Basic Financial Statements: Overview

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Basic Financial Statements Overview
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Principle 1Accounting Reporting Capabilities

• Present fairly and with full disclosure funds and
  activities in conformity with GAAP
• Determine and demonstrate compliance with
  finance-related legal and contractual provisions

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GAAP Requirements

• Trying to assure comparability among and between
  governments
• Full disclosure may result in much more
  information than adequate disclosure required
  by FASB

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Categories and Types of Funds

• GOVERNMENTAL FUNDS
• General Fund
• Special Revenue Funds
• Capital Projects Funds
• Debt Service Funds
• Permanent Funds

• PROPRIETARY FUNDS
• Enterprise Funds
• Internal Service Funds
• FIDUCIARY FUNDS
• Pension Trust Funds
• Investment Trust Funds
• Agency Funds
• Private Purpose Trust Funds

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Governmental Funds

• Most basic type of fund use basic fund format
  defined earlier
• Used to account for general government activities
• Accounting equation does not allow for capital
  assets and long-term liabilities necessitates
  use of nonfund accounts
• General Capital Assets
• General Long-Term Liabilities

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Nonfund accounts

• General Capital Assets property, plant,
  equipment used in general operation of government
• General Long-term Liabilities debt used to
  finance capital assets and other long-term
  liabilities not recognized in the governmental
  funds

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Proprietary Funds

• Used to account for business-like activities of
  the government
• Golf courses
• Maintenance operations
• Airports
• Utilities
• May use more traditional accounting equation

Current Assets Capital Assets
Current Long-term Liabilities
Net Assets


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Fiduciary Funds

• Accounts for assets held by government in trustee
  or agency capacity for others
• Not used to report assets held for governments
  own use

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Principle 5Reporting Capital Assets

• Must know which fund type is using capital
  assets
• Proprietary fund reported at fund and
  government-wide level
• Fiduciary fund reported only at fund level
• Governmental Fund reported only at
  government-wide level and in notes to financial
  statements

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Principle 6Valuation of Capital Assets

• Report at historical cost (may use estimated cost
  of historical cost cannot be determined)
• Cost of capital asset included charges to get it
  to intended location and ready for use
• Donated capital assets reported at fair value at
  time of donation, plus charges to get it to
  intended location and ready for use

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Principle 7Depreciation of Capital Assets

• Capital assets depreciated over useful lives
• Inexhaustible capital assets (land and some land
  improvements) should not be depreciated
• Infrastructure assets may be accounted for using
  the modified approach

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Reporting depreciation depends on fund category

• Proprietary fund reported at fund and
  government-wide level
• Fiduciary fund reported only at fund level
• Governmental Fund reported only at
  government-wide level and in notes to financial
  statements

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Principle 8Accounting for Long-Term Liabilities

• Must know type of fund incurring liability
• Proprietary Fund report at fund and
  government-wide level
• Fiduciary Fund report only at fund level
• Governmental Fund
• Unmatured report at government-wide level in
  the notes
• Matured report as fund liabilities

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Principle 9Measurement Focus (MF) and Basis of
Accounting (BA)

• Government-Wide Financial Statements
• Measurement focus is on economic all resources
• Basis of accounting is accrual
• Revenues, expenses, gains, losses, assets,
  liabilities recognition depends on transaction
• Exchange when exchange takes place
• Nonexchange according to GASBS 33

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Principle 9Measurement Focus (MF) and Basis of
Accounting (BA)

• Governmental Fund Financial Statements
• Measurement focus is on current financial
  resources
• Basis of accounting is modified accrual
• Revenues recognized in period they become
  available and measurable
• Expenditures recognized when liability is
  incurred, except for interest on long-term debt
  which is recognized when due

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Principle 9Measurement Focus (MF) and Basis of
Accounting (BA)

• Proprietary Fund Financial Statements
• Measurement focus is on economic all resources
• Basis of accounting is accrual
• Revenues, expenses, gains, losses, assets,
  liabilities recognition depends on transaction
• Exchange when exchange takes place
• Nonexchange according to GASBS 33

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Principle 9Measurement Focus (MF) and Basis of
Accounting (BA)

• Fiduciary Fund Financial Statements
• Measurement focus is on economic all resources
• Basis of accounting is accrual
• Exception for certain liabilities of defined
  benefit pension plans and certain postemployment
  healthcare plans

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Revenue Recognition Rules Must be

• Earned or levied
• Measurable
• Available
• Collected in current period or soon enough
  thereafter to pay liabilities of the current
  period usually considered to be 60 days
• If not collected within this period, reported as
  deferred revenues in current period and revenues
  in year when they become available

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Expenditure Recognition Rules

• For current operations capital outlay, when
  liabilities to be paid currently by governmental
  funds are incurred
• For debt service (principal and interest) when
  payments on long-term liabilities are due

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Reporting Interfund ActivityReciprocal
interfund activity

• Interfund loans (asset / liability)
• Short-term (due from / due to)
• Long-term (advance to / advance from)
• Interfund services provided and used recognized
  as revenue in providing fund and
  expenditure/expense in using fund

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Reporting Interfund ActivityNonreciprocal
interfund activity

• Interfund transfers
• Reported in governmental funds as Other Financing
  Sources / Uses
• Reported in proprietary funds after nonoperating
  revenues and expenses
• Interfund reimbursements
• Repayment from one fund to another increases
  expenditures / expenses in paying fund while
  decreases them in receiving fund
• Not separately reported in financial statements

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Principle 13Annual Financial Reports

• Minimum reporting requirements
• Managements Discussion Analysis
• Basic Financial Statements
• Government-wide financial statements
• Fund financial statements
• Notes to the financial statements
• Required supplementary information other than MDA

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Principle 13Annual Financial Reports

• Government-wide Financial Statements
• Statement of Net Assets
• Statement of Activities

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Principle 13Annual Financial Reports

• Governmental Fund Statements (Schedules)
• Balance Sheet
• Statement or Revenues, Expenditures, Changes in
  Fund Balance
• Statement or Revenues, Expenditures, Changes in
  Fund Balance Budget-to-Actual (may be either
  BFS or RSI)

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Principle 13Annual Financial Reports

• Proprietary Fund Statements
• Statement of Net Assets / Balance Sheet
• Statement of Revenues, Expenses, Changes in Net
  Assets
• Statement of Cash Flows

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Principle 13Annual Financial Reports

• Fiduciary Fund Financial Statements
• Statement of Fiduciary Fund Net Assets
• Statement of Changes in Fiduciary Fund Net Assets