Governmental GAAP Edition. Warren Ruppel

Transcription

1 Governmental GAAP 2017 Edition Warren Ruppel

2 Chapter 1 New Developments... 1 Introduction... 1 Recently Issued GASB Statements and Their Effective Dates... 1 Exposure Drafts... 2 Exposure Drafts Implementation Guides... 2 Exposure Draft Omnibus 201X... 2 Exposure Draft Certain Debt Extinguishment Issues... 2 Exposure Draft Leases... 3 Invitation to Comment... 5 Financial Reporting Model Improvements Governmental Funds... 5 GASB Project Plan... 5 Summary... 5 Chapter 2 Foundations of Governmental Accounting... 7 Learning Objectives... 7 Introduction... 7 Chapter Overview... 7 Entities Covered by Governmental Accounting Principles... 7 Distinguishing a Governmental Entity from a Not-for-Profit Organization... 8 Overview of the History of Governmental Accounting Standards Setting... 9 Objectives of Governmental Accounting and Financial Reporting GASB Concepts Statement Primary Characteristics of a Government s Structure and the Services It Provides Control Characteristics Resulting from a Government s Structure Objectives of Financial Reporting Communication Methods Concepts Statement 3, Communication Methods in General-Purpose External Financial Reports that Contain Basic Financial Statements Elements of Financial Statements Measurement of Elements of Financial Statements Hierarchy of Governmental Accounting Standards GAAP Hierarchy for Governments Codification of Certain FASB and AICPA Accounting and Financial Reporting Guidance Summary Review Questions Review Answers Chapter 3 Fund Accounting Fundamentals Learning Objectives Introduction Definition of Fund and the Purpose of Fund Accounting Why Do Governments Use Fund Accounting? Fund Accounting Under the GASBS 34 Reporting Model How Is the Number of Funds to Be Established Determined? A Synopsis of the Various Types of Funds Used By Governments for Accounting and Financial Reporting Governmental Funds Proprietary (Business-Type) Funds Fiduciary Funds Major Funds A Definition of Basis of Accounting and Measurement Focus Basis of Accounting Recognition and Measurement of Certain Fund Liabilities and Expenditures Measurement Focus A Synopsis of Basis of Accounting and Measurement Focus Used By Each Type of Fund... 37

3 Summary Review Questions Review Answers Chapter 4 General Fund and Special Revenue Funds Learning Objectives Introduction Basis of Accounting and Measurement Focus Nature and Use of the General Fund Nature and Use of Special Revenue Funds Accounting for Certain Revenue and Expenditures of General and Special Revenue Funds Special Considerations Component Units Special Assessments Miscellaneous Revenues Expenditures Accounting for Assets, Liabilities, and Fund Balances of General and Special Revenue Funds Inventories and Prepaids Fund Balances Summary Review Questions Review Answers Chapter 5 Capital Projects Funds Learning Objectives Introduction Basis of Accounting Measurement Focus When Are Capital Projects Funds Used? Revenues and Other Financing Sources Proceeds from Debt Issuance Bond Anticipation Notes Demand Bonds Special Assessment Debt Arbitrage Rebate Accounting Summary Review Questions Review Answers Chapter 6 Debt Service Funds Learning Objectives Introduction Situations When a Debt Service Fund Is Required or Desirable Basis of Accounting and Measurement Focus Expenditure Recognition for Debt Service Payments Accounting for the Advance Refunding of Long-Term Debt Crossover Transaction and Refunding Bonds Summary Review Questions Review Answers Chapter 7 Proprietary Funds Learning Objectives Introduction Basis of Accounting and Measurement Focus for Proprietary Funds Accounting Requirements under GASBS Enterprise Funds Background and Uses Specific Accounting Issues ii

4 Internal Service Funds Background and Uses Specific Accounting Issues Summary Review Questions Review Answers Chapter 8 Fiduciary Funds Learning Objectives Introduction Agency Funds Pass-Through Grants Special Assessments Pension (and Other Employee Benefit) Trust Funds Deferred Compensation Plans Investment Trust Funds Private-Purpose Trust Funds GASB Statement 84 Fiduciary Activities Identifying Fiduciary Activities Fiduciary Component Units Pension and OPEB Arrangements That Are Not Component Units Other Fiduciary Activities Control of Assets Own-Source Revenues Reporting Fiduciary Activities in Fiduciary Funds Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Reporting Fiduciary Component Units Effective Date Summary Review Questions Review Answers Chapter 9 Financial Statements Prepared by Governments Learning Objectives Introduction Basic Financial Statements Management s Discussion and Analysis Government-Wide Financial Statements Statement of Net Position Statement of Activities Expense Presentation Revenue Presentation Fund Financial Statements Governmental Fund Balance Reporting under GASBS Nonspendable Fund Balance Restricted Fund Balance Committed Fund Balance Assigned Fund Balance Unassigned Fund Balance Fund Balance Classifications Stabilization Agreements Fund Balance Display on the Balance Sheet Disclosures Budgetary Comparison Schedules Notes and Other Disclosures New Disclosure Requirements for Tax Abatements Effective Date iii

5 Loans Reimbursements Interfund Transactions Fund Financial Statements Intra-Entity Transactions Government-Wide Financial Statements Statement of Net Position Statement of Activities Intra-Entity Activity Reporting Deferred Inflows and Outflows of Resources Display Requirements Statement of Net Position Net Investment in Capital Assets Component of Net Position Restricted and Unrestricted Components of Net Position Financial Reporting for Governmental Funds Disclosures Items Previously Reported as Assets and Liabilities Refundings of Debt Nonexchange Transactions Sales of Future Revenues and Intra-Entity Transfers of Future Revenues Debt Issuance Costs Leases Acquisition Costs Related to Insurance Activities Lending Activities Mortgage Banking Activities Regulated Operations Revenue Recognition in Governmental Funds Comprehensive Annual Financial Report CAFR Requirements Narrative Explanations Cash Flow Statement Preparation and Reporting When Is a Cash Flow Statement Required? Objectives of the Statement of Cash Flows Cash and Cash Equivalents Definitions Classification of Cash Receipts and Cash Disbursements Direct Method of Reporting Cash Flows from Operating Activities Format of the Statement of Cash Flows Summary Review Questions Review Answers Chapter 10 The Importance of Budgets to Governments Learning Objectives Introduction Budget Background Executive Budget Appropriated Budget Nonappropriated Budget Budgetary Execution and Management Budget Amendments Budgetary Reporting Which Funds of the Government Adopt Budgets? General Fund Special Revenue Funds Capital Projects Funds Debt Service Funds Proprietary Funds Fiduciary Funds Differences between the Budget and GAAP iv

6 Basis of Accounting Differences Timing Differences Perspective Differences Entity Differences Budgetary Control Summary Review Questions Review Answers Chapter 11 Definition of the Reporting Entity Learning Objectives Introduction Background Accountability Focus Financial Reporting Entity Defined Primary Government GASB Statement No. 61 (GASBS 61), The Financial Reporting Entity An Amendment of GASB Statements No. 14 and No GASB Statement No. 39 (GASBS 39), Determining Whether Certain Fundraising Organizations Are Component Units Amendment of GASB Statement No Reporting of Component Units Other Organizations That Are Included in the Reporting Entity GASB Technical Bulletin (GASBTB ), Tobacco Settlement Recognition and Financial Reporting Entity Issues Display of Component Units Overview of Reporting Component Units Discrete Presentation of Component Units Blended Component Units Government Combinations and Disposals of Government Operations Identifying Government Combinations Types of Government Combinations Government Mergers Reporting Government Mergers in Governmental Fund Financial Statements Recognition and Measurement of Government Acquisitions Consideration Intra-Entity Government Acquisitions Reporting Government Acquisitions on a Provisional Basis Reporting Government Acquisitions in Governmental Fund Financial Statements Transfers of Operations Reporting Transfers of Operations in Governmental Fund Financial Statements Disposals of Government Operations Reporting Disposals of Government Operations in Governmental Fund Financial Statements Notes to the Financial Statements Summary Review Questions Review Answers Chapter 12 Cash and Investments Valuation and Disclosures Learning Objectives Introduction Valuation of Investments GASB Statement 52 (GASBS 52), Land and Other Real Estate Held as Investments by Endowments Specific Application of the Requirements of GASBS Compliance with Amortized Cost Criteria Portfolio Maturity Requirements Portfolio Quality Requirements Portfolio Diversification Requirements v

7 Portfolio Liquidity Requirements Shadow Pricing Requirements Accounting and Financial Reporting for Participants in External Investment Pools Disclosures Effective Date Financial Reporting Requirements Internal Investment Pools Assignments of Interest Required Disclosures Accounting and Financial Reporting Standards for External Investment Pools and Individual Investment Accounts Individual Investment Accounts Deposits and Investment Risk Disclosures Level of Detail Deposit and Investment Policies Custodial Credit Risk Securities Lending Transaction Disclosures Concentration of Credit Risk Interest Rate Risk Foreign Currency Risk New Fair Value Measurement and Application Standard Fair Value Measurement of Particular Assets and Liabilities Unit of Account Markets Market Participants Price and Transaction Costs Valuation Techniques and Approaches Valuation Techniques Valuation Approaches Fair Value Hierarchy Measuring Fair Value If the Volume or Level of Market Activity for an Asset or a Liability has Significantly Decreased Identifying Transactions That Are Not Orderly Using Quoted Prices Provided by Third Parties Measurement Principles Nonfinancial Assets Liabilities Application of Fair Value Application of Fair Value to Investments Net Asset Value per Share Readily Determinable Fair Value Application of Fair Value to Debt Securities Equity Interests in Common Stock Acquisition Value Disclosures Additional Disclosures for Fair Value Measurements of Investments in Certain Entities That Calculate the Net Asset Value per Share (or Its Equivalent) Effective Date and Transition Nature of Securities Lending Transactions Previous Accounting Treatment GASBS 28 s Effect on the Balance Sheet GASBS 28 s Effect on the Operating Statement Pooled Securities Disclosure Requirements Split Interest Agreements A Government Is the Intermediary Life Interests in Real Estate vi

8 A Third Party Is the Intermediary Summary Review Questions Review Answers Chapter 13 Derivative Instruments Learning Objectives Introduction Scope Recognition and Measurement of Derivative Instruments Hedging Derivative Instruments Evaluating the Effectiveness of a Hedge Methods for Determining the Effectiveness of a Hedge The Hedgeable Item Is an Existing or Expected Financial Instrument Consistent Critical Terms Method Quantitative Methods Synthetic Instrument Method Dollar-Offset Method Regression Analysis Method Other Quantitative Methods The Hedgeable Item Is an Existing or Expected Commodity Transaction Consistent Critical Terms Method Quantitative Methods Synthetic Instrument Method Dollar-Offset Method Regression Analysis Method Other Quantitative Methods Hybrid Instruments Synthetic Guaranteed Investment Contracts Notes to the Financial Statements Summary Information Hedging Derivative Instruments Investment Derivative Instruments Contingent Features Hybrid Instruments Synthetic Guaranteed Investment Contracts Summary Review Questions Review Answers Chapter 14 Capital Assets Learning Objectives Introduction Capitalization Policy Valuation of Assets Recorded Capital Asset Accounting Depreciation of Capital Assets Modified Approach Definition Accounting and Financial Reporting for Intangible Assets Using the Economic Resources Measurement Focus Internally Generated Intangible Assets Specific Amortization Issues Impairment Indicator Accounting and Financial Reporting for Intangible Assets Using the Current Financial Resources Measurement Focus Impairment of Capital Assets Definition of Impairment vii

9 Determining Whether a Capital Asset Is Impaired Measuring Impairment Reporting Impairment Losses Insurance Recoveries Disclosures Relating to Capital Assets Service Concession Arrangements Service Concession Arrangements within the Scope of GASBS Transferor Accounting and Financial Reporting for Facilities and Related Payments Received from an Operator Governmental Operator Accounting and Financial Reporting for the Right to Access Facilities and Related Payments to a Transferor Accounting for Revenue Sharing Arrangements Required Disclosures Capitalization of Interest Background Amount of Interest to Be Capitalized Capitalization Period Capitalization of Interest Involving Tax-Exempt Borrowings and Certain Gifts and Grants Disclosures Asset Retirement Obligations Recognition Recognition of an ARO Recognition of a Deferred Outflow of Resources Initial Measurement Initial Measurement of an ARO Initial ARO Measurement Exception for a Minority Owner Initial Measurement of a Deferred Outflow of Resources Subsequent Measurement and Recognition Subsequent Measurement and Recognition of an ARO Subsequent ARO Measurement Exception for a Minority Owner Subsequent Measurement and Recognition of a Deferred Outflow of Resources Recognition and Measurement in Financial Statements Prepared Using the Current Financial Resources Measurement Focus Effects of Funding and Assurance Provisions Notes to Financial Statements Effective Date and Transition Summary Review Questions Review Answers Chapter 15 Debt and Other Obligations Learning Objectives Overview of the Accounting for Debt and Other Obligations Demand Bonds Advance Refundings Bond, Revenue, and Tax Anticipation Notes Special Assessment Debt Pollution Remediation Obligations Recognition Benchmarks Measurement of Liabilities Accounting for Recoveries Capitalization of Pollution Remediation Outlays Display in Governmental Fund Financial Statements Disclosures Accounting for Contingencies Probability Classifications for Loss Contingencies viii

10 Accrual of Loss Contingencies Disclosure of Loss Contingencies General or Unspecified Operations Risks Gain Contingencies GASB Statement No. 70 (GASBS 70), Accounting and Financial Reporting for Nonexchange Financial Guarantee Transactions Accounting and Financial Reporting for Nonexchange Financial Guarantee Transactions Recognition and Measurement in Economic Resources Financial Statements Recognition and Measurement in Current Financial Resources Financial Statements Governments Receiving a Financial Guarantee Intra-Entity Nonexchange Financial Guarantees Involving Blended Component Units Disclosures Governments That Issue Guaranteed Obligations GASB Statement No. 58 (GASBS 58), Accounting and Financial Reporting for Chapter 9 Bankruptcies Accounting Recognition Accounts Payable, Notes, and Debt Obligations Capital Leases Pensions and Other Postemployment Benefits Other Liabilities Other Matters Disclosure Requirements Sales and Pledges of Receivables and Future Revenues Intra-Entity Transfers of Assets and Future Revenues Amortization of Deferred Revenues and Charges Residual Interest Statement of Governmental Accounting Standards No. 47 (GASBS 47), Accounting for Termination Benefits Recognition of Termination Liabilities and Expense in Accrual Basis Financial Statements Recognition of Termination Benefit Liabilities and Expenditures in Modified Accrual Basis Financial Statements Effect of Termination Benefit on an Employer s Defined Benefit Pension or OPEB Obligations Disclosures Summary Review Questions Review Answers Chapter 16 Landfill Closure and Postclosure Care Costs Learning Objectives Introduction Applicability Municipal Solid Waste Landfills Estimated Total Current Cost of Closure and Postclosure Care Recording Closure and Postclosure Care Costs Proprietary Funds and Government-Wide Financial Statements Recording Closure and Postclosure Care Costs Governmental Funds Reporting Changes in Estimates Accounting for Assets Placed in Trust Responsibility for Landfill Closure and Postclosure Care Assumed by another Entity Disclosures Summary Review Questions Review Answers Chapter 17 Postemployment Benefits Pension and Other Learning Objectives Introduction Scope and Applicability ix

11 Financial Reporting for OPEB by Employers Termination Benefits Requirements for Defined Benefit Pension and OPEB Plans Measurement of Annual Pension Cost and Its Recognition by the Employer New Rules for Agent Employers and Agent Multiple-Employer Plans Effective Date Measuring Annual Pension Cost Single-Employer and Agent Plans Defined Benefit OPEB Plans Single-Employer and Agent Multiemployer Plans Calculation of the ARC Parameters for Actuarial Calculations, Including the ARC Benefits to Be Included Actuarial Assumptions Economic Assumptions Actuarial Cost Method Actuarial Value of Assets Employer s Annual Required Contribution ARC Contribution Deficiencies and Excess Contributions Net Pension Obligation Liability (or Asset) at the Transition to GASBS Net OPEB Obligation Annual OPEB Cost Insured Benefits OPEB Liabilities (Assets) at Transition for Defined Benefit OPEB Plans Recording Pension-Related Assets, Liabilities, and Expenditures/Expenses Governmental Funds Proprietary Funds and Other Entities That Apply Proprietary Fund Accounting Employers with Multiple Plans and Multiple Funds Cost-Sharing Multiemployer Plans Recognition of OPEB Expenses/Expenditures, Liabilities and Assets Cost-Sharing Employers Additional Guidance on Expenditure/Expense Recognition GASB Technical Bulletin (GASBTB ), Accounting and Financial Reporting by Employers and OPEB Plans for Payments from the Federal Government Pursuant to the Retiree Drug Subsidy Provisions of Medicare Part D GASB Technical Bulletin (GASBTB ), Determining the Annual Required Contribution Adjustment for Postemployment Benefits Employer Pension and OPEB Disclosures Amendment to GASBS Disclosures in Notes to the Financial Statements Required Supplementary Information Employers with Defined Contribution Plans Other Provisions Insured Plans Special Funding Situations GASB Statement No. 68 (GASBS 68), Accounting and Financial Reporting for Pensions An Amendment of GASB Statement No Defined Benefit Pensions Measurement of Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Financial Statements Prepared Using the Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting Notes to Financial Statements of Single and Agent Employers Required Supplementary Information of Single and Agent Employers Cost-Sharing Employers Defined Contribution Pensions Special Funding Situations Effective Date and Transition x

12 GASB Statement No. 71 (GASBS 71), Pension Transition for Contributions Made Subsequent to the Measurement Date An Amendment of GASB Statement No GASB Statement No. 73 (GASBS 73), Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements No. 67 and Revenue Recognition for Support of Nonemployer Contributing Entities Not in a Special Funding Situation GASB Statement No. 82 (GASBS 82), Pension Issues An Amendment of GASB Statements No. 67, No. 68, and No GASB Statement No. 75 (GASBS 75), Accounting and Financial Reporting for Postemployment Benefits Other than Pensions Defined Benefit OPEB That Is Provided through OPEB Plans That Are Administered through Trusts That Meet the Specified Criteria Alternative Measurement Method Notes to Financial Statements Required Supplementary Information Defined Benefit OPEB That Is Provided through OPEB Plans That Are Not Administered through Trusts That Meet the Specified Criteria Defined Contribution OPEB Special Funding Situations Effective Date Summary Review Questions Review Answers Chapter 18 Compensated Absences Learning Objectives Introduction Scope of GASBS Basic Principle Vacation Leave (and Other Compensated Absences with Similar Characteristics) Sick Leave (and Other Compensated Absences with Similar Characteristics) Sabbatical Leave Other Factors Affecting the Liability Calculation Financial Reporting Considerations Summary Review Questions Review Answers Chapter 19 Accounting for Leases Learning Objectives Introduction Accounting Basis Lessee Accounting Lessor Accounting Other Leasing Issues for Governmental Entities Operating Leases with Scheduled Rent Increases Fiscal Funding and Cancellation Clauses Summary Review Questions Review Answers Chapter 20 Nonexchange Transactions Learning Objectives Introduction Classes of Nonexchange Transactions Accounting and Financial Reporting Requirements Property Taxes xi

13 Income and Sales Taxes, and Other Derived Tax Revenues Adjustments for the Accrual Basis of Accounting Grants and Other Financial Assistance Practice Issues Review Questions Review Answers Chapter 21 Risk Financing and Insurance-Related Activities/Public Entity Risk Pools Learning Objectives Introduction Risk Financing and Insurance Activities of State and Local Governments (Other Than Public Entity Risk Pools) Disclosure of Loss Contingencies Risk Retention by Entities Other than Pools Governmental Entities That Participate in Risk Pools Entities Participating in Public Entity Risk Pools with Transfer or Pooling of Risk Entities Participating in Public Entity Risk Pools without Transfer or Pooling of Risk Other Matters for Entities Other than Public Entity Risk Pools Disclosure Requirements Accounting and Financial Reporting for Public Entity Risk Pools What Is a Public Entity Risk Pool? Specific Accounting and Financial Reporting Requirements Disclosure Requirements and Required Supplementary Information Summary Review Questions Review Answers Chapter 22 Pension and OPEB Plan Financial Statements Learning Objectives Introduction Pension Plan Accounting and Financial Reporting Defined Benefit Pension Plans Single-Employer or Agent Multiemployer Plans Cost-Sharing Multiemployer Plans Administration of Multiple Plans Financial Reporting Framework GASB Statement No. 50 (GASBS 50), Pension Disclosures An Amendment of GASB Statements No. 25 and Amendments to GASBS Defined Contribution Pension Plans Postemployment Benefit Plans Other Than Pensions Defining Postemployment Benefits Other Than Pensions (OPEB) Financial Reporting by OPEB Plans Public Employee Retirement Systems (PERS) Financial Reporting Framework Required Supplementary Information Parameters Required Supplementary Schedules Alternative Measurement Method for Plans with Fewer Than 100 Members OPEB Plans That Are Not Administered as Trusts (or Equivalent Arrangements) Defined Contribution Plans GASB 67 Requirements for Pension Plan Accounting and Financial Reporting GASB Statement No. 67 (GASBS 67), Accounting and Financial Reporting for Pensions An Amendment of GASB Statement No Types of Defined Benefit Pension Plans Number of Pension Plans Financial Statements Statement of Changes in Fiduciary Net Position xii

14 Notes to Financial Statements Disclosures Specific to Single-Employer and Cost-Sharing Pension Plans Required Supplementary Information Notes to the Required Schedules Measurement of the Net Pension Liability Total Pension Liability Defined Contribution Pension Plans Effective Date and Transition GASBS 74 Requirements for OPEB Plans Types of OPEB and OPEB Plans Types of Defined Benefit OPEB Plans Defined Benefit OPEB Plans That Are Administered through Trusts Financial Statements Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Net Increase (Decrease) in Fiduciary New Position Notes to Financial Statements Required Supplementary Information Notes to the Required Schedules Measurement of the Net OPEB Liability Selection of Assumptions Projection of Benefit Payments Discount Rate Effective Date and Transition Summary Review Questions Review Answers Chapter 23 Educational and Other Governmental Entities Learning Objectives Introduction School Districts Legal Compliance Fund Accounting Reporting Entity Governmental Colleges and Universities Reporting Entity Considerations Costs of Activities That Include Fundraising Allocation Methods Incidental Activities Special-Purpose Governments Governmental Hospitals and Other Health-Care Providers Reporting Entity Considerations Governmental Not-for-Profit Organizations Other Public Benefit Corporations Utilities Summary Review Questions Review Answers Glossary Index xiii