Unit 19 - Governmental Accounting - Reporting Flashcards
The focus of certain fund financial statements of a local government is on major funds. Accordingly…
The main operating fund is always reported as a major fund.
The focus of reporting of governmental and proprietary funds (but not internal service funds) is on major funds. The main operating fund (e.g., the general fund) is always reported as a major fund, and any governmental or enterprise funds believed to be particularly important to users also may be reported in this way. These funds must be reported as major if they meet the quantitative thresholds.
Capital projects fund of a local govt. must be reported as major if
Total liabilities of that fund are 10% of the total liabilities of all governmental funds and 5% of the total liabilities of all governmental and enterprise funds combined.
Any fund must be reported as major if total revenues, expenditures or expenses, assets, or liabilities (excluding extraordinary items) of the fund
(1) are at least 10% of the corresponding element total (assets, etc.) for all funds of the same category or type, that is, for all governmental or all enterprise funds, and
(2) the same element that met the 10% standard is at least 5% of the corresponding element total for all governmental and enterprise funds in the aggregate.
How are other financing sources reported in the govt. funds stmt. of revenues, expenditures and changes in fund balances?
Other financing sources and uses are reported in the governmental funds statement of revenues, expenditures, and changes in fund balances. They include
(1) the face amount of long-term debt,
(2) issuance premium or discount,
(3) some payments to escrow agents for bond refundings,
(4) interfund transfers, and
(5) sales of capital assets.
Accordingly, the only item reported in the general fund as other financing uses is the $100,000 transfer to a debt service fund.
A transaction that is unusual in nature and infrequent in occurrence most likely is reported in the governmental funds statement of revenues, expenditures, and changes in fund balances
After other financing sources and uses.
Extraordinary items are transactions or other events that are unusual in nature and infrequent in occurrence. Extraordinary items are reported separately after other financing sources and uses.
A city had to make significant repairs to a building damaged by flooding of a nearby river. Damage due to flooding is not unusual but has been infrequent in the last few years. How should the city’s general fund report the cost of the repairs in its fund financial statements?
As an expenditure.
The general fund is one of the governmental funds. Thus, the modified accrual basis of accounting is used for these funds.
The measurement focus is on current financial resources, i.e., determining financial position and changes in it.
Accordingly, decreases in fund financial resources are reported as expenditures, not accrual-basis expenses.
Govt - Wide FS
Which of the following activities should be excluded when governmental fund financial statements are converted to government-wide financial statements?
Fiduciary activities.
Fiduciary funds provide operational information about fiduciary activities.
Information about fiduciary funds, including fiduciary component units, is excluded from the government-wide financial statements.
Consequently, they are reported only in the fund statements (statements of fiduciary net position and changes in fiduciary net position).
Govt. - Wide FS
In the government-wide statement of net position, restricted capital assets should be included in the
Net investment in capital assets, net of related debt, component of net position.
Net position has three components:
(1) net investment in capital assets, net of related debt, accumulated depreciation, and deferred inflows and outflows of resources;
(2) restricted net position; and
(3) unrestricted net position.
Net investment in capital assets includes unrestricted and restricted capital assets. However, debt related to significant unspent proceeds is classified in the same net position component as those proceeds.
Govt. - Wide FS
Government-wide financial statements are prepared using the
Economic Resources Measurement Focus - YES
Current Financial Resources Measurement Focus - NO
Accrual basis - YES
Modified Accrual basis - NO
Government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting and should report all of the government’s assets, liabilities, revenues, expenses, gains, and losses.
The economic resources focus measures revenues and expenses in the same way as in for-profit accounting.
It also emphasizes a longer-range measure of revenues earned or levied (and accrued immediately if measurable) and cost of services. The accrual basis recognizes most transactions when they occur, regardless of when cash is received or paid.
Govt. - Wide FS
In preparing Chase City’s reconciliation of the statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities, which of the following items should be subtracted from changes in fund balances?
Book value of capital assets sold during the year.
In the statement of activities, only the gain or loss on the sale of a capital asset is reported. (The acquisition was recorded in the governmental funds as an expenditure for its full amount.) But in the governmental funds, the proceeds are recorded as an increase in resources. Consequently, the change in net position (statement of activities) differs from the change in fund balances by the carrying amount of the capital assets sold. This item requires a reconciling subtraction from the change in fund balance.
Proprietary Funds Reporting
The statement of revenues, expenses, and changes in fund net position for proprietary funds
Distinguishes between operating and nonoperating revenues and expenses.
A statement of revenues, expenses, and changes in fund net position is the required operating statement for proprietary funds.
Operating and nonoperating revenues and expenses should be distinguished, and separate subtotals should be presented for operating revenues, operating expenses, and operating income.
Proprietary Funds Reporting
Dogwood City’s water enterprise fund received interest of $10,000 on long-term investments. How should this amount be reported on the statement of cash flows?
Investing activities.
Reporting of cash flows of proprietary funds and entities engaged in business-type activities, e.g., governmental utilities, is required.
Cash inflows should be classified as operating, noncapital financing, capital and related financing, and investing.
Investing activities include making and collecting loans (other than program loans) and acquiring and disposing of debt and equity instruments. Cash inflows from investing activities include interest and dividends received as returns on loans (not program loans), debt of other entities, equity securities, and cash management or investment pools.
Fiduciary Funds Reporting
Fish Road property owners in Sea County are responsible for special assessment debt that arose from a storm sewer project. If the property owners default, Sea has no obligation regarding debt service, although it does bill property owners for assessments and uses the monies it collects to pay debt holders. What fund type should Sea use to account for these collection and servicing activities?
Custodial.
When capital improvements are financed by special assessment debt, the debt service transactions of a special assessment issue for which the government is not obligated should be reported in a custodial fund in the statement of fiduciary net position, not a debt service fund.
This reporting reflects the government’s limited responsibility to act as an agent for the assessed property owners and the bondholders.
Fiduciary Funds Reporting
River City has a defined contribution pension plan. How should River report the pension plan in its financial statements?
Disclose in the notes to the financial statements the classes of employees covered and the employer’s and employees’ obligations to contribute to the fund.
A defined contribution pension plan must report
(1) a plan description,
(2) a summary of significant accounting policies, and
(3) information about investment concentrations.
The plan description should identify the plan as a defined contribution plan and disclose the number of participating employers and other contributing entities.
The description also should include
(1) the classes of employees covered,
(2) the total current membership,
(3) a brief description of plan provisions,
(4) the authority under which they are established (or may be amended), and
(5) contribution requirements.
Fiduciary Funds Reporting
Which of the following is a required financial statement for an investment trust fund?
Statement of changes in fiduciary net position.
Investment trust funds report fiduciary activities involving (1) the external portion of investment pools and (2) individual investment accounts held in a trust meeting certain criteria.
Separate statements of fiduciary net position and changes in fiduciary net position should be presented for each such fund. The external portion belongs to legally separate entities not included in the reporting entity.
Fiduciary Funds Reporting
Taxes collected and held by Franklin County for a separate school district are accounted for in which fund?
Custodial.
Fiduciary fund reporting emphasizes net position and changes in net position. Fiduciary funds report fiduciary activities. The criteria for identifying these activities ordinarily emphasize
(1) whether the government controls the assets of the activity and
(2) the beneficiaries in the fiduciary relationship.
Custodial funds report fiduciary activities not reported in
(1) pension (and other employee benefit) trust funds,
(2) investment trust funds, or
(3) private-purpose trust funds.
Accordingly, custodial funds generally report fiduciary activities not involving a trust or the equivalent. For example, tax custodial funds are used when a governmental entity is the collection agent of taxes for disbursement to other governmental units, e.g., school districts or special taxing districts.
