2-1.THE SOLUTION TO THIS AND THE FIRST EXERCISE OF CHAPTERS 1 AND 3 THROUGH 9

Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-1 CHAPTER 2Overview of Financial Reporting for State and Local Governments

2-1.THE SOLUTION TO THIS AND THE FIRST EXERCISE OF CHAPTERS 1 AND 3 THROUGH 9

WILL DIFFER FROM STUDENT TO STUDENT ASSUMING EACH HAS A DIFFERENT CAFR.

2-2.

A. AFINANCIAL REPORTING ENTITY IS THE PRIMARY GOVERNMENT

TOGETHER WITH ITS COMPONENT UNITS .COMPONENT UNITS ARE

ORGANIZATIONS FOR WHICH THE PRIMARY GOVERNMENT IS FINANCIALLY

ACCOUNTABLE, AND OTHER ORGANIZATIONS FOR WHICH THE NATURE AND

SIGNIFICANCE OF THEIR RELATIONSHIP WITH THE PRIMARY GOVERNMENT

ARE SUCH THAT EXCLUSION WOULD CAUSE THE REPORTING ENTITY 'S

FINANCIAL STATEMENTS TO BE MISLEADING OR INCOMPLETE .

B. APRIMARY GOVERNMENT IS A STATE GOVERNMENT, GENERAL PURPOSE

LOCAL GOVERNMENT , OR SPECIAL PURPOSE GOVERNMENT .AN EXAMPLE OF

A PRIMARY GOVERNMENT WOULD BE ANY STATE , MUNICIPALITY, OR

COUNTY (GENERAL PURPOSE GOVERNMENTS ) AND ANY SPECIAL-PURPOSE

GOVERNMENT THAT MEETS THE CERTAIN CRITERIA .

C. A COMPONENT UNIT IS A LEGALLY SEPARATE ORGANIZATION FOR WHICH

THE ELECTED OFFICIALS OF THE PRIMARY GOVERNMENT ARE FINANCIALLY

ACCOUNTABLE.IN ADDITION, A COMPONENT UNIT CAN BE ANOTHER

ORGANIZATION FOR WHICH THE NATURE AND SIGNIFICANCE OF ITS

RELATIONSHIP WITH A PRIMARY GOVERNMENT ARE SUCH THAT EXCLUSION

WOULD CAUSE THE REPORTING ENTITY 'S FINANCIAL STATEMENTS TO BE

MISLEADING OR INCOMPLETE.

D. THE TWO PRIMARY METHODS FOR REPORTING COMPONENT UNITS IN THE

FINANCIAL STATEMENTS OF A PRIMARY GOVERNMENT ARE BLENDING AND

DISCRETEPRESENTATION.BLENDING REPORTS THE COMPONENT UNIT AS

ONE OF THE FUNDS OF THE PRIMARY GOVERNMENT , WHICH THEN RESULTS IN

INCLUDING THE COMPONENT UNIT AS PART OF THE BASIC FINANCIAL

STATEMENTS.BLENDING IS USED ONLY WHEN COMPONENT UNITS ARE

SUFFICIENTLY INTERTWINED WITH THE PRIMARY GOVERNMENT THAT THEY

ARE, IN SUBSTANCE, THE SAME AS THE PRIMARY GOVERNMENT .DISCRETE

PRESENTATION INVOLVES REPORTING THE COMPONENT UNIT IN A COLUMN

TO THE RIGHT OF THE PRIMARY GOVERNMENT IN THE GOVERNMENT -WIDE

FINANCIAL STATEMENTS OF THE REPORTING ENTITY .

Essentials of Accounting for Governmental and Not for Profit Organizations 13th Edition Copley Solutions Manual Visit TestBankDeal.com to get complete for all chapters

Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-2 2-3.

A. THE THREE MAJOR SECTIONS OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT

ARE THE INTRODUCTORY, FINANCIAL, AND STATISTICAL SECTIONS.

B. THE GOVERNMENT-WIDE FINANCIAL STATEMENTS ARE THE STATEMENT OF NET

POSITION AND THE STATEMENT OF ACTIVITIES.GOVERNMENT-WIDE STATEMENTS

ARE PRESENTED USING THE ECONOMIC RESOURCES MEASUREMENT FOCUS AND THE

ACCRUAL BASIS OF ACCOUNTING .

C. THE GOVERNMENTAL FUND STATEMENTS ARE THE BALANCE SHEET AND THE

STATEMENT OF REVENUES,EXPENDITURES, AND CHANGES IN FUND BALANCES.

GOVERNMENTAL FUND STATEMENTS ARE PRESENTED USING THE CURRENT

FINANCIAL RESOURCES MEASUREMENT FOCUS AND MODIFIED ACCRUAL BASIS OF

ACCOUNTING.

D. THE PROPRIETARY FUND STATEMENTS ARE THE STATEMENT OF NET POSITION

(OR BALANCE SHEET),STATEMENT OF REVENUES,EXPENSES, AND CHANGES IN

FUND NET POSITION, AND THE STATEMENT OF CASH FLOWS.THE PROPRIETARY

FUND STATEMENTS ARE PREPARED USING THE ECONOMIC RESOURCES

MEASUREMENT FOCUS AND THE ACCRUAL BASIS OF ACCOUNTING .

E. THE FIDUCIARY FUND STATEMENTS ARE THE STATEMENT OF FIDUCIARY NET

POSITION AND THE STATEMENT OF CHANGES IN FIDUCIARY NET POSITION.

FIDUCIARY FUND STATEMENTS ARE PREPARED USING THE ECONOMIC RESOURCES

MEASUREMENT FOCUS AND THE ACCRUAL BASIS OF ACCOUNTING .

• MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) IS CONSIDERED TO BE

REQUIRED SUPPLEMENTARY INFORMATION (RSI) AND IS PRESENTED IN THE

FINANCIAL SECTION AFTER THE AUDITOR 'S REPORT.THE REMAINDER OF RSI IS

GENERALLY PRESENTED AFTER THE NOTES TO THE FINANCIAL STATEMENTS AND

INCLUDES (A) BUDGETARY COMPARISON SCHEDULES ,(B ) INFORMATION

REGARDING INFRASTRUCTURE ASSETS WHEN USING THE MODIFIED APPROACH (C)

SCHEDULES REQUIRED FOR DEFINED BENEFIT PENSION PLANS , AND (D)

INFORMATION REQUIRED FOR EXTERNAL FINANCING POOLS .

Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-3

2.4 THE GENERAL FUND IS ALWAYS CONSIDERED A MAJOR FUND .OTHER

GOVERNMENTAL FUNDS ARE CONSIDERED MAJOR WHEN BOTH OF THE FOLLOWING

CONDITIONS EXIST:(A) TOTAL ASSETS, LIABILITIES, REVENUES,OR EXPENDITURES

OF THAT INDIVIDUAL GOVERNMENTAL FUND CONSTITUTE 10 PERCENT OF THE

TOTAL FOR THE GOVERNMENTAL FUNDS CATEGORY ,AND(B) TOTAL ASSETS,

LIABILITIES, REVENUES,OR EXPENDITURES OF THAT INDIVIDUAL GOVERNMENTAL

OR ENTERPRISE FUND ARE 5 PERCENT OF THE TOTAL OF THE GOVERNMENTAL AND

ENTERPRISE CATEGORIES, COMBINED.ADDITIONALLY, A GOVERNMENT MAY

DESIGNATE ANY FUND MAJOR IF REPORTING THAT FUND SEPARATELY WOULD BE

USEFUL.WHEN APPLYING THESE RULES, DEFERRED OUTFLOWS OF RESOURCES ARE

INCLUDED WITH ASSETS AND DEFERRED INFLOWS ARE INCLUDED WITH LIABILITIES .

AN ENTERPRISE FUND IS CONSIDERED MAJOR IF:(A) ASSETS, LIABILITIES,

REVENUES,OR EXPENSES ARE 10 PERCENT OR MORE OF THE TOTAL FOR ALL

ENTERPRISE FUNDS,AND(B) ITS ASSETS, LIABILITIES, REVENUES,OR EXPENSES ARE

5 PERCENT OR MORE OF THE TOTAL OF THE GOVERNMENTAL AND ENTERPRISE

CATEGORIES, COMBINED.WHEN APPLYING THESE RULES, DEFERRED OUTFLOWS OF

RESOURCES ARE INCLUDED WITH ASSETS AND DEFERRED INFLOWS ARE INCLUDED

WITH LIABILITIES.

•OPERATING ACTIVITIES ARE THOSE ASSOCIATED WITH OPERATING INCOME .

AS A RESULT, CASH FLOWS FROM INTEREST EXPENSE , INTEREST REVENUE

AND INVESTMENT INCOME DO NOT APPEAR IN THE OPERATING ACTIVITIES

SECTION.

2-5 SEVERAL DIFFERENCES EXIST BETWEEN THE GASB FORMAT CASH FLOW

STATEMENT AND THE FASB FORMAT REQUIRED OF COMMERCIAL BUSINESSES :

1)GASB REQUIRES GOVERNMENTS TO PREPARE CASH FLOWS FROM OPERATING

ACTIVITIES ON THE DIRECT METHOD.

2)THE RECONCILIATION OF INCOME TO CASH FLOWS FROM OPERATING

ACTIVITIES OF THE PROPRIETARY FUND , WHICH APPEARS IN THE BOTTOM

SECTION OF THE STATEMENT , BEGINS WITH OPERATING INCOME , NOT NET

INCOME (OR TOTAL CHANGE IN NET POSITION).

3)THE STATEMENT HAS FOUR SECTIONS , RATHER THAN THE THREE OBSERVED

IN FASB FORMAT STATEMENTS.THESE INCLUDE:

•NONCAPITAL RELATED FINANCING ACTIVITIES INVOLVE THE BORROWING

AND PAYMENT (INCLUDING INTEREST) OF LOANS FOR PURPOSES OTHER THAN

FINANCING CAPITAL ADDITIONS – CHIEFLY, BORROWING FOR OPERATIONS .

•CAPITAL AND RELATED FINANCING INCLUDE GRANTS AND DEBT

TRANSACTIONS (INCLUDING INTEREST) USED TO FINANCE CAPITAL

ADDITIONS.

•INVESTING ACTIVITIES INVOLVE THE ACQUISITION AND SALE OF

INVESTMENTS AS WELL AS CASH RECEIVED FROM INVESTMENT INCOME .

Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-4

2-6.THE DIFFERENCE BETWEEN ASSETS AND LIABILITIES IS CALLED NET POSITION AND IS

REPORTED IN THREE CATEGORIES:

NET INVESTMENT IN CAPITAL ASSETS IS COMPUTED BY TAKING THE CAPITAL

ASSETS, LESS ACCUMULATED DEPRECIATION , AND DEDUCTING OUTSTANDING DEBT

THAT IS RELATED TO THE FINANCING OF CAPITAL ASSETS .LIABILITIES INCURRED

TO FINANCE OPERATIONS (INCLUDING LONG-TERM LIABILITIES FOR COMPENSATED

ABSENCES OR EMPLOYEE BENEFITS ) WOULD NOT BE DEDUCTED.

RESTRICTED NET POSITION INCLUDE RESOURCES THAT ARE RESTRICTED BY :(A)

EXTERNAL PARTIES, INCLUDING CREDITORS, GRANTORS, CONTRIBUTORS, OR BY

LAWS OR REGULATIONS OF OTHER GOVERNMENTS, OR (2) LAWS OR

CONSTITUTIONAL PROVISIONS OF THE REPORTING GOVERNMENT .

THE REMAINING AMOUNT ,UNRESTRICTED NET POSITION , IS A “PLUG” FIGURE

THAT IS DETERMINED BY DEDUCTING THE BALANCES OF THE OTHER TWO

CATEGORIES FROM THE OVERALL EXCESS OF ASSETS OVER LIABILITIES .