ACIS+4124_5124+Chapter+6+Powerpoints+Student

ACIS+4124_5124+Chapter+6+Powerpoints+Student - ACIS...

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1 ACIS 4124/5124 Chapter 5 Accounting for General Long- Term Liabilities and Debt Service
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2 Debt and other long-term liabilities that arise from the activities of governmental funds If proprietary or fiduciary fund debt has general obligation (“full faith and credit”) backing the contingent liability should be disclosed in the notes General Long-term Liabilities
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3 ax-supported bonds ong-term warrants ong-term notes apital lease obligations nfunded compensated absences Examples of General Long-term Liabilities
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4 Pollution Remediation Obligation Relates to liabilities arising from the clean-up of hazardous waste or hazardous substances resulting from existing pollution Recognize if the liability is reasonably estimable and an “obligating event” has occurred The liability is measured using expected cash flows
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5 Direct debt —obligations that will be repaid by the government whose debt is being evaluated Overlapping (indirect) debt obligations of other governments that also have the power to tax property located in the jurisdiction of the government whose debt is being evaluated Terms Used in Describing Debt Burden
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6 Debt Limit: A ceiling on the amount of debt, defined as a statutory percentage of assessed valuation or some other valuation of taxable property Debt margin: The difference between the debt limit and the amount of debt outstanding subject to the limit Debt Burden
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7 Debt per capita (ratio of debt to population) Ratio of debt to estimated true value of taxable property Ratio of debt service expenditures to total general expenditures Multiple year trends in the above ratios Debt Burden Measures
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8 Account for financial resources set aside to pay for the principal and/or interest on general long-term liabilities only Resources may come from Taxes levied by DSF Taxes levied by the GF and transferred to DSF Special assessments Debt Service Funds
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9 Principal matures in annual installments For regular serial bonds, the resources raised each year approximate debt service requirements Deferred serial bonds – first installment delayed for a period of more than one year after date of issue Advantage of serial bonds: no sinking fund needed Types of Tax-Supported Bonds – Serial Bonds
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10 Principal matures in one lump-sum amount at the end of the bond term Not used as frequently as serial bonds Disadvantage of term bonds: Usually requires a sinking fund, and therefore investment management Types of Tax-Supported Bonds – Term Bonds
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ACIS+4124_5124+Chapter+6+Powerpoints+Student - ACIS...

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