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37 Cards in this Set

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Governmental Reporting Standards
-Established by GASB 34, require basic F/S's* and required supplementary information.
-Government-wide F/S's, fund F/S's, and notes to the F/S's.
1. Operational Accountability: focus of government-wide F/S's 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.
2. Fiscal Accountability: focus of the fund F/S's is to demonstrate that the government entity's actions in the current period have compiled with public decisions concerning the raising and spending of public funds in the short-term (usually one budgetary cycle or one year).
Integrated Approach
-Requires operational and fiscal accountability individually and to show the relationship between the two through a reconciliation.
-This reconciliation link the accountability objectives between the two levels of reporting.
-See figure below
Required Reporting for General Purpose Governmental Units
1. Management's Discussion and Analysis (MD&A)
2. Government-wide F/S's*: Statement of Net Assets and Statement of Activities
3. Fund F/S's*: Governmental, Proprietary, and Fiduciary Funds
4. Notes to the F/S's
5. Required Supplementary Information (RSI): Pension, Budget, Infrastructure
6. Other Supplementary Information (optional)
Optional Reporting for General Purpose Governmental Units
-Comprehensive Annual Financial Report (CAFR): not a GAAP requirement, it is a GFAO designed presentation.
1. Introductory Section (unaudited): letter of transmittal, organizational chart, list of principal officers.
2. Basic F/S's and Required Supplementary Information (audited): MD&A, Government-wide F/S's, Fund F/S's, Notes to the F/S's, Required supplementary information.
3. Statistical Section (not part of basic F/S): Ten years of selected financial data, and 10 years of economic data, other data.
Primary Government
-Consists of all organizations that make up the legal government entity, considered the nucleus.
1. State governments
2. General Purpose Local Governments
3. Special Purpose Governments (that meet all criteria): (1) Has a separate-elected governing body, (2) Is legally separate, and (3) Is fiscally independent of other state and local governments.
Special Purpose Governmental Units
-(That are not primary governments) are organizations that are financially accountable to a primary government. Typically engage in:
1. Governmental activities
2. Business-type activities
3. Fiduciary activities
4. Governmental and business-type activities.
Component Unit
-Usually an organization for which the elected official of the primary government are financially accountable. May also be an organization that by its nature and the significance of its relationship w/ the primary government, cannot be excluded from the primary government's F/S's w/out making the primary government's F/S's misleading or incomplete.
1. Blended Presentation: so intertwined w/ primary government that they are basically the same. Used when: (1) a board of the component unit is substantively the same as that of the primary government, OR (2) the component unit serves the primary government almost exclusively or exclusively, (3) the component unit is not a separate legal entity. Combines the financial information with the primary government.
2. Discrete Presentation: used when criteria for blended presentation are not met. Displays component units in separate columns and most component units should use this presentation.
-See figure below
Reporting NFP Entities as a Component Unit of Government
-NFP organizations provide ongoing support to a primary government or to a component unit that may also be a component unit of the primary government (Ex's: private foundations associated w/ state universities or public health care facilities).
1. Criteria for Discrete Presentation:
(1) Resources held by the tax-exempt organization are for the near-exclusive benefit of the primary government (benefit standard).
(2) The primary government has access to a majority of the resources held by the tax-exempt organization (access standard).
(3) Resources held by the tax-exempt organization are significant to the primary government (significance standard).
2. Criteria for Other Component Unit Presentation: legally separate, tax-exempt organizations meeting the criteria of a financially integrated entity should be classified as a component unit of the government if their relationship is so significant as to make the F/S's misleading w/out component unit treatment.
Management's Discussion and Analysis
-Required supplementary information before the F/S's. Narrative that provides a brief, objective, and easily readable analysis of the government's financial activities based upon currently known facts, decisions, and conditions. Presents both a short-term and long-term analysis.
1. Description of the F/S's: easily readable analysis, condensed F/S information (3 years of data required if comparative), analysis of overall financial position and results of operations, analysis of balances and transactions of individual funds, analysis of significant variations, description of significant assumptions.
2. Identity of the Primary Government and Discrete Component Units
3. Economic Conditions and Outlook
4. Major Initiatives: describes capital and LTD activity during the year.
Government-Wide F/S's
-Statement of Net Assets and the Statement of Activities. GASB 34 requires the use of the economic resources measurement focus and the full accrual basis of accounting for both statements.
-Government-wide F/S's 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 Assets- Net Assets
-Format: Assets - Liabilities = Net Assets.
-3 Components of Net Assets
1. Invested in Capital Assets, Net of Related Debt: groups all capital assets and is reduced by accumulated depreciation and outstanding debt.
2. Restricted Net Assets: assets subject to external restrictions imposed by creditors, grantors, contributors, laws, or regulations.
3. Unrestricted Net Assets: controlled by management and can be modified or removed. As restrictions are satisfied or terminated, restricted net assets should be reclassified as unrestricted.
Capitalization of Assets
-Capital assets, including infrastructure assets should be capitalized and depreciated.
1. Valuation: cost of capital asset should include all ancillary charges necessary to place the asset into its intended location and condition of intended use.
2. Construction Period Interest: capitalization of construction period interest isn't required.
3. Infrastructure: (ex: streets, bridges) should be recorded as general capital assets. They are only reported on the government-wide F/S's b/c of the incompatibility of recording these assets at the fund level w/ the governmental fund focus.
Required and Modified Approach
1. 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.
-Governments may not have sufficient records to meet the standards for the required approach
2. Modified Approach: Infrastructure assets that are part of a network or subsystem of a network (eligible infrastructure assets) are not required to be depreciated provided the features of its two requirements (below) are met.
-Under this approach, ongoing infrastructure expenditures are typically reported as expenses, unless the capital outlays result in additions or improvements, in which case they would be capitalized.
Capitalization Alternatives- Modified Approach
-Governments may use the modified approach is they meet the following requirements.
1. Government's Asset Management System Meets Certain Conditions: (1) Inventory of eligible infrastructure assets is up-to-date, (2) A summarized condition assessment is performed, (3) Each year, an estimate is made of the amount necessary to maintain and preserve the eligible infrastructure assets.
2. Government Documentation Should Include Data on Asset Preservation: (1) A complete condition assessment is performed at least every 3 years, (2) 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 and Changes
1. Reporting Requirements: (1) a schedule reporting the condition of the government's infrastructure, and (2) a comparison schedule of needed and actual expenditures to maintain the infrastructure.
2. Accounting Changes: change from depreciation (required approach) to modified as well as vice versa, should be treated as a change in accounting estimate.
Identifying and Valuing Impairment
-Governments are required to determine if impairment of an asset has occurred. Insurance recoveries are netted against the loss.
1. Physical Damage: measured using the restoration cost approach. Loss is equal to the estimated cost to restore the asset and loss value is used to write down historical cost.
2. Enactment of Laws or Obsolescence: measured using the service units approach. Loss is estimated based on the productive units available before and after the impairment. Unit values are used to quantify the impairment write off.
3. Asset Life (Duration) or Reduced Utility: measured using the service units approach.
Artwork and Historical Treasures
-General rule, governments should capitalize works of art, historical treasures, and similar assets at their historical cost or FV at date of donation (estimated if necessary). Under certain circumstances, governments have the alternative not to capitalize works of art. Regardless of whether they are donated or purchased, they can elect not to capitalize when collections meet the following criteria:
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.
Statement of Net Assets- Miscellaneous
1. Interfund Receivables and Payables: elimination of interfund activities within major activity categories should be prepared to avoid "grossing up" balances of assets and liabilities.
2. Internal Service Funds: generally should be reported in the governmental activities column.
3. Government-wide F/S's includes all liabilities and assets over which a government has control or responsibility. This includes component units. Fiduciary funds (PAPI) are not included.
Statement of Activities
-Like the I/S, revenues and expenses are reported here.
-Is a consolidated statement of all governmental and business-type activities.
Program Approach, Functions / Programs
1. Program Approach: government-wide statement of activities uses a net program cost format that is not consistent with commercial accounting. It indicates each program's dependence on general revenues of the government. Total costs by function are compared to program revenue associated w/ each function to arrive at the net cost.
2. Functions/Programs: net expense for each function or program is classified into one of 3 categories: (1) Primary government governmental activities (GRaSSP + S), (2) Primary government business-type activities (E), and (3) Component Units.
Program Revenue Categories
1. Charges for Services: revenues based on exchange or exchange-like transactions including: (1) Charges for services to customers or applicants who directly benefit from them, (2) Charges for services to other governments, and (3) Fines and forfeitures.
2. Operating Grants and Contributions: mandatory and voluntary non-exchange transactions w/ other governments, organizations, or individuals restricted for use in a particular program.
3. Capital Grants and Contributions: same as above.
-"SOC" away these revenues.
Net (Expense) Revenue and Changes in Net Assets
-The net expense or revenue is presented in three categories and a total column.
1. Primary government governmental activities column (GRaSPP + S).
2. Primary government business-type activities column (E).
3. Total column (1 & 2)
4. Component unit column
1. General Revenues: presented separately in the same 3 categories as above.
2. Special Items: reported separately, they are separate or infrequent.
3. Changes in Net Assets: computed by deducting the general revenues from net (expenses) revenues.
4. Internal Service Funds: activity should generally be reported in the governmental activities column.
5. Eliminations: generally, internal transactions that artificially "double up" on activity should be eliminated.
-Interfund services (water, utilities) shouldn't be eliminated.
-Internal activity associated w/ blended component units should be reclassified as interfund activity.
-Internal activity associated w/ discretely presented component units should be reported as external transactions.
Government-Wide Statement of Activities
-Is the operating statement of the government. Uses full accrual, identical to commercial accounting.
-The net program cost format is generally not used in commercial accounting and reporting.
Fund Financial Statements
-GASB 34 emphasizes reporting by major fund rather than fund type. Reporting by major fund provides more meaningful information.
-Major Funds are specifically defined as follows: a major fund must meet the 10% criteria within its category and also meet the 5% criteria associated w/ both categories.
Major Fund Rules- 2 Criteria
-(both must be met)
1. 10% Test: to meet, the individual GRaSPP funds are compared to the total of all governmental and enterprise funds. The enterprise funds are individually compared to the total of all governmental and enterprise funds.
-Must have 10% or more of the corresponding total revenues, expenditures / expenses, assets, or liabilities of (1) all Governmental funds OR (2) Enterprise funds (the "separate columns")
-Like segment reporting
2. 5% Test: to meet, the GRaSPP funds are individually compared to the total of governmental funds and enterprise funds. Each enterprise fund is individually compared to the total of all enterprise funds and governmental funds.
-5% or more of revenues, expenditures / expenses, assets, or liabilities of (1) All Governmental funds AND (2) All Enterprise funds (the "total columns").
Other Major Fund Rules
-Government officials may elect to report a fund as major regardless of the quantitative criteria. The general fund is always considered a major fund.
-Internal service funds aren't considered in the evaluation of major and non-major funds. The only proprietary funds used in the determination of major and non-major are the enterprise funds.
Reconciliation of Government Fund to Government-Wide
1. Full Accrual = Modified Accrual ± Adjustments
2. Basis of Accounting Differences: involves increasing revenues to show revenues earned rather than only those measurable and available and recognizing expenses when incurred.
3. Measurement Focus Differences: involves adjustment of capital asset and LTD accounts. Loan proceeds (net of principal payments on debt) must be eliminated from resource inflows on the governmental fund operating statement and the related LTD must be added to the B/S. Current period capital expenditures (net of depreciation) must be eliminated from resource outflows on the governmental fund operating statement and the related capital asset (net of A/D) must be added to the B/S.
Application to F/S's
-Must reconcile: (1) the differences in fund balances of governmental funds and net assets in the government-wide F/S's,* & (2) The differences in the net change in fund balances of governmental funds and the change in net assets for governmental activities.**
-*Difference in Measurement Focus: (1) add non-current assets, (2) add internal service fund net assets, (3) subtract non-current liabilities.
-Difference in Basis: adjust for accrual of revenue and adjust for accrual of expenses.
-GALS BARE, see figure below
**Difference in Measurement Focus: (1) Add capital outlay (net of depreciation expense), (2) Subtract debt proceeds, (3) Add internal service fund changes in net assets accounted for in the proprietary funds.
-Basis of Accounting: adjust for accrual of revenue and expenses.
-GOES BARE, see figure below
Proprietary Funds- Statement of CF's (Differences)
1. Direct method is required
2. A reconciliation of operating income (not net income) to net cash provided by operations is required.
3. There are 4 categories (instead of 3 in commercial): Operating, Investing, Capital and related financing activities, Non-capital financing activities.
4. Interest income / cash receipts are reported as "investing activities" (not as operating).
5. Interest expense / cash payments are either: Capital and related financing, or Non-capital financing (not operating).
6. Capital asset purchases are reported as "financing activities" (not as investing).
Notes to the F/S's
-Essential to fair presentation and considered integral to the F/S's. Notes should should focus on the primary government, specifically:
-Government activities, Business-type, Major funds, Non-major funds in the aggregate, Additional information regarding discretely presented component units.
Generic Governmental Disclosures
1. A description of government-wide activities, noting the exclusion of fiduciary funds.
2. Policies relating to elimination of internal activity.
3. Description of the modified approach for reporting infrastructure, if used.
4. Segment information.
Specific Governmental Disclosures (GASB 34)
1. Description of major activities for: major funds, internal service funds, and fiduciary funds.
2. Length of time used to define "available" in determining revenue recognition under the modified accrual basis (measurable and available, GR- 60 days).
3. Actions taken to correct material non-compliance w/ finance-related or legal compliance.
4. Schedule of short-term debt.
5. Analysis of interfund account balances and analysis of A/R and A/P.
Required Supplementary Information
-(other than MD&A)
1. Budgetary Information: budgetary comparison schedules for the general fund and for each major special revenue fund that has a legally adopted annual budget. Most show original budget, final amended budget, and actual amounts. Computation of variances and differences between budget/original and actual/final is optional. Must include a reconciliation to GAAP.
2. Infrastructure Information: schedules that disclose assessed condition of infrastructure and estimated amount to maintain and preserve it for each of the past 5 years.
3. Pension Information: requires presentation of 6 years of data. Schedule of funding progress, schedule of employer contributions, notes to schedule.
4. Other supplementary information (like combining statements for non-major funds) is optional.
Interfund Activity
1. Reciprocal Interfund Activity: includes exchange-type transactions between funds. (1) Interfund Loans: unrealizable balances are reclassified as transfers. (2) Interfund Services Provided and Used: accounted for as revenues and expenses / expenditures.
2. Non-Reciprocal Interfund Activity: non-exchange transactions between funds. (1) Interfund Transfers: normally displayed as other financing sources and uses after non-operating revenues and expenses. (2) Interfund Reimbursements: not displayed as interfund transactions.
Interfund Activity- F/S's
-Display and disclosure of interfund activities is meant to isolate meaningful relationships w/out needlessly grossing up transactions.
1. Within the governmental (and business-type) activities column of the government-wide F/S's they should be eliminated.
2. Between the governmental activities and business-type activities (on gov't-wide F/S's) they should be eliminated.
3. Between the primary government and its fiduciary funds, the transaction should be reported as if between external parties.
-F/S disclosures should include interfund loans and transfers.