life (duration) or reduced utility - measured using the service units approach
Artwork and historical treasures
as a general rule, governments should capitalize works of art, historical treasures, and similar assets at their historical cost or fair value at date of donation (estimated if necessary), whether they are held as individual items or in a collection
under certain circumstances, governments have the option not to capitalize works of art; regardless of whether collection items are donated or purchased, governments may elect not to capitalize works of art when that collection meets all 3 of the following conditions:
the collection is held for public exhibition, education, or research in furtherance of public service rather than financial gain
the collection is protected, kept unencumbered, cared for, and preserved
the collection is subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections
Statement of activities
revenue and expenses are reported on the government-wide statement of activities using the full accrual basis; this is a consolidated statement of all governmental and business-type activities
the government-wide statement of activities uses a net program cost format that is not consistent with commercial accounting; the format provides cost information about the primary functions of the government and indicates each program’s dependence on general revenues of the government; total costs by function are compared to program revenue associated with each function to arrive at the net cost that must be defrayed by tax revenues
the net expense or revenue for each function or program is classified into one of these categories: primary government governmental activities, primary government business-type activities, and component units
expenses are reported by function on the full accrual basis; this category represents expenses directly associated with each of the functions or programs listed
program revenues are revenues directly associated with the function or program on the full accrual basis; exchange revenue is recognized when goods or services are transferred; revenue recognition is similar to commercial business enterprises; non-exchange revenue involves transactions in which a government gives or receives value without directly receiving or giving equal value in exchange
program revenue category types: charges for services, operating grants and contributions, and capital grants and contributions
special items are reported separately; special items are unusual or infrequent (but not both) and are within the control of management
the government-wide statement of activities is the operating statement of the government; the basis of accounting is full accrual (identical to commercial accounting); the net program cost format generally is not used in commercial accounting and reporting
to remember the categories of program revenue, just recall that the government can SOC away these revenues:
services, operating grants and contributions, and capital grants and contributions
