GASB Statement 34 does not mandate that governments prepare and publish an annual financial report. However, the Statement establishes new financial reporting requirements for governmental entities by restructuring much of the information that entities have presented in the past. The impact of this Statement on the presentation of the annual financial statements is depicted in table 5. The table identifies the differences between the Statement 34 presentation and that of the previous governmental reporting model used to prepare a Comprehensive Annual Financial Report (CAFR). Many of the CAFR schedules and presentations provide information beyond that required by Statement 34. Show Table 5 (GASB Statement 34) compares the contents of the CAFR under the new reporting model per GASB Statement 34 with the contents of the CAFR under the previous model. Comparisons identify key components of each chapter for an overall comparison of the chapter between models. The table is not intended to be an item-by-item comparison of the models.
[back to top] As table 5 shows, the new reporting model involves significant changes to the financial statements prepared and presented by governmental entities. The next sub-section outlines the major elements of the financial statements and related disclosures as required by Statement 34:
Under the new financial reporting model, the basic financial statements are
Governmentwide Financial Statements
The governmentwide financial statements are
The Statement of Net Assets presents a columnar presentation of the assets, liabilities, and net assets of the reporting entity in two categories: governmental activities and business-type activities. Discretely presented component units are reflected in a separate column or columns on the face of the statement. Statement 34 does not alter the requirements for presenting component units as established by Statement 14, The Financial Reporting Entity (issued in June 1991). Table 6 highlights the major differences between the Statement 34 presentation for the statement of net assets and the balance sheet presentation under the previous reporting model.
As mentioned above, Statement 34 requires separate columns for governmental activities and business-type activities of the reporting entity in the statement of net assets. Table 7 outlines definitions within the Statement for these types of activities.
Statement 34 states that although internal service funds are reported as proprietary funds of the reporting entity, the activities accounted for in internal service funds are usually more governmental than business-type in nature. If enterprise funds are the predominant or only participants in an internal service fund, however, the entity should report the internal service fund's residual assets and liabilities within the business-type activities column in the Statement of Net Assets. Other presentation requirements relative to the Statement of Net Assets follow:
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Statement of Activities.The operations of the governmental unit should be presented in a net (expense) revenues format in the Statement of Activities. General revenues, contributions to term and permanent endowments, contributions to permanent fund principal, special and extraordinary items, and transfers should be reported separately after the total net expenses of the entity's functions to arrive at the "change in net assets" for the period. The purpose of using this format is twofold:
Fund Financial Statements Governmental Fund Financial Statements.Governmental fund financial statements (including financial statements for the general, special revenue, capital projects, debt service, and permanent funds) should be prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Under this measurement focus and basis of accounting, revenues should be recognized in the accounting period in which they become available and measurable and expenditures should be recognized in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest on general long-term debt, which should be recognized when due. Proprietary Fund Financial Statements.Proprietary fund financial statements (including financial data for enterprise and internal service funds) should be prepared using the economic resources measurement focus and the accrual basis of accounting. Accordingly, revenues should be recognized in the accounting period in which they are earned and become measurable, and expenses should be recognized in the period incurred, if measurable. Fiduciary Fund Financial Statements.Fiduciary fund financial statements (including financial data for fiduciary funds and similar component units) should be prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues should be recognized in the accounting period in which they are earned and become measurable, and expenses should be recognized in the period incurred, if measurable. Table 9 compares the financial statement types by focus and basis of accounting.
Note Disclosures GASB Statement 34 does not amend the existing general note disclosure requirements but requires additional disclosures as follows. Summary of Significant Accounting Policies (Additional Disclosure Requirements).
[back to top] Required Disclosures for Capital Assets.Statement 34 requires disclosure of each major class of capital assets, including capitalized collections of works of art, historical treasures, and similar assets. Capital assets associated with governmental activities should be reported separately from those associated with business-type activities, capital assets being depreciated separately from those that are not being depreciated, and the valuation basis separately from accumulated depreciation. For each class, the following information should be presented, if applicable:
Required Disclosures for Long-Term Liabilities.The note disclosures should contain information about long-term liabilities, including long-term debt instruments such as bonds, notes, loans, and leases payable, as well as other long-term liabilities such as compensated absences, claims, and judgments, as follows:
Disclosures Relating to Donor-Restricted Endowments.The following information is required relating to donor-restricted endowments in the notes:
The definition of a segment requires that a specific identifiable revenue stream be pledged in support of revenue bonds or other revenue-backed debt. It is not a requirement that the debt be backed solely by pledged revenues. The identifiable activity is typically the source of the pledged revenues. In addition, there must be an externally imposed requirement to separately account for the activity's revenues, expenses, gains and losses, assets, and liabilities. (GASB Statement 37, p. 17). Segment disclosures are not required for an activity in which the only outstanding debt is conduit debt for which the entity has no obligation beyond the resources provided by related leases or loans. In addition, segment reporting is not required when an individual fund both is a segment and is reported as a major fund. GASB Statement 34 requires the following segment disclosures:
[back to top] Management's Discussion & Analysis and Other RSI
MD&A is restricted to the following topics, although there is no limit to the information that may be presented about these topics.
The entity should ensure that information contained in MD&A is not duplicated in the letter of transmittal. Differences between MD&A and the letter of transmittal are outlined in table 10.
If the reporting entity provides comparative financial statements by presenting basic financial statements and RSI for two years, a separate MD&A for each year is not required, but it must address both years presented in the comparative financial statements. MD&A should include comparative condensed financial information and related analysis for both years. Component Units Financial accountability for a potential component unit is determined by either of the following:
In May 2002, GASB issued Statement 39, Determining Whether Certain Organizations Are Component Units, which amended Statement 14 to establish the criteria for the inclusion of organizations on this basis. A legally separate, tax-exempt organization should be reported as a component unit if all of the following criteria are met:
Component units may be
Blended Component Units A component unit should be blended in either of these circumstances:
Discretely Presented Component
Units When component units are presented in the basic financial statements (i.e., Statement of Net Assets and Statement of Activities), each statement should distinguish between the governmental and business-type activities of the government and between the total entity and its discretely presented component units, by reporting each in separate columns (and rows in the Statement of Activities). Component units that are fiduciary in nature, however, should be included only in the fund financial statements with the entity's fiduciary funds. Statement 39 provides that a discrete presentation must be used for an organization that meets the requirements as a component unit under its new criteria. (Statement 39, paragraph 7) [back to top] An entity's financial statements are an important element in conveying the current state, financial health, and future viability of the organization. Financial statements, regardless of the industry, report on a number of similar components, including assets, liabilities, and equity (i.e., fund balances or net assets). School districts and other governmental agencies are no exception. The GASB is the oversight body responsible for establishing the governmental reporting criteria, including the level of detail, format, and required contents of external financial statements. GASB provides much guidance in the proper interpretation and implementation of these requirements. Readers are encouraged to refer to this source for further questions on financial reporting issues not covered in this document. [back to top] CONTINUED<< BACK 1 2 3 4 5 What is the basis of accounting in government?The accrual basis of accounting is adjusted when dealing with governmental funds. The sum total of these adjustments is referred to as the modified accrual basis.
Which basis of accounting is used for the basic governmental functions of state and local governments?GASB is the standard-setting authority of generally accepted accounting principles (GAAP) for state and local governments, including school districts.
What is the most common basis of accounting used by most government organizations?Entity-wide financial reporting of state and local governments uses the accrual basis of accounting.
What is the basis of accounting for the governmentThe government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting, as are the Enterprise Funds, Component Units and the Fiduciary Funds financial statements.
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