Ch 2 Basic Financial Statement Conceptual Illustrations

Ch 2 Basic Financial Statement Conceptual Illustrations -...

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Unformatted text preview: The Fundamental Features of the SLG Accounting and Financial Reporting Model 55 - The balance sheets for proprietary funds and governmental funds report intelfund loans. In Illustration 2—12, both the proprietary fund and the governmental fund show a “Due to other funds” account as liabilities. If either of the funds had been owed money from another fund, “Due from other funds” would be reported as part of its assets; a noncurrent interfund receivable is indicated by the term “Advance to other funds.” 0 A major difference in the proprietary fund balance sheet and the governmental fund bal- ance sheet is found in the “equity” section. - The proprietary fund balance sheet ends With a “Net Assets” section whereas the gov— ernmental fund balance sheet ends with a “F und Balance” section. ' Apart from the difference in the titles for the sections, the line items reported within the “Net Assets” section are different from the line items reported within the “Fund Balance” section. 0 The meaning of the line items within each of the sections will be discussed thoroughly in later chapters. For now, it is worthwhile to note that the “Unreserved” fund balance reported in the governmental fund balance sheet represents net financial assets that are available for appropriation and expenditure in the next period. The recommended annual financial report of a state or local government is the Annual Financial comprehensive annual financial report, or CAFR. The CAFR contains three sec~ Reporting tions: (1) Introductory, (2) Financial, and (3) Statistical. The Financial section— which typically begins with the auditor’s report—includes the MD&A (which is required supplementary information or RSI); Basic Financial Statements, includ- ing the related notes; and any other RSI. The Basic Financial Statements are sum— marized in Illustration 2-13. The Financial Section of the CAFR is diagrammed in Illustration 2-14. I ILLUSTRATION 2-13 Composition of the Basic Financial'Statements Government-wide! Financial Statements (One Set) Government-wide Statement of Net Assets Government-wide Statement of Activities Governmental Funds Statement of Net Assets Governmental Governmental Funds Statement of Revenues, Funds Expenditures, and Changes in Fund Balances Basic Financial . _ Financial Statements General Fund and Major Specral Revenue Funds S ta temen ts* Statement of Revenues, Expenditures, and Changes (Consist of Two in Fund Balances—Budget and Actual Categories of .Fund. . Statements) Fmancral Proprietary Funds Statement of Net Assets Statements Proprietmy (Three Sets) Funds Proprietary Funds Statement of Revenues, Expenses, Financial and Changes in Net Assets Statements Proprietary Funds Statement of Cash Flows Fiducmr)’ Fiduciary Funds Statement of Net Assets Funds Financial Statements Fiduciary Funds Statement of Changes in Net Assets *The notes are an integral part of the financial statements. 54 CHAPTER 2 State and Local GovernmentAccounting and Financial Reporting Model: The Foundation ILLUSTRATION 2-12 Balance Sheet Formats " , Proprietary Fund Governmental Fund ‘ Balance Sheet Balance Sheet June 30, 20X8 June 30, 20X8 (in thousands) (in thousands) Assets Assets ’ :3 Current Assets: Cash $230 Cash $ 220 Receivables, net 280 E Receivables, net 200 Inventory __3_§ Inventory ___:1§ Total assets {5% ‘ Total current assets fl — Noncurrent assets: ‘ Capital assets: 1 Land p 240 ‘ Buildings and equipment $3,650 Less accumulated depreciation (660) 2,990 Total noncurrent assets E Total assets W Liabilities and Net Assets Liabilities and Fund Balance Current liabilities: Liabilities: Accounts payable ‘ $ 28 Accounts payable $ 24 Due to other funds 10 Due to other funds 20 Current portion of bonds payable __2_80_ Deferred revenue £ Total current liabilities ___3_1§ Total liabilities _86 ‘ Noncurrent liabilities: Compensated absences 20 l‘ Bonds payable -' . 2_,80_0 ' Total noncurrent liabilities ‘ M Total liabilities ‘ , . fl Net Assets Fund balance: ‘ Invested in capital assets, net of related debt 260 Reserved for inventory 18 Restricted for debt service 20 Unreserved if} Unrestricted __2_80 Total net assets I _5_60 Total fund balance 1:62 Total liabilities and net assets $3,_698_ Total liabilities and fund balance W Note: The proprietary funds statement was prepared using a balance sheet format, which reports a separate line item for “Total liabilities and net assets.” Many governments use the “Assets — Liabilities = Net Assets” format, which ends with a double—underlined “Total net assets” as the final line of the statement. balance sheet to the governmental fund balance sheet, you will note that only proprietary funds report noncurrent assets and noncurrent liabilities. As previ Z ously discussed: - The economic resources measurement focus used for proprietary funds results in report- ing both current and noncurrent assets and both current and noncurrent (or long—term: liabilities. 0 The current financial resources measurement focus used for governmental funds results il reporting only financial assets and related liabilities in the governmental fund balanct sheet. The Fundamental Features of the SLG Accounting and Financial Reporting Model 53 ‘ ILLUSTRATION 2-11 Operating Statement Formats Proprietary Fund Governmental Fund Statement of Revenues, Expenses, Statement of Revenues, Expenditures, and Changes in Net Assets and Changes in Fund Balance For the Year Ended June 30, 20X8 (in thousands) For the Year Ended June 30, 20X8 (in thousands) Operating Revenues: Revenues: Sales of goods $1,200 Taxes $1,260 Billings for services 600 Licenses and permits 20 Other __4_0 Intergovernmental 480 Total M Charges for services Miscellaneous Total Operations 1,440 Depreciation 280 Expenditures: £ Other __29 Operating Total _1,_7£0_ Capital outlay 100 Debt service Long-term debt principal Nonoperating Revenues (Expenses): Interest Operating Expenses: Operating Income (Loss) Interest revenue Total Interim expense Excess (Deficiency) of Revenues over Expenditures Other Other Financing Sources (Uses): Income (loss) Before Contributions, Transfer from (to) other funds Transfers, and Extraordinary Items Long‘term debt issues Capital Contributions Special and Extraordinary Items: Special item _ Special andpExtraordinary Items: Extraordinary item V I Special item Transfer from (to) other funds . Extraordinary item Increase (Decrease) in Net Assets Net Change in Fund Balance Net AssetsmBeginning of Period Fund BalancemBeginning of Period Net Assets—End of Period Fund Balance—End of Period Notes: Both (1) classification of governmental fund revenues and (2) classification of expenditures by function, program, and other cate— gories are discussed and illustrated in Chapters 3 to 6. Governmental fund expenditures are classified by character in this example. in a governmental fund and a general capital asset or general long-term liability should be reported as other financing sources or other financing uses. For example, proceeds of general long-term liability debt issues—possibly proceeds of general obligation bonds that are to be expended through a Capital Projects Fund—are reported in the “Other [Nonrevenue] Financing Sources” section of the operating statement of the recipient governmental fund. (Note that this applies only to 1 GLTL proceeds, not to proprietary and fiduciary fund long—term debt.) Balance Sheets Illustration 2-12 presents comparative, side—by-side balance sheet formats for a proprietary fund and a governmental fund. It highlights how the different mea- surement focuses and bases of accounting used by proprietary funds and gov- ernmental funds affect their balance sheets. By comparing the proprietary fund "56 CHAPTER 2 State and Local GovernmentAccounting and Financial Reporting Model: The Foundation l I: ILLUSTRATION 2-14 Basic Financial Statements and Accompanying Information INDEPENDENT AUDITOR'S REPORT (Precedes MD&A) MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) FUND RECONCILIATION GOVERNMENT-WIDE Financial Statements Summary of Financial Statements Consolidating Accrual Governmental Funds Worksheet 1—w—1 (Modified Accrual) - Balance Sheet - Statement of Revenues, Expenditures, and Changes in Fund Balances ' Statement of Net Assets ' Statement of Activities Adjustments - Statement of Revenues, Expenditures, and Changes in Fund Balances—Budget and Actual (gr RSI Schedule) Proprietary Funds (Accrual) ' Statement of Net Assets - Statement of Revenues, Expenses, and Changes in Fund Net Assets - Statement of Cash Flows (Direct Method) Fiduciary Funds (Accrual) . Statement of Net Assets ' Statement of Changes in Net Assets " NOTES To the Financial Statements Other Required Supplementary Information (RSI) —-- = Basic Financial Statements A CAFR is required to include the following information: 1. Introductory section—includes a letter of transmittal, table of contents, and other intro- ductory content. 2. Financial sectionmincludes a. Management’s Discussion and Analysis (MD&A)—a structured, objective, “required supplemental information (RSI)” narrative report by management that summarizes analytically the key events that occurred during the year and the status of the SLG at year-end. b. Basic Financial Statements (BFS)—which include (1) Government-wide‘Financial Statements (a) Statement of Net Assets I (b) Statement of Activities ...
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This note was uploaded on 08/01/2011 for the course ACCT 434 taught by Professor Mcclellan during the Spring '11 term at National.

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Ch 2 Basic Financial Statement Conceptual Illustrations -...

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