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Governmental Accounting - PART B
Governmental Reporting focused on which 2 important types of Accountability?
Operational & Fiscal
The focus of the Government-wide F/S is ____ Accountability.
*Government-wide F/S focus = report the extent to which the government has met its operating objectives EFFICIENTLY and EFFECTIVELY, using all resources available for that purpose - and to the extent which it can meet its objectives in the future
The focus of the Fund F/S is ___ Accountability.
*Fund F/S focus = show that the government entity's actions in the CURRENT period have COMPLIED with public decisions concerning the raising/spending of public funds in the ST (1 budgetary cycle/year)
The _____ Approach requires a reconciliation of the Fund F/S to the Government-wide F/S to link both accountability objectives.
What is is REQUIRED presentation for Governments (in order)?
- Fund F/S
- Government-Wide F/S
- Notes to the F/S
- Required Supplementary Info
Define "Basic F/S"
-Each Fund's F/S (Governmental, Proprietary & Fiduciary)
-NOTES to the F/S
*Fund F/S- Major funds shown individually & Non-major shown in aggregate
*Fund F/S & Government-Wide F/S must show the reconciliation
What are the 3 topics discussed in Required Supplementary Info?
- PENSIONS (Sources of changes & info about components of Net Pension Liability over past 10 years)
- BUDGET (comparison schedules)
- INFRASTRUCTURE (Roads and bridges & assets for entities using the modified approach)
Other Supplemental Info may be presented AFTER Required Supplemental Info, but it is _____. What are some items that could be shown in Other Supplemental Info?
-Combined statement for non-major funds
-Variances between beg & end budget, end budget & actual
What is the name of the OPTIONAL Reporting that Governments may choose to present?
Comprehensive Annual Financial Report
The CAFR adds an ____ section to the beg and ____ section to the end of the GASB 34 Presentation (MD&A, Basic F/S & Req Supp Info)
+ Intro section @ Beg
+ Statistical section @ end (10 years of data)
What are some topics that could be included in the Intro section that is added in the Optional CAFR presentation?
- Letter of Transmittal
- Organizational Chart
- List of Principal Officers
The focus of the Government-Wide F/S is on the ____ government.
Examples of Primary Government Entities (3):
GENERAL purpose LOCAL government (city or county)
*SPECIAL purpose LOCAL that meet all "SELF" test
Special Purpose local governments, such as a hospital authority or school district, that meet all of the following criteria can be considered a PRIMARY government: (SELF)
- Has a SEPARATELY ELECTED governing body
- LEGALLY separate
- FINANCIALLY INDEPENDENT of other state/local governments
Primary Governments report by ____
If the Primary Government does not pass the SELF test (Primary Government), then it is a ____ ____ and is either ___ or ____.
*Either BLENDED or DISCRETE
A component unit of the primary government is an organization for which the elected officials of the primary government are ____ ____.
*Or the organization cannot be excluded from the primary government's F/S without making them misleading/incomplete
The component unit is considered BLENDED (presentation in same column as primary government) if: (3)
- Board = Same of primary government
- Serves the primary government exclusively or almost exclusively
- It is not a separate legal entity
If none of the 3 Blended circumstances are present, the component unit is considered ____ and can be presented in a SEPARATE column.
Private NFP - Legally separate, tax-exempt organizations should be reported as a Discrete Component Unit if they meet ALL of the 3 following standards?
- Benefit Standard - resources held are for near-exclusive benefit of primary government
- Access Standard - primary government has access to majority of their resources
- Significance Standard - resources held are significant to the primary government
MD&A is a narrative that should include the following: (4)
- Description of the F/S
*Easily readable, Condensed F/S info, Analysis of overall financial positions and operation results and significant variances, description of significant assumptions used
- Identity of Primary Gov't & DISCRETE components
- Economic conditions & outlook
- Major Initiatives (Capital Asset & LT debt activity during the year)
What is not shown in MD&A?
- Variance Analysis
Government-Wide F/S are which 2 statements:
- Statement of Net Position
- Statement of Activities
Statement of Net Position Format:
Assets - Liability = Net Position
Net Position has what 3 components:
- Restricted (Externally)
- Net Investment in Capital Assets
Are Capital Assets on the Statement of Net Position (B/S) for the Government-wide F/S?
Is Capitalization of construction period interest required for capital assets used in governmental activities?
When recording Depreciation on the Capital Assets for Government-wide F/S, what 2 approaches can be used?
The Required Approach requires all assets meeting capitalization requirements to be ___ and ____ included in it's FUNCTIONAL category.
Recorded & Depreciated
The Modified Approach allows certain Infrastructure Assets to not be depreciated, if (2):
- ONGOING infrastructure Expenditures = Expense
- Outlays results in ADDITION or IMPROVEMENT = Capitalize
Government's may use the Modified Approach if what 2 requirements are met:
1) Government's Asset Management System meets certain conditions
(Infrastructure assets are up-to-date, condition assessment is performed, yearly estimate of amount necessary to maintain/preserve infrastructure @ condition level
2) Government Documentation Includes Data on Asset Preservation
(Condition Assessment made every 3 years, Past 3 condition assessments are at or above CL established)
Changing from the Depreciation (Required Approach) to the Modified Approach, or vice versus - is a change in Accounting ___.
BOTH Government and NFP may elect NOT to capitalize works of art when the collection meets all of what 3 requirements:
- Held for Public Exhibition
- Protected & Cared for
- Requires proceeds from sale of collection to be used to acquire more items for that collection
Are Inter-fund Receivable and Payables recorded on the Government-wide F/S?
The Government-wide F/S includes all A & L over which a government has control or responsibility - therefore, Fiduciary funds (PAPI) ___ included and Component Units ____ included.
Fiduciary Funds (PAPI) = NOT included
Component Units = Included
GRaSPP S = Governmental Activities
E = Business - Type Activities
The Government-Wide's Statement of Activities (I/S) has 3 different types of Rev --> SOC AWAY THESE REV!
- Charges for SERVICES
- OPERATING Grants & Contributions
- CAPITAL Grants & Contributions
A "MAJOR FUND" must meet the ___ and ___ criteria test.
10% & 5%
To meet the 10% test- the INDIVIDUAL GRSPP funds must be at least 10% of the total of all ___ funds OR the INDIVIDUAL ENTERPRISE Funds must be at least 10% of the total of all ____ funds.
To meet the 5% test- each individual fund must be at least 5% of the total of _____ funds.
ALL GOVERNMENTAL + ENTERPRISE FUNDS
Which fund will ALWAYS be a Major Fund?
The F/S must reconcile the differences in the ___ of the governmental funds B/S to the ____ of the government-wide B/S by what acronym:
Fund Balance --> Net Position
GRaSPP Fund Balance
+ Assets (Non-Current)
- Liabilities (Non-Current)
+ Internal Service Fund Net Position
+/- Accrued Rev & Exp Adjustments
The F/S must also reconcile the differences in the ____ in Fund Balance displayed in the governmental funds I/S to the ____ in Net Position displayed in the governmental activities column of the Government-Wide F/S by what acronym:
CHANGE in Fund Balance --> CHANGE in Net Position
GRaSPP Net Change in Fund Balance
- Other Finance Sources
+ Internal Service Fund Net Income
+/- Accrued Rev & Exp Adjustments
Governmental Funds (GRaSPP) B/S =
FUND Balance (NRCAU)
Governmental Funds (GRaSPP) I/S =
Other Financing Sources (Uses)
Change in Fund Balance
Proprietary Funds (SE) B/S =
NET POSITION (RUN)
Proprietary Funds (SE) I/S=
Operating Exp - *Dep Exp
Non-Opearting Exp - *Int Exp
Change in Net Position
***Proprietary Funds (SE) REQUIRED C/F =
Non-Capital Financing Activities
Capital Financing Activities
What method is required?
A reconciliation of ____ ___ to net cash provided by operations is required.
*Not Net income
Interest income/cash receipts are reported as ____ and Interest expense/cash payments are reported as ____, not _____.
Interest income/cash receipts = Investing
Interest expense/cash payments = Financing
Capital asset purchases are reported as ____.
What are the 3 NON-Capital Financing Activities?
- Cash Receipts from GRANTS OR SUBSIDIES
- Cash received from PROPERTY TAXES
- Operating TRANSFERS
Are Fiduciary Funds reported on the Government-Wide F/S?
Fiduciary Fund (PAPI) B/S=
Fiduciary Fund (PAPI) I/S=
Change in Net Position
What are the 2 types of Inter-fund Activities?
Reciprocal Inter-fund Activities include _____ transactions between funds and 2 examples are:
Reciprocal = EXCHANGE-type
- Inter-fund LOANS
- Inter-fund SERVICES provided and used
NON-Reciprocal Inter-fund Activities include ____ transactions between funds and 2 examples are:
- Inter-fund TRANSFERS w/o exchange of equivalent value
*DISPLAYED AS OF Sources
- Inter-fund REIMBURSEMENTS made by 1 fund on behalf/for the other fund
If a transaction is made between the primary government and its Fiduciary Fund it should be reported as if between ___ parties.
The overall emphasis for NFP F/S is on ___ ___ for the organization as a ___.
Basic Info for the organization as a WHOLE
NFP Organizations use the ___ basis of Accounting.
What are the 4 Required F/S for NFP Organizations?
B/S - Statement of Financial Position
I/S - Statement of Activities
C/F - Statement of CFs
*Statement of Functional Expenses - required for Voluntary Health & Welfare Org, Encouraged for everyone else
NFP Organization B/S=
Net Assets (EQUITY)
Unrestricted Net Assets are not ____ or ___ restricted.
Not permanently or temporarily restricted
Example of Unrestricted:
Internal Board Designated Funds
Temporarily Restricted Net Assets have donor-imposed stipulations either by _____ or can be ____ and removed by actions of the organization.
Passage of TIME
FULFILLED & removed by actions
Where should an OVER Expenditure of Temporarily Restricted Net Assets be deducted from?
Unrestricted Net Assets
Permanently Restricted Net Assets have donor-imposed stipulations that ____ expire by passage of time or can be fulfilled/removed by actions of the organization.
Permanent Restricted are contributions with restrictions that can never be removed, such as an ____ fund.
*Where the Corpus(Principal) must be retained intact and income can be used by the NFP in accordance with the donor's stipulations
Contributions with donor-imposed restricted are recorded as an increase in either ___ or ___ restricted net assets in the period RECEIVED.
Temporarily or Permanently
Can donor-imposed restrictions that are met in the SAME PERIOD they are RECEIVED be recorded as UN-RESTRICTED Support (Contribution Rev)?
*Organization must disclose, however and apply this policy consistently
Expenses are decrease in ____ net assets.
NFP Organization's I/S=
Revenue, G & Other Support
Expenses and Losses
Change in Total ASSETS
Change in PUT
What are the 2 Expenses categories for NFP Organizations?
Example of Support Services:
- Management & General
- Membership & Development
NFP Organizations that combine fundraising efforts with program services should ___ the combined costs between both functional categories of expenses.
NFP Organization C/F=
*FASB = 3 Activities - either method may be used
*GASB = 4 Activities - requires DIRECT method
Statement of Functional Expenses is required for ____ organizations, but encouraged for the rest of NFP Organizations.
Voluntary Health & Welfare
What are the 4 common groups of functional classifications?
Management & General Costs
Multiple Cost Items
Fundraising Expenses include:
UNSOLICITED Merchandise sent out
Cost of sending out appeals to the public
Salaries of fundraising personnel
Accounting for Contributions
NFP Organizations report resource inflows in the F/S as either ____ or ____.
Revenues represent ___ transactions.
Other Support represents operating income that is ____ or ____ in some way that is anticipated as part of the central ongoing activities of the organization.
Donated (Contributed) or Provided
Cash Contributions are recorded as revenue ___ when ___.
@ FV when RECEIVED
Unconditional Promises/Pledges are recorded as revenue ___ when ____.
@ FV when promise is MADE
If the Unconditional Promise/Pledge is to contribute in the FUTURE, it is a reported as ____ support.
*Once collection of pledge is made - results in reclassification --> Increase Unrestricted Net Assets
*Once money is spent on restricted purpose --> Decrease Unrestrcited Net Assets
DR Operating Expense, CR Cash/Unrestricted Net Assets
Are CONDITIONAL promises/pledges recorded as revenue?
*NOT until conditions are substantially met
Good Faith deposits that accompany a CONDITIONAL promise are accounted for as a ___ ___ in the ___ section of the B/S.
Good Faith Deposits - Conditional Promises =
REFUNDABLE ADVANCE - Liability
Multi-year Pledges are recorded at ____ when ____.
@ NPV when the pledge is made
Future collections for Multi-year pledges are considered ____ ___ revenues.
The difference between the NPV of the Multi-year Pledge & Current amount collected =
Pledges/Promises should be recorded at the NRV, meaning an ___ for ___ pledges must be recorded like A/R.
Allowance for UN collectable Pledges
Split-Interest Agreements represent donor contributions that are ____.
SHARED with other beneficiaries
Split-Interest Agreements should be recorded @ ___ @ the date of ____ and should be displayed as ____ ____.
@ FV @ Acquisition date
Donated Services should be recorded as CONTRIBUTION REVENUE @ FV if the services meet the EITHER of the following 2 criteria:
- Create or Enhance a non-financial asset
- Require specialized skill that would have otherwise been paid for by the organization (attorney, accountant, doctor etc)
DR Expense, CR Contribution- Non Operating Revenue
Likewise to Government, NFP do not have to record contributed works of art/historical treasures if all of the following requirements are met:
- Held for public viewing
- Protected/Cared for
- Proceeds from sale of donated items will be used to reinvest in other collection items
What if the requirements are not met?
Must recognize collection as:
ASSET & REVENUE
Agency Transactions are resources received by a NFP organization which the NFP has ___ ___ ___ over.
No discretion/Variance Power
Ability to use assets in any way
Agency Transactions are recorded as an ___ and ___.
Asset & Liability
No variance power=
Receipts that are restricted by a donor for specific PURPOSES are displayed as restricted revenues and an increase in ____ ___ ____ but if restricted for specific BENEFICIARIES, must be displayed as _____ since the NFP organization has no variance power.
Restricted Net Assets
Liabilities - no variance power
Gifts-in-Kind = ___ contributions and should be measured @ ___
NON- Cash - @ FV
Exchange Transaction Equation=
Amount Transferred - FV Due/Purchases = Contribution Revenue
Financially Interrelated Organizations
An organization that accepts assets from a donor and agrees to use/manage them on behalf/for a specified beneficiary WITHOUT variance power recognizes the assets as _____, but if they were granted variance power, must recognize the asset a ___.
WITHOUT Variance Power:
DR Asset, CR LIABILITY
WITH Variance Power
DR Asset, CR Contribution REVENUE
***If the recipient & beneficiary were FINANCIALLY INTERRELATED and is granted variance power:
DR Asset CR Contribution REVENUE
Beneficiaries will recognize their rights to assets held by others (the recipient) unless the recipient is ____.
GRANTED VARIANCE POWER
How will the beneficiary recognize their right to assets held by others (the recipient)
- Interest in the Net Assets of the Recipient (EQUITY)
- Beneficial Interest
- Receivable & Contribution Revenue
Beneficiaries recognize an Interest in the Net Asses of the Recipient (EQUITY transaction) when the organizations are ____.
DR Asset, CR Equity Transaction (Statement of Activities)
Other Accounting Issues
Investment in Securities are recorded @ ___
Gains & Losses (Realized and unrealized) are reported on the Statement of Activities as increases or decreases in _____ net assets.
*Unless - the use of the investment is temporarily or permanently restricted by donor stipulations or by law
Allocate pooled investment G/L ___.
Losses on Investments of a Permanently Restricted Fund first go to reduce ______ _____ net assets to the extent that previously recognized gains have not been earned or used in the temporarily restricted category and then are applied to ____ net assets.
First - Temporarily Restricted
Then - Unrestricted
Investment income (Div and interest) is reported in the period earned as an increase in _____ net assets.
*Unless donor stipulations or law state otherwise
NFP Specific Industry Applications
Colleges & University Revenues=
Student & Tuition Fees (GROSS)
Government aid, grants & contracts
Gross Revenue for Student Tuition & Fees=
Assessed Student Tuition & Fees - Cancelled Class= Gross Rev from Tuition & Fees
Why is Student & Tuition fees recorded @ Gross?
Scholarships, tuition waivers, and similar reductions are recorded as expenses or as classified as an allowance which reduces revenues
College & University Expenses=
Scholarship & Fellowship
What are the 3 Revenues for Health Care Organizations?
1) Patient Service Revenues
2) OTHER Operating Revenues
3) NON-Operating Revenues
Other Operating Revenues=
Tuition from schools
Revenues from educational programs
Donated supplies or equipment
Gift Shop Revenue
Medical Transcription Fees
UNRESTRICTED interest & div income from investment activities
UNRESTRICTED gifts & bequests
Merger: Consideration = ____, Measurement = _____
Acquisition: Consideration = ____, Measurement=______
Transfer of Operations: Consideration=____, Measurement=_____
Is goodwill or other intangibles specifically recognized?
Sets with similar terms
F10 State and Local Governments: Part 2
Far 9 Gov Non-Profit
Other sets by this creator
Reg 1- Individual Tax- Income