20_Fischer10e_SM_Ch17_final - CHAPTER 17 UNDERSTANDING THE...

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CHAPTER 17 UNDERSTANDING THE ISSUES 1. The new reporting model adopts full accrual ac- counting for the government-wide statements for both governmental and business-type activ- ities. Therefore, a conversion of the govern- mental fund activity is necessary in order to present government-wide financial statements. Since business-type activities are already recorded at full accrual, there is no conversion necessary from fund to govern- ment-wide financial statements. 2. Both fund and government-wide financial state- ments are required in the new model. Fund statements include (1) the governmental fund balance sheet and statement of revenues, ex- penditures, and changes in fund balances; (2) the proprietary fund balance sheet, statement of revenues, expenses, and changes in net as- sets, and statement of cash flows; and (3) the fiduciary fund statement of net assets and statement of changes in net assets. The fund statements provide information on flows of financial revenues. Government-wide state- ments include a statement of net assets and a statement of activities. They provide full accru- al, consolidated government-wide reports. Budgetary comparison information may be re- ported in a statement and in a schedule accompanying the financial statements. 3. Major funds are those funds management chooses to disclose in a separate column in the fund statements either due to their relative size or because they are of particular interest or convey unique information. The general fund is always considered a major fund. Funds whose assets, liabilities, revenues, or expenditures/ex- penses are at least 10% of all funds in a cat- egory (all governmental or all enterprise) and are at least 5% of all government and enter- prise funds combined must be considered ma- jor funds. 4. The purpose of the MD&A is to give a concise overview and analysis of the information in the government’s financial statements. Information required to be included: a brief discussion of the basic financial statements, including how they relate to each other and the significant differences in the information they provide; condensed current and prior-year financial information from the government-wide financial statements; an analysis of the government’s overall financial position and results of opera- tions, including impact of important economic factors; an analysis of individual fund financial information, including the reasons for significant changes in fund balances (or net assets) and whether limitations significantly affect the future use of the resources; an analysis of significant variations between original and final budget amounts and between final budget amounts and actual budget results for the gen- eral fund; a description of changes in capital assets and long-term liabilities during the year; a discussion of the condition of infrastructure assets; and a description of currently known facts, decisions, or conditions that have or are expected to have a material effect on the finan- cial position or results of operations.
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20_Fischer10e_SM_Ch17_final - CHAPTER 17 UNDERSTANDING THE...

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