Governmental Accounting (Part B)

Question 1

Please provide a description of what is in MD&A (required supplementary information before F/S)?

Answer 1

1) An easily readable analysis
2) Condensed financial statement information
3) Analysis of overall financial position and results of operations
4) Analysis of balances and transactions of individual funds
5) Analysis of significant variances *
6) A description of significant assumptions

NO:

1) NO Varaiance analysis
2) NO reconciliation of fund f/s -> government-wide F/S

Question 2

What is the accounting method and economic focus of both government-wide financial statements?

Answer 2

1) Economic resources measurement focus
2) Full accrual basis of accounting

• Fiduciary funds are excluded

Question 3

What is the format of the statement of net position of the government-wide financial statements (consolidated financial statement).

What are the three components of net position?

Answer 3

Asset - Liabilities = Net Position

Net Position:

1) Restricted
2) Unrestricted
3) Net investment in capital assets

Question 4

Is construction period interest capitalized for capital assets in governmental statement of net position?

Answer 4

NOT REQUIRED

Question 5

How is infrastructure recorded in government-fund statement of net position?

Answer 5

Infrastructure includes bridges, gutters, and streets

Infrastructure is expenditured in fund financial statements but capitalized in government-wide financial statement of net position.

Question 6

What is the required and modified approach of showing capitalized assets in statement of net position?

Answer 6

1) Required Approach
- All assets meeting capitalization requirements should be recorded and depreciated. Depreciation expense that is related to the specially identified direct expense of a functional category should be recorded: Ex: Depreciation expense on police cards would be classified as public safety.

2) Modified Approach
- Infrastructure assets that are part of a network or subsystem of a network are not required to be depreciated as long as 2 requirements are met.

Question 7

What are the two requirements that need to be met for modified approach of governmental financial statements?

Answer 7

1) Requirement One
- Inventory of eligible infrastructure assets is up-to-date
(you know what you got)
- Summarized condition assessment of the eligible infrastructure assets (how they are doing)
- Each year, an estimate is made of the amount necessary to maintain and preserve the eligible infrastructure assets at the condition level established (what you have to do to keep them maintained)

2) Requirement Two
- A complete condition assessment is done at least every three years
- Support assertions that the eligible infrastructure assets are being presented at (or above) the condition level established and disclosed by the government.

Question 8

What is a change in estimated for government wide statement of net position?

Answer 8

1) Going from Required approach to Modified approach

2) Going from Modified approach to Required approach

Question 9

How are artwork and historical treasures treated for depreciation?

Answer 9

Artwork and historical treasures are capitalized at their historical cost OR fair value.

Question 10

When can a government choose not to capitalize artwork and historical treasures?

Answer 10

If ALL of the following are met:

1) The collection is held for public exhibition
2) The collection is protected
3) 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. (can’t use money to be used for anything else besides artwork)