Introduction to Governmental and Not-for-Profit Accounting, 7e

Transcription

1 Introduction to Governmental and Not-for-Profit Accounting, 7e Chapter 10: Government-Wide Financial Statements

2 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

3 Overview of Government-Wide Financial Statements To prepare: start with fund-level statements

4 Focus and Format of Government-Wide Financial Statements

5 Focus and Format of Government-Wide Financial Statements

6 Remember That

7 Format of Government-Wide Financial Statements: Statement of Net Assets The Statement of Net Position The statement of net position may have four columns of financial data: one for governmental activities, one for businesstype activities, one for the total of those two columns, and one for discretely presented component units.

8 Format of Government-Wide Financial 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

9 Format of Government-Wide Financial Statements: Statement of Activities The 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.

10 Format of Government-Wide Financial Statements: Statement of Activities

11 Format of Government-Wide Financial Statements: Statement of Activities Shows extent to which programs are selffinancing 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

12 Format of Government-Wide Financial Statements: Statement of Activities Bottom General revenues (all taxes) Unrestricted grants Special items

13 Government-wide Statement of Activities: Reporting Expenses Governmental units report expenses by function or program (such as public safety and culture and recreation)

14 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

15 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

16 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 governmentwide statement of activities will, of course, differ from the total governmental funds column 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?

17 Format of Government-Wide Financial 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

18 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

19 Government-Wide Financial Statements Internal Service Fund Balances/Activities Eliminate artificial profits generated by صوري ISFs Elimination column of worksheet Revenues (ISF) 100,000 Expenses (ISF) 95,000 Public safety expenditures 3,000 Recreation expenditures 2,000

20 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

21 Preparing Government-Wide Financial Statements: Report Capital Assets Reinstate prior-year government-wide account balances for capital Expenditures Capital assets-equipment 1,000,000 Accumulated depreciation-equipment 400,000 Net position 600,000 Reclassify current capital expenditures as assets Capital assets-equipment 200,000 Expenditures-capital outlay 200,000 Record current depreciation Depreciation expense-equipment 110,000 Accumulated depreciation-equipment 110,000

22 Preparing Government-Wide Financial 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 debt Other financing sources-proceeds from bond issue 200,000 Bonds payable 200,000 Record debt redemption Bonds payable 100,000 Expenditures-bond principal 100,000

23 Preparing Government-Wide Financial 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

24 Preparing Government-Wide Financial Statements: Accrue Revenue 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 Revenues-property taxes 15,000 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 10-*

25 Preparing Government-Wide Financial 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

26 Preparing Government-Wide Financial 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

27 Creating Government-Wide Financial Statements: Additional Entries Illustrated Adjust for loss on capital assets Accumulated 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 Revenues-property taxes 10,000 Net position 10,000 Recognize current year revenues using accrual Deferred tax revenues 18,000 Revenues-property taxes 18,000

28 Creating Government-Wide Financial Statements: Additional Entries Illustrated Record beginning balance of accrued compensation, adjust for current year Net position 4,000 Accrued compensated absences 4,000 Compensated absences expense 1,000 Accrued compensated absences 1,000 Eliminate interfund transfers Transfer in from General Fund 65,000 Transfer out to Debt Service Fund 65,000

29 Preparing Government-Wide Financial 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

30 Capital Assets: By Fund Type

31 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

32 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

33 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

34 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

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