CHAPTER 1: INTRODUCTION TO ACCOUNTING AND FINANCIAL

Copyright ©2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.1-1

CHAPTER 1: INTRODUCTION TO ACCOUNTING AND FINANCIAL

REPORTING FOR GOVERNMENT AND NOT-FOR-

PROFIT ENTITIES

OUTLINE

Number Topic Type/Task Status

(re: 17/e)

Questions:

1-1 Differences between types of organizations Identify Same 1-2 Distinguishing between general purpose and special purpose governments Identify Same 1-3 Standards-setting bodies Identify Same 1-4 Determining which standard-setting body sets standards for a nongovernmental NFP Categorize Same 1-5 Nature and significance of interperiod equity Explain Same 1-6 Determining the purpose of the two types of accountability Determine Same 1-7 Primary reporting objectives for NFPs and governments Compare Same 1-8 Comprehensive annual financial report Recognize Same 1-9 Federal government performance and accountability report Identify/Describe Same 1-10 NFP reporting of expenses Explain Same

Cases:

1-11 Research Case—GASB Apply New 1-12 Research Case—GASB Summarize 1-11 1-13 Research Case—FASB Summarize New 1-14 Research Case—FASB Analyze New 1-15 Research Case—FASAB Summarize 1-13 1-16 Research Case—Federal Financial Reporting Objectives Analyze 1-15

Exercises/Problems:

1-17 Examine the CAFR Examine 1-16 1-18 Financial Statement Differences Differentiate 1-17 revised 1-19 Various Multiple Choice 1-18 item 9 is new; other items are the same or revised 1-20 Matching concepts and reporting characteristics or requirements for governmental and NFP organizations Classify 1-19 revised 1-21 Matching standards governing organizations Classify New Accounting for Governmental & Nonprofit Entities, 18e Jacqueline Reck,Suzanne Lowensohn, Earl Wilson (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All Chapters Solutions Manual Supplement files download link at the end of this file. 1 / 4

Chapter 01 - Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities Copyright ©2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.1-2

CHAPTER 1: INTRODUCTION TO ACCOUNTING AND FINANCIAL

REPORTING FOR GOVERNMENT AND NOT-FOR-

PROFIT ENTITIES

Answers to Questions 1-1.Following is a list of some of the differences between business organizations and government/not-for-profit organizations.

General Problem Information: Differences between types of organizations

Learning Objective: 1-1

Topic: Distinguishing Characteristics of Governmental and Not-for-Profit Entities

Bloom’s Taxonomy: Remember

Accreditation Skills tag: AACSB: Communication, AICPA: BB Industry

Level of Difficulty: Easy

1-2.a.GPc.SPe.SP b.SPd.GP f. GP

General Problem Information: Distinguishing between general purpose and special

purpose governments

Learning Objective: 1-1

Topic: What are Governmental and Not-for-profit Organizations?

Bloom’s Taxonomy: Remember

Accreditation Skills tag: AACSB: Communication, AICPA: BB Industry

Level of Difficulty: Easy

Business Organizations Government/Not-for-for profit Organizations Providers of resources expect either repayment or economic benefits proportionate to the resources provided.Many providers of resources do not expect repayment or economic benefits proportionate to the resources provided.Primary operations are undertaken to provide goods or services at a profit.Primary operations are not undertaken to provide goods or services at a profit or profit equivalent.There are defined ownership interests that can be sold, transferred or redeemed or entitle the owner to a share of remaining resources at liquidation.There are no defined ownership interests. 2 / 4

Chapter 01 - Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities

Copyright ©2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.1-3 Ch. 1, Answers (Cont’d)

1-3. Illustration 1-1 depicts the standard-setting jurisdiction of the FASB, GASB and FASAB.As shown, the FASB has responsibility for setting accounting and financial reporting standards for business enterprises and nongovernmental not-for-profit organizations. The GASB has responsibility for setting standards for state and local governments and governmental not-for-profit organizations. The FASAB has responsibility for setting accounting and reporting standards for the federal government and its agencies and departments.

General Problem Information: Standards-setting bodies

Learning Objective: 1-2

Topic: Sources of Financial Reporting Standards

Bloom’s Taxonomy: Remember

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Easy

1-4. No, I do not agree with this board member’s statement. Since Beth House Museum is a nongovernmental not-for-profit organization, it is required to follow the standards issued by FASB. Since its purpose is not the same as a business organization, FASB has developed reporting standards for organizations such as Beth House Museum that reflect its unique purpose and users. Governmental not-for-profit organizations must follow GASB financial reporting standards. (See illustration 1-1.)

General Problem Information: Determining which standard-setting body sets standards for a nongovernmental NFP

Learning Objective: 1-2

Topic: Sources of Financial Reporting Standards

Bloom’s Taxonomy: Understand

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Medium

1-5. Interperiod equity, whether current period revenues are sufficient to pay for current period services, is an important component of accountability. Failure to pay for current period services means that the financial burden is being passed to future year taxpayers who may not receive any benefit from the past services.

General Problem Information: Nature and significance of interperiod equity

Learning Objective: 1-3

Topic: Objectives of Financial Reporting

Bloom’s Taxonomy: Understand

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Medium

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Chapter 01 - Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities

Copyright ©2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.1-4 Ch. 1, Answers (Cont’d)

1-6. The purpose of operational accountability is to assess whether the government has used its resources efficiently and effectively in meeting its operating objectives. The purpose of fiscal accountability is to assess the short-term flow of current financial resources.Government–wide financial statements are primarily focused on providing information to assess operational accountability, while fund financial statements are focused on providing information to assess fiscal accountability.

General Problem Information: Determining the purpose of the two types of

accountability

Learning Objective: 1-4

Topic: Financial Reporting of State and Local Governments

Bloom’s Taxonomy: Understand

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Medium

1-7. The primary financial reporting objective for not-for-profit organizations is to provide decision-useful financial information to resource providers, such as donors, members, and creditors. The primary financial reporting objective for a government organization is accountability, but other objectives include providing useful information for economic, social, and political decisions. Thus, the reporting focus for the two types of organizations differs in that the not-for-profit organization financial reports are to focus on providing information that is useful in making decisions; while the government organization is to focus primarily on providing information that can be used to assess whether public resources were raised and used for their intended purposes.

General Problem Information: Primary reporting objectives for NFPs and governments

Learning Objective: 1-3

Topic: Objectives of Financial Reporting

Bloom’s Taxonomy: Understand

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Medium

1-8. A CAFR should have an introductory section, financial section, and statistical section.The contents of each section are described briefly in the section headed “Comprehensive Annual Financial Report.” Minimum requirements for general external financial reports are but a portion of the content of the CAFR. The minimum requirements of the general external financial report include the basic financial statements and related notes (government-wide and fund), management’s discussion & analysis (MD&A), and other required supplementary information (RSI). As can be seen, the minimum requirements for the general external financial report do not include an introductory section, other supplementary financial information, or a statistical section.

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