1
Q
Who appoints GASB members
A
FAF
5 year terms
2
Q
Governmental Accounting Standards Advisory Council (GASAC)
A
advisor to GASB
appointed by FAF
3
Q
primary government
A
any state government or general purpose local government
4
Q
special purpose government may also be primary if
A
it is legally separate (corporate powers)
has separately elected governing body
fiscally independent
5
Q
corporate powers
A
has name, right to be sued/sue on its own, right to buy/sell and issue debt
6
Q
fiscally independent if
A
-determine budget without another government’s substantive authority
-levy taxes, set rates without susbstantive approval
-issue bonds without substantive approval
7
Q
determining component units
A
- legal standing: is it legally separate from primary
-financial accountability: does primary government appoint majority of governing body? fiscally dependant? primary holds majority equity interest
-imposition of will: infulence programs (remove appointed members, modify budget, modify fees affecting revenue, veto decisions, hire/dismiss)
-financial benefit/burden on primary
-fiscal dependency
-misleading to exclude: if primary financial statements would render the statements misleading
8
Q
methods for displaying component units
A
-blending
- discrete presentation
- inclusion as a fiduciary fund
9
Q
blending
A
data presented in manner like presentation of balances and transactions of primary government
criteria:
- composition of two boards: if the 2 boards are substantively the same
- providing services to primary government: entirely or almost exclusively provides services or benefits to primary
10
Q
discrete presentation
A
if doesn’t meet blended criteria present in fin statements by one of these ways:
- separate column for each component unit in statemnet of net position
-aggregate into statement of net position and statement of activities presented after fund statements in basic financial statements
- aggregate info in statement of net position and activities and condensed financial info to notes in fin statements
11
Q
inclusion as a fiduciary fund
A
if benefit pension/postemployment held in trust and accumulates assets from other governments
12
Q
related organizations
A
PG not financially accountable even though it appoints majority of board.
disclose in notes
13
Q
joint ventures
A
contract between 2 or more participants with joint control and ongoing financial interest
- disclose in notes
14
Q
jointly governed organizaitons
A
no ongoing financial interest by participating government
- disclose in notes
15
Q
annual comprehensive financial report (ACFR)
A
not required by gaap but important for investment community
- 3 sections:
introductory
financial
statistical
16
Q
Introductory section
A
all basic information about the organizational unit
- includes letter of transmittal
17
Q
letter of transmittal
A
addresses accounting standards, profile of government, local economy, long range planning, cash management, risk financing, inependent audit, awards and acknowledgement
18
Q
financial section
A
includes auditors report, management discussion and analysis, basic financial statements, required supplementory information, combining statements and individual fund statements and schedules, statistical seciton
19
Q
statistical section
A
provide historical perspective, context and detail to assist with using financial info
- 9 years prior required
20
Q
financial trends info
A
info about net position and changes in net position, and information about governmental funds
21
Q
revenue capacity information
A
presented as revenue base (presented as real property, and personal property), revenue rates, and principal revenue payers (info about 10 largest payers should be presented)
22
Q
debt information presented
A
ratios of outstanding debt, direct and overlapping debt, debt limitations, and pledged revenue coverage
23
Q
demographic and economic information
A
population, total per capita personal income, unemployment rate and principal employers
24
Q
operating info
A
number of government employees, operating indicators and capital asset info
25
narrative explanations
enhance statistical section, use explanaitons
26
basic financial statements for general purpose government
government wide financial statements
fund financial statements
notes to fin statements
27
government wide financial statements
provides info about government as a whole (governmental activities and business type activities) except fiduciary activities
- statement of net position
- statement of activites
uses economic resources measurement and accrual basis
28
fund financial statements
columnar format for primary governments fund statements
- governmental, proprietary, fiduciary
special purpose governments that are only business type activities or fiduciary may only present statements that are applicable
29
notes to financial statements
communicate info essential for fair presentation of basic fin statements
- summary of significant accounting policies
- stewardship compliance
-detail notes on all activities and funds
-segment info- enterprise funds
- individual major component unit disclosure
-nature of primary government accountability to related orgs
- related party transactions
- summary discusion of significant contingencies
- effects of events
30
special purpose financial reports
popular reporting
citizen centric reporting
31
popular reporting/ summary financial information
reports to citizens, condensed financial statements and summary reports
supplements ACFR or basic financial statements
32
fund
fiscal and accounting entity intended to stand alone
-each fund is a fiscal and accounting entity in and of itself)
- each fund has self balancing set of accounts
- funds are segregated (many funds)
- used for carrying on specific activities in law or enabling legislation or attaining certain objectives
- can consolidate several funds into 1 for reporting
33
governmental funds
accounting for general services provided to public
- current financial resources and modified accrual
---all transactions using current fin resources flow through operating statement
---receivable is deferred inflow of financial resources if not collected in current period
- mostly supported through non exchange revenue
34
proprietary funds
business like activities that charge a fee for goods/services
- match revenue and expenses
-determination of operating income, changes in net position and cash flows
- economic resources and accrual basis
- enterprise funds provide goods/services to customers external to primary government and may not be charged sufficient fees so revenues are augmented by grants
35
fiduciary funds
report activities in funds with trust agreements or equivalent (pension, investment trust, private purpose trust funds) or funds without a trust (custodial fund)
---economic resources and accrual
---not reported at government wide level
36
elements of a trust
- contribution from employer and non employers and related earnings are irrevocable (can only be used for terms/conditions of trust)
-assets dedicated to providing benefits in accordance with the terms
- assets legally protected
37
own source revenue
revenue generated by government itself
--water/sewer charge, investment earnings, sales tax
38
types of governmental funds
general fund
special revenue fund
capital projects fund
debt service fund
permanent fund
39
general fund
accounting/reporting all financial resources except those required to be in another fund
- mainly funded by taxes
40
special revenue fund
proceeds of specific revenue sources that're restricted/committed to expenditures for specified purposes other than debt service or capital projects
--account for grants
--if component unit general fund is blended with primary government, general fund of component should be reported as special revenue
41
capital project fund
restricted, committed, assigned to expenditures for major capital outlays by general government
--revenues: issuing bonds, intergovernmental revenues, interest income, earmarked taxes, transfers from other funds
-- capital assets accounted for as capital outlays on operating statement
42
debt service fund
restricted, committed, assigned to expenditures for principal and interest
- if not authorized likely in general fund
--revenues: earmarked taxes, grants, investment earnings on balances, transfers
- expenditures: principal and interest
- debt refunding (refinancing)
43
permanent funds
legally restricted to extent that only earnings, not principal, may be used for purposes that support government programs
- budgeted endowments
44
types of proprietary funds
enterprise fund
internal service fund
45
enterprise fund
report any activity that a user fee is charged to external users
-public utilities, municipal golf, rec center, hospitals
46
internal service fund (ISF)
one department or agency provides goods/services to another department/agency of governmental unit or other government units on cost reimbursement basis if reporting government is predominant participant
- shouldn't have defecit/surplus
- assets/liab reclassified based on predominant participant (if enterprise funds then business type activities)
- common use is risk financing activities to centralize
47
types of fiduciary funds
pension
investment trust
private purpose trust
custodial
48
pension fund
dictated by terms of individual plan and need separate fund for each
49
contribution plan
benefit based on contribution plus investment returns
50
defined benefit plan
specify amount of benefit that will be received
51
investment trust fund
- external portion of investment pools and individual investment accounts held in trust
- report pool at fair value
- external portion belongs to legally separate entities and report separately
- internal portion belongs to primary government and its component units (report as asset)
52
fair value
price that would be received to sell an asset at measurement date
53
private purpose trust fund
- all fiduciary activities not in pension or investment
- use of principal and earnings restricted and beneficiaireis are outside government
ex scholarships
54
custodial funds
anything not required to be reported in previous
ex tax collected by one government and provided to another
55
major fund requirements
- total assets and deferred outflows, liabilities and deferred inflows, revenue or expenditures are at least 10% of total for all funds of category (governmental) or fund type (enterprise)
- 5% of corresponding total for all governmental and enterprise funds combined
56
major funds
reporting for governmental and enterprise funds by major fund
- not major fund aggregated into single column
- ISF and fiduciary reported by fund type not major fund
57
balance sheet equation
assets + deferred outflows of resources = liabilities + deferred inflows + fund balances
58
deferred inflow of resources
acquisition of fund balance applicable to future reporting period
59
deferred outflow of resources
consumption of fund balance applicable to future reporting period
60
balance sheet oder
assets
liabilities
deferred inflow
fund balances (non spendable, restricted, committed, assigned, unassigned)
61
nonspendable fund balance
amounts cant be spent because not in spendable form (inventory, long term debt) or legally/contractually required to be maintained intact
62
restricted fund balance
- externally imposed by creditors, grantors, law
- imposed by law through constitutional provisions or enabling legislation
63
committed fund balance
can only be used for specific purpose
- consent by legislative adn executive
64
assigned fund balance
intent to be used for specific purposes but not restricted/ committed
65
unassigned fund balance
only general fund should have a balance for this category
66
stabilization arrangements
set aside money for revenue shortage/budget imbalance
- considered specific purpose and report as restricted/committed in general fund
67
required financial statements for proprietary funds
statement of net position
statement of revenue, expense and change in fund net position
statement of cash flows
68
required financial statements for governmental funds
balance sheet
operating statement
69
statement of net position formula
balance sheet format:
(assets + deferred outflows = liabilities + deferred inflows + net position)
or net position format:
((assets+ deferred outflows) - liabilities - deferred inflow= net position)
70
statement of cash flows
uses direct method for determining cash flows
71
required financial statements for fiduciary funds
statemnet of fiduciary net position
statement of changes in fiduciary net position statement
72
budgetary accounting and reporting
4 accounts
- estimated revenue (debit)
- budgetary fund balance (credit)
- appropriations (credit)
- encumbrances (debit)
73
budgetary equation
estimated beginning available fund balance + estimated revenues = amount available for appropriation - appropriations = estimated ending available fund balance
74
if estimated revenue is more than appropriations - at start of fiscal year for operating budget
debit: estimated revenue
credit: appropriations and estimated change in fund balance
75
if estimated revenue is same as appropriations - at start of fiscal year for operating budget
no journal entry
76
if estimated revenue is less than appropriations - at start of fiscal year for operating budget
debit: estimated revenue and estimated change in fund balance
credit: appropriations
77
recording revenue during the year
debit: cash
credit: revenue
78
budgetary revenue reporting to modify estimated revenue - to increase estimated revenue
debit: estimated revenue
credit: estimated change in fund balance
79
if supplemental appropriations made during the year
debit: estimated change in fund balance
credit: appropriations
80
encumbrance
set aside portion of appropriation so funds are available to pay
81
recording encumbrances
debit: encumbrance
credit: restricted/ committed/ assigned fund balance
82
encumbrance using grant funds
restricted
83
encumbrance because required resolution, legislation or ordinance
committed
84
not restricted or committed encumbrance
assigned
85
statement of revenue, expenditures and changes in fund balance
revenue - expenditures = excess of revenue over expenditures + other financial sources and uses (include transfers) + special and extraordinary items = net change in fund balance + fund balance beginning of period = fund balance at end of period
86
when goods/services received, encumbrance relieved - journal entry is
debit - restricted/committed/ assigned fund balance
credit -
encumbrances
debit -
expenditures
credit -
vouchers payable
87
available balance is
appropriation - expenditures - encumbrances
88
relieving encumbrance if actual cost is different than amount encumbrance
debit - fund balance 5000
credit - encumbrance 5000
debit - expendit 4800
credit - vouchers pay 4800
89
closing entries - end of budget period appropriations no longer available
Debit - appropriations, estimated change in fund balance
Credit - estimated revenue
90
budgetary reporting
- budgetary comparison schedule required supplementary info
- required for general fund and each major special revenue fund with legally adopted budget
91
government wide reporting
focuse on activities of government not funds
- government and proprietary included, not fiduciary
- 2 columns: governmental activities and business type activities (enterprise funds)
- governmental activities need to be converted to economic resources and accrual basis
92
required financial statements for government wide reporting
statement of net position and statement of activities
93
Managements discussion and analyssi
- required before financial statements
- easily readable analysis of financial activities of government
- if info not required can provide in transmittal letter in ACFR
94
example of reconciling government activities to be economic resources and accrual basis
capital:
debit - capital asset (economic resources)
credit - capital outlay (govt fund)
long term debt
debit - other financial resources (govt fund/ operating statement)
credit - long term debt (economic resources/ liability)
95
revenue deferred for lack of availability
modified accrual:
debit - property tax receivalbe 1M
credit:
property tax rev 1M
debit - cash 900k
credit - prop tax receivable 900k
debit - cash 50k
credit - prop tax rece 50k
debit - property tax rec 50k
credit - deferred inflow 50k
---accrual basis all 1M recorded as revenue
adjusting entry to reconcile to govt wide (econ resources/accrual)
debit - deferred inflow 50k
credit - prop tax rev 50k
96
preparing government wide statements from fund statements
journal entries prepared from grand totals from fund financial statements
- most balances for government fund on position statement and op statement except capital assets/depreciation and long term obligations/amortization
debit - capital assets
credit - net position
debit - net position
credit - long term debt
97
statement of net position formula
assets + deferred outflows - liabilities - deferred inflows = net position
98
order to present assets/liabilities on statement of net position
order of liquidity
99
net position displayed in 3 components
- net investment in capital assets
- restricted net position
- unrestricted net position (or defecit)
100
residual investment
useful life of asset is greater than period of investment (capital assets)
101
modified approach for infrastructure
- to not have to record depreciation
- demonstrate government is maintaining assets at or above condition level
----must do condition assessment every 3 years
----maintenance is expensed
----expense preservation costs (if not using modified approach - capitalize)
102
statement of activities
- uses net cost format to identify which cunction requires financial support
- detail by function at same level as fund financial statements
103
activity
program/services conducted in governmental and proprietary funds
104
program revenues reported in 3 categories on statement of activities
- charges for service
- program specific operating grants
- program specific capital grants
105
general revenues on statement of activities
all other revenues and unrestricted grants/earnings
106
special items
significant transactions/events within control of management and either unusual in nature or infrequent
- tobacco settlement
107
extraordinary items
both unsusual and infrequent
- tornado damage
108
eliminations and reclassifications
gaap - minimize "grossing up" of data by eliminating several interfund transactions
109
eliminating: interfund receivables and payables
- eliminate all interfund receivables/payables within a category of funds within the governmental activities and business type activities columns
- residual amounts between presented as internal balances or due to/due from amounts
- internal balances eliminated in total column for primary government
- amounts due to/from fiduciary funds included as receivable from or payable to external parties
110
example of elimination
Due to Due From Amt
Gen Fund Spec Rev 10
Debt Serv Gen Fund 15
Enterp 1 Gen Fund 5
Enterp 1 Enterp 3 7
-- 1 and 2 eliminated since both govt funds
--- 4 eliminated because both enterprise funds
-- 3 not eliminated since between funds
statement of net position:
assets - internal balances govt act - (5) bus typ act - 5 total - 0
111
Internal Service fund transfers
- most customers government funds so report under government activities
- if customer is enterprise funds then business type activies
-- should break even
112
reporting component units
blended: funds of the government and rolled up to govt wide financial statements as govt activities or business type activities
discretely: preseneted only at government wide level
fiduciary: only reported in fiduciary fund financial statements
113
major components reporting
- separate columns in statement of net position and statemnet of activities
- combining statements in basic financial statements after fund financial statements
- condensed financial statements in notes
114
reporting cash and investments
at fair market value
115
notes and disclosures for cash and investments
- apply to primary and component units
- risk exposures and fund level
- legal/contractual provisions for deposits
- deposits as of balance sheet date and during period
116
custodial credit risk
if failure of depository financial institution, government won't be able to recover deposits or recover collateral securities in possession of outside party
117
at risk for custodial credit risk if
not covered by depository insurance and the deposits are
- uncollateralized
- collateralized with securities held by the financial institution
- collateralized with securities held by the financial institutions trust department or agent but not in depositor governments name
118
investments at risk for custodial credit risk if
uninsured, not registered in the name of government and are held by either
- the counterparty
- counterparty's trust department/agent but not in government's name
119
required to report most investments at fair market value except
mutual funds and private equity may be net asset value
120
investment income is reported as
revenue in operating statement
121
disclosures/additional notes for investments
streamlined or complex (post employement benefits)
122
complex levels for investment disclosures
level 1: inputs are quoted prices in active markets for identical assets/liabilities (publicly traded)
level 2: inputs other than quoted prices included within level 1 that are observable (swap contracts)
level 3: unobservable inputs such as management's assumption of default rate (commercial real estate)
123
derivative instruments
financial instrument with
- settlement factors
- leverage
- net settlement
*measured at fair value
*report on statement of net position or balance sheet
*divide into hedging derivatives and investment derivatives
124
derivative settlement factors
has one or more reference rates and notional amounts, payment provisions
- determine amount of settlement
125
derivative leverage
small/no initial net investment that allows for derivative instruments to have changing cash flows, or fair values that replicate an insturment that would normally require much larger investment (interest rate swap)
126
derivative net settlement
readily settled by means outside the contract or provides delivery of asset
127
hedge accounting
requires changes in fair value of hedging derivatives to be reported as deferred inflows or deferred outflows
128
note disclosures for hedging derivatives
objectives
terms
risks
129
securities lending transactions
government entities transfer securities to broker dealers and other entities for collateral and agree to return collateral in future
130
reporting securities lent as
assets
-underlying securities
- cash received as collateral and investment made with that cash
131
when should collateral be reported as assets
if governmental entity can pledge or sell them without borrower default
132
imposed nonexchange revenue transactions
governments impose tax based on something other than exchange (property tax)
- receivable recognized in period when government has enforceable legal claim
- if prior to period for which tax levied, deferred inflow recognized
133
government mandated nonexchange transactions
government at one level provides resources to government at another level and required government to use resources for purpose established by provider
- receivable and revenue recognized by recipient government when meets eligibility
134
voluntary nonexchange transactions
2 or more parties willingly enter into agreement (entitlements, shared revenue, donation)
- receivable and revenue recognized when eligibility met
135
how receivables are reported
receivable reported net allowances and discounts
136
loans
evaluate collectibility and establish allowances based on experience
137
interfund activity
activity that takes place between funds
- reciprocal
- nonreciprocal
138
reciprocal interfund activity
like exchange transactions
- interfund loans
- interfund services provided and used
139
interfund loans
affect only balance sheet and statement of net position
140
nonreciprocal interfund activity
interfund transfers and reimbursements
141
inventory methods
- consumption
- purchases
142
consumption inventory method
maintain goods in inventory until requested
- record as asset until used
- proprietary funds and business type activity
ex office supplies
143
purchases inventory method
when goods purchased, expenditure recorded unless significant goods on hand then report as inventory (consumption method)
-government funds often don't maintain inventory
144
prepaid items
government funds commonly use purchases method but gaap allows use of consumption method
145
capital assets
not reported in government funds
146
classification of capital assets
- land
- buildings (permanent structures)
- improvements
- machinery/equipment
- works of art/historical treasures
- intangible assets
- infrastructure
- construction in progress
147
additions
extend life/capacity of capital assets
148
preservation
applies to infrastructure and applies to costs incurred to restore infrastructure to original condition
- modified approach will expense, if not using then capitalize
149
when to identify intangible asset in statement of net position
when identifiable:
- asset is separable
- asset arises from contractual/other legal rights regardless if transferable/separable
150
subscription based information technology arrangement (SBITA)
intangible asset
contract that conveys control of the right to use another party's software
151
internally generated intangible assets
created or produced by government or contractor or if from 3rd party but need more than minimal incremental effort
152
capitalize outlays for internally generated intangible assets if
- determination of specific objective of project and nature of service capacity
- demonstration of technical/ feasibilty for completing project so will provide expected service capacity
- current intention/ability to complete
153
internally generated computer software (intangible) stages
- preliminary
- application
- post implementation/operation
154
preliminary project stage
formulation, evaluate alternatives
expense
155
application development stage
design software, test
capitalize
156
post implementation/operation stage
training and maintenance
expense
157
impairment of capital asset
service utility has declined significantly and unexpectedly
158
if no longer using impaired asset
report at lower of carrying value or fair market value
159
if continuing to use impaired asset
measure impairment using either
- restoration cost approach
- service units approach
- deflated depreciated replacement cost approach
160
restoration cost approach
amount of impairment derived from estimated costs to restore utility
convert to historical cost
--- physical damage
161
service units approach
isolates historical cost that cannot be used due to impairment (service before and after)
---environmental or technological
162
deflated depreciated replacement cost approach
replicates historical cost to find current cost to replace
----changes in manner or duration
163
how insurance recoveries are factored into impairment loss
netted
164
advances
resources that are not available
165
advances for governtal and business type activities
debit - cash
credit - advances
166
governmental funds report resources not available
debit - accounts rec
credit - revenue
if availability period and payment is not made:
debit - revenue
credit - deferred inflow
167
compensated absences
- create long term liabilities
- liabilties recognized for leave that hasnt been used and leave used but not yet paid
168
when parental/military/jury duty leave should be recognized
when leave commences
169
termination benefits - healthcare related
calculate discounted PV of expected future benefit payments
170
termination benefits - non healthcare
- if benefit terms estimate obligation to pay specific amounts - dicsount PV of expected future benefit payments
- if dont estimate obligation - calculate as either discounted PV of expected future benefit payments or undiscounted total of estimated future benefits at current costs
171
recognition of termination benefit liability/expenditure in accrual basis
for voluntary termination when employee accepts offer and amounts can be estimated
172
plan of involuntary termination
- identifies number of employees to terminate, job classifcation/functions affected, locations, when to occur
- estimate terms of termination benefits in detail to enable employees to determine type/amount of benefits
173
when to recognize liability/expense for involuntary termination
when plan of termination approved, communicated to employees and amounts estimated
modified accrual: if available financial resources will be used
174
risk financing activities
gaap allows use of general fund or internal service fund to account
-isf may create a surplus reserve for future catastrophic losses/errors
- general fund uses current financial resources and if they overcharge other funds, excess=transfers
175
insurance
- premiums = expenses
- analyze potential for additional premiums/loss expenditures and report adjustments for contingencies
- consider level of risk transferred to insurer to determine disclosure
176
predomininent participant in risk financing/insurance
activity should be reported in general fund/isf
if not, fund is public entity risk poop and reported as enterprise fund
177
pollution remediation obligations
- pre cleanup activities
- cleanup activities
- external government oversight and enforcement
- operation and maintenance of remedy
* doesn't include prevention/control obligation
178
recognition and measurement of pollution remediation liability
- obligating events: when government knows/believes site is polluted
- recognition benchmarks: liability should be recognized as ranges of their components become reasonably estimable
- measurement: measured based on outlays expected to be incurred to settle liability - current value
179
pollution remediation outlays should be expensed unless
- to prepare property in anticipation of a sale
- prepare property for use when property acquired with know pollution that was expected to be remediated
- restores pollution caused decline that was impairment
- acquire ppe that has future alternative use
180
report pollution remediation in government wide and proprietary statements by
reporting in statement of activities and statement of revenue, expenditures, and changes in net position as a program or operating expense, special item or extraordinary item
not reported in government funds
181
landfills
EPA issued regulations for closure and post closure monitor of landfills
GAAP requires estimated closure and post closure costs to be recognized while landfill is still operating regardless when cash disbursement made
-- recognize expense and liability in each period the landfill accepts solid waste
182
recognition for landfill costs formula
(estimated total current cost x cumulative capacity used) - amounts previously recognized / total estimated capacity
183
asset retirement obligation (ARO)
common in public utilities
- recognized for retirement of tangible capital assets or disposal
- liability only recognized when there are external or internal obligating events
184
types of employers
- single employer
- agent employers
- cost sharing employer
185
single employer
employees provided with defined benefit pensions/OPEB of only 1 employer
186
agent employers
multiple employer plans but separate accounts for each employer
187
cost sharing employer
multiple employer plans are pooled and can pay benefits of any employer
188
defined benefit pensions and OPEB
GAAP requires measurement of asset liability as:
- portion of PV of projected benefit payments to be provided through pension plan to current active and inactive employees attributable to those employees past periods of service
less
- amount of pension fiduciary net position
189
defined contribution or OPEB
recognize expense for amount of contributions to employees accounts defined by benefit terms as attributable to employee service in period, net of forfeited amount
190
a change in pension/OPEB liability recognized for difference between
- amounts recognized in expense, and
- amounts paid by employer in defined contribution plan
191
single and agent accounting
- in government wide financial statements and proprietary, if no arrangement where another government has legal responsibilty to pensions is required to recognize liability equal to net pension liability
192
total liability for pension
beginning balance at start of period equating to actuarial PV of projected benefits that hasnt been earned or restricted
add period's service cost
add interest
193
cost sharing
recognize liability for proportionate share of net pension liability
194
notes
short term (1 year or less)
195
tax anticipation note
since taxes received 2x per year, may have a cash flow problem - redeem after taxes received
196
bond anticipation note
provide cash to undertake a capital project prior to selling long term debt
197
bonds
long term debt - usually no longer than life of assetr being constructed
-premiums/discounts amortized over life of issue
198
refunding bonds
if declines in interest rates - refinance
199
direct borrowings
government enters into loan agreement with lender (bank)
200
direct placements
government issues debt security directly to investor (mutual/hedge fund)
- lessens issuance costs, inherent risk
201
lease
government must have control of the right to use underlying asset
202
embedded lease
fits definition of lease but doesnt contain words "rent" or "lease"
203
short term lease
max possible term of 12 months including any options to extend
204
reporting for leases
lessees report liability and right to use asset for discounted PV of payments during lease term
lessor report receivable and deferred inflow
205
escheat property
transfers property to government
- person dies without will/heirs, deposits for utilities that remain unclaimed, bank accounts idle for extended time
- record as revenue, estimate claim and record as liability
206
government combination
arrangement should result in continuation of substantial portion of services provided by separate entities
207
government merger
2 or more governments cease to exist as separate entities and combined to 1 or more governments
- combine assets/liabilities
208
government acquisition
government acquires another entity or operations of another entity in exchange for signifcant consideration
- recognize assets/liabilities of acquired government
209
transfer of operations
operations of an entity rather than combination of legally separate entities, in which no significant consideration is exchanged
- transfer to exisiting or new entity
210
revenue should be recognized
net of estimated refunds, discounts or allowances
211
reporting net revenue
1. charge for service (net bad debt 5000 and discount 15000) 325000
2. charge for service 345000
less: bad debt and disc 20000
3. revenues net and disclose in notes
212
governmental funds recording revenue
record based on receipt of current financial resources (measurable and available)
- revenue not received within availability period - report as deferred inflow
213
proprietary, fiduciary funds and government wide reporting revenue
recognize revenue based on receipt of economic resources and record in period earned/owed
- resources received prior to revenue recognition = unearned revenue (liability)
214
operating revenue
- used in proprietary funds
- directly attributable to goods/services produced
215
nonoperating revenue
- used in proprietary funds under operating revenue
-result from other activities such as investment income, grants, gain/loss on sale
216
derived tax revenue
result when government imposes tax on an exchange transaction
217
income tax
- employers withhold from payrolls and remit to government
---- recognize derived tax revenue in period employees earn income
-estimated payments by taxpayers
----recognize when taxpayers earn underlying income
218
sales tax
merchant collects tax and remits to government
--recognize net of estimated refunds
--local governments can piggyback a local tax with state (state tax = 5, local tax =1, merchant sends 6 to state then remits 1 to local)
219
imposed revenue
taxes and fines imposed on an act committed or omitted by taxpayer, where the act is not an exchange (owning property, breaking the law)
--recognize net estimated refunds and uncollectibles
220
property tax
recognize in period government has enforceable claim (lien or assessment date)
-- revenue recognized in period tax is intended to finance (payments in advance = deferred inflow)
221
estate tax
recognize as revenue in period estate settles
222
fines
recognize revenue when government has enforceable claim or when revenue received
--for some offenses bond is paid prior to court date, this would be a liability since no claim yet
223
government mandated nonexchange revenue
government provides resources to government at antoher level and requires resources for specific purposes established in legislation
224
volunteer nonexchange revenue
legislation or contractual agreements completed willingly by 2+ parties
225
entitlement
amount of payment to which state or local government is entitled, as determined by the other government pursuant to an allocation formula
- may or may not be restricted
226
revenue recognized when eligibility requirements met
- recipient must meet characteristics
- time requirements met
- specify if reimbursement basis
- specify contingencies
-- resources transmitted before criteria met, provider records as asset, recipient records as liability
227
pass through grants
government receives grant to pass them to secondary recipient
- record in custodial fund or special revenue fund
228
reimbursement grants
allowable expenditure is the prime factor for determining eligibility
- revenue recognized when expenditure made
229
donations
valued at acquisition value (price that would be paid to acquire asset)
- government fund: no revenue reported unless involves flow of current financial resources
- proprietary/fiduciary: revenue is recorded by:
debit: capital asset
credit: donated revenue
230
investment revenue
accrual: interest earnings recorded when earned
modified accrual: earned and available
231
loan revenue
interest is recognized as revenue
proprietary funds/government wide: interest is revenue, face amount is asset
232
expense/expenditure
modified accrual: expenditure
accrual: expense
233
payroll and associated benefits
record when cost is incurred for both accrual and modified accrual
healthcare is prepaid
234
compensated absences
- if leave related to services already rendered and probable will be paid, government recognizes expense and liability
235
vacation leave
expense recorded when vacation taken, unused portion is a liability at end of year
236
journal entry for compensated absences
accrual:
debit: public service salary expense 960
credit: cash 768
credit: compensated absences 192 (16 hours of unused vacation)
modified accrual only reports expenditure of 768
if employee takes the 16 hours next year:
debit: compensated absence 192
credit: cash 192
237
operating materials and supplies
expenditure reported if a fund liability is incurred (goods/services are provided) regardless of when payment made
238
governmetal funds can use purchases or consumption method for inventories and prepaid items
purchases method: expenditure recorded when item purchased, any signficant inventory at year end is recorded as assets
consumption method: item purchased is recorded as inventory asset, expenditure recorded when item is placed into service
239
acquisition/construction using current financial resources/ modified accrusl
debit: capital outlay
credit: cash
240
retainage
percent of progress payments on major construction contracts witheld from contractor invoices
-after completion, contractor paid retained amount
debit: capital outlay
credit: retainage payable
credit: cash
241
depreciation/amortization
amount consumed during the year (accrual basis only)
-salvage value deducted from cost to establish amount to be depreciated
- cost included ancillary charges to place asset in service
242
capital contributions
one government contributes capital assets to another
- no transaction in governmental funds
-proprietary/fiduciary: assessed value reported in operating statemnet less any amount paid:
debit: capital asset
credit: contributed capital
243
long term obligations
modified accrual: expenditures
accrual: expenses
244
principal payment on long term obligations
governmental funds:
debit: expenditure - debt service principal
credit: cash
proprietary and fiduciary: no expense recorded - results in reduction of long term obligation
245
interest payment on long term obligation
government funds report debt service (principal and interest expenditures) when payment is due
proprieatry and fiduciary report interest expense
246
recording leases
government funds: expenditure when payment made (capital outlay)
prop/fiduc: expense interest portion of lease and reduction of long term lease liability for principal:
debit: lease payable
debit: interest expense
credit: cash
247
reporting claims and judgements
government funds: report expenditure when current financial resources will be used to pay liability
prop/fiduc: report expense in period occurred
ex: claim was 80000, payments in 2021 = 5000 2022= 25000
govt funds:
debit: expenditure 5000
credit: cash 5000
debit: expenditure 25000
credit: cash 25000
prop/fiduc:
debit: claims expense 80000
credit: claims payable 75000
credit: cash 5000
debit: claims payable 25000
credit: cash 25000
248
amortization of bond premium/discount
discounted over life of issue
- discount: amortization increases the effective interest rate
- premium: amortization decreases the effective interest rate
straight line method, effective interest rate method, proportionate to stated interest requiremnets methode
249
ex entries for bond amortization
issue 50M bond, 20 years, discount 200k, straight line
debit: cash 49800000
debit: bond discount 200000
credit: bonds payable 50m
each year:
debit: interest expense 10000
credit: bonds discount 10000
250
debt issue costs
expenditure/expense should be reported separate as period costs
- underwriting fees, legal fees, printing fees, etc
govt funds: operating statement with debt service function
prop/fiduc: expense in period occurred
251
interest on deep discount debt
serial bonds = annual payments of interest and principle
term bond= annual interest payments and full principle at end
zero coupon = pay at maturity (interest and principle)
- GAAP still requires to expense each year:
debit: interest expense
credit: accrued interest payable
(no entry for government fund)
252
loss/gain on sale of assets
prop/fiduc on operating statement
debit: cash
debit: accum depreciation
debit: loss on sale
credit: capital asset
government funds report entire proceeds (cash) as other financing sources
253
gain/loss on refunding bonds
- amortized difference between reacquisition price and carrying amount of old debt
- period is remiaing life of old debt or life of new debt if shorter
- difference between reacquisition price and carrying amount reported as deferred inflow/outflow
- no entry for govt funds
254
proceeds from long term obligations
inflow of resources recorded as other financial sources
ex. lt obligations
debit: cash
debit: expenditure- bond issuance costs
credit: other fin source - bond premium
credit: other fin source- face value
ex. leases
debit: expenditure- capital outlay
credit: other fin source - lease
ex sale of capital asset
debit: cash
credit: other fin source - sale of capital asset
255
current refunding
new debt is used immediately
256
advance refunding
new debt is turned over to escrow agent to invest and used to pay later
- proceeds are other fin source
257
interfund services provided and used
- reciprocial: one fund pays for goods/services provided
- record as exchange - revenue (providing) and expense/expenditure (receiving)
258
interfund transfer
nonreciprocal
- prop funds reported after non operating income (expense)
- govt wide - transfer from primary (program expense) to component unit (contribution)
259
interfund reimbursement
repayment on another funds behalf (expense/expenditure)
ex. general fund pays employers retirement for all funds (100k). 15k billed to special revenue funds and 10k to enterprise funds
special rev fund records expenditure of 15k
enterprise records expense of 10k
general fund reduces expenditures
CGFM
flashcards
Decks in class (8)
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