Introduction to Governmental and Not-for-Profit Accounting, 7e · PDF fileTitle: Introduction to Governmental and Not-for-Profit Accounting, 7e Author: ALAMRY Created Date: 12/4/2015

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*

Introduction to Governmental and

Not-for-Profit Accounting, 7e

Chapter 10: Government-Wide

Financial Statements


Chapter 10 Topics

• Format of Government-Wide Financial

Statements

• Preparing Government-Wide Financial

Statements

• Creating Government-Wide Financial

Statements from Fund Financial Data:

Comprehensive Illustration

• Capital Assets, Including Infrastructure

Assets


Overview of Government-Wide


• To prepare: start with fund-level statements


Focus and Format of Government-Wide



Focus and Format of Government-Wide



Remember That


Format of Government-Wide Financial

Statements: Statement of Net AssetsThe Statement of Net Position

The statement of net position

may have four columns of

financial data:

one for governmental

activities, one for business-

type activities, one for the

total of those two columns,

and one for discretely

presented component units.



Statements: Statement of Net Position

• Columns: governmental, business-type,

total, discrete component units

• Assets – Liabilities = Net Position OR

Assets = Liabilities + Net Position

• Report in order of liquidity or classified

• Net position: 3 components:

– Net investment in capital assets, restricted,

unrestricted

• Unrestricted differs from unassigned fund balance



Statements: Statement of ActivitiesThe Statement of Activities

shows the extent to which each function is self-financing

(through fees and intergovernmental grants) and the extent to

which it draws on the government’s taxes and other general

revenues.

the statement of activities is presented in two sections:

• The upper portion shows the net expenses of each function

or program

• the lower portion shows the general revenues and the

resulting change in net position for the year.



Statements: Statement of Activities



Statements: Statement of Activities• Shows extent to which programs are self-

financing

• Columns

– Direct expense for each function/program

• First column

• Indirect may be allocated

– Program revenues

– Net direct expenses against three program

revenue columns

– Separate: interest on general long-term debt


Statements: Statement of Activities

• Bottom

– General revenues (all taxes)

– Unrestricted grants

– Special items


Government-wide Statement of

Activities: Reporting Expenses


Governmental units report expenses by

function or program (such as public safety

and culture and recreation)


Government-Wide Statement of

Activities: Program Revenues

• Charges for services: fees for specific services – Reported by program that generates them

– Includes fines, forfeitures

• Program specific grants and contributions– Nonexchange revenues restricted for use in a

particular program

• Capital grants and contributions– Contributions of capital assets and grants

restricted to capital purposes

Government-wide Statement of

Activities: General Revenues• General Revenues:

– Reported after net functional expense

– All taxes, even if restricted for a specific

purpose

– All other revenues not restricted for a specific

purpose

• Special and Extraordinary Items



Preparing Governmental Wide

Statement of Activities

Preparing Statement of Activities

Because of the conversion to the economic resources measurement focus and the

accrual basis of accounting, the governmental activities column of the government-

wide statement of activities will, of course, differ from the total governmental fundscolumn in the funds statement of revenues, expenditures, and changes in fund

balances.

Interfund and Internal Service Fund Balances and Activity

As discussed in previous chapters, fund accounting often results in transfers among,

charges to ,and balances due to and from the various funds. As a general rule, these

types of internal activities and balances—reported in the fund financial statements—

are eliminated when preparing the government-wide statement of net position and

statement of activities. Unless the eliminations are made, totals for the entity as a

whole will be inflated. How are these eliminations made?



Statements: Interfund Activity

• Within governmental funds or enterprise

funds

– Eliminate interfund receivables/payables on

government-wide statement of net position

• Between governmental, enterprise funds

– Interfund receivables/payables between

governmental funds and enterprise funds

retained

• Report as internal balances

Government-Wide Financial

Statements – Internal Service Fund

Balances/Activities

• Assets/liabilities aggregated with those of

primary activities using ISF services

– Most often with governmental activities

• Eliminate ISF activity — revenues and

expenses/expenditures


Government-Wide Financial

Statements – Internal Service Fund

Balances/Activities

• Eliminate “artificial” profits generated by

ISFs

– Elimination column of worksheet

Revenues (ISF) 100,000

Expenses (ISF) 95,000

Public safety expenditures 3,000

Recreation expenditures 2,000


صوري

Preparing Government-Wide

Financial Statements: Process• Worksheet approach

– Three sets of debit/credit columns

• Starting balances from preclosing trial balances

• Adjustments

– Measurement focus and basis of accounting

adjustments for governmental funds

• Adjusted balances



Preparing Government-Wide Financial

Statements: Report Capital Assets

• Reinstate prior-year government-wide account

balances for capital ExpendituresCapital assets-equipment 1,000,000

Accumulated depreciation-equipment 400,000

Net position 600,000

• Reclassify current capital expenditures as assetsCapital assets-equipment 200,000

Expenditures-capital outlay 200,000

• Record current depreciationDepreciation expense-equipment 110,000

Accumulated depreciation-equipment 110,000



Statements: Report Long-Term Debt

• Reinstate prior year government-wide account balances for long term debt

Net position 500,000

Bonds payable 500,000

• Record current-year sales of debtOther financing sources-proceeds from

bond issue 200,000

Bonds payable 200,000

• Record debt redemptionBonds payable 100,000

Expenditures-bond principal 100,000



Statements: Accrue Revenue

• Derived tax revenues: when exchange

occurs

– Sales tax, income tax

• Imposed nonexchange revenue: when

levied

– Real property taxes, fines

• Deferred revenues: adjust (removing)

– Beginning- and end-of-year deferrals


Statements: Accrue Revenue

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

• Property-tax adjustments– Reverse revenues applicable to 2012 but recognized

in fund statements during 2013

Revenues-property taxes 10,000

Net position 10,000

– Recognize additional revenues from 2013 property

tax levy by removing deferral

Deferred property tax revenues 15,000


10-*



Statements: Accrue Expenses• Stub period interest

– Interest between last interest payment in one

fiscal year and the fiscal year end

• Record beginning of year interest liability:Net position 2,000

Accrued interest payable 2,000

• Adjust balance to end-of-year liability:Accrued interest payable 500

Expenditures—interest on bonds 500

• Record expenses, not expenditures



Statements: Accrue Expenses

• Adjust other expenditures to expenses

– Use “expense” for government-wide

• Fund-level: recognized when due

• Government-wide (full accrual): recognize

when incurred

– Regardless of when cash is paid

• Common adjustments: compensated

absences, judgments, claims, pension and

other postemployment benefits


Creating Government-Wide Financial

Statements: Additional Entries Illustrated

• Adjust for loss on capital assetsAccumulated depreciation-capital assets 16,000

Other financing sources-sale of assets 1,000

Loss on sale of assets 3,000

Capital assets 20,000

• Reverse prior year revenues in current year fund-level statements


Net position 10,000

• Recognize current year revenues using accrualDeferred tax revenues 18,000



Creating Government-Wide Financial

Statements: Additional Entries Illustrated

• Record beginning balance of accrued

compensation, adjust for current yearNet position 4,000

Accrued compensated absences 4,000

Compensated absences expense 1,000

Accrued compensated absences 1,000

• Eliminate interfund transfersTransfer in from General Fund 65,000

Transfer out to Debt Service Fund 65,000



Statements: Required Reconciliations

• Reconcile governmental fund statements

to government-wide statements

• In summary form

• 2 reconciliations required:

– Reconcile financial position statements

– Reconcile operating statements

• Appear at bottom of statements or in

separate schedules


Capital Assets: By Fund Type


Capital Assets:

Infrastructure Assets

• Very long-lived, stationary

• Examples: roads, tunnels, drainage/

water/lighting systems

• Not buildings

– Unless they are ancillary to infrastructure

• Must capitalize

• Must depreciate OR use modified

approach


Capital Assets: In General

• Report historical cost, including ancillary

costs

– All costs to get ready for use

• Depreciated over estimated useful life

– Unless inexhaustible, such as land

– OR infrastructure assets: use modified

approach


Capital Assets: Infrastructure

Assets, Modified Approach

• Not required to depreciate IF:

– Asset management system in place

– Assets preserved at established & disclosed

condition level

• Expense any expenditures to preserve

– Additions and improvements are capitalized

• Improvements increase capacity or efficiency


Capital Assets:

Capital Asset Accounting

• Capital Investment Account Group (CIAG)

– Journal entries related to investments in

capital assets:

• Acquisitions, depreciation, disposals, debt related

to acquisitions

• To improve internal control over assets

• To assist in preparing government-wide

statements


All rights reserved. No part of this publication may be

reproduced, stored in a retrieval system, or transmitted,

in any form or by any means, electronic, mechanical,

photocopying, recording, or otherwise, without the prior

written permission of the publisher. Printed in the United States of America.

Documents

Introduction to Governmental and Not-for-Profit Accounting, 7e · PDF fileTitle: Introduction to Governmental and Not-for-Profit Accounting, 7e Author: ALAMRY Created Date: 12/4/2015