Governmental Financial Reporting

Topics: Generally Accepted Accounting Principles, Balance sheet, Asset Pages: 71 (3053 words) Published: April 11, 2015
Governmental Financial
Presented by
David R. Koeppen, Ph.D., CPA
Department of Accountancy
Boise State University


Reporting Basics
Fund Accounting
Government-wide Financial Statements
Summary and Conclusion


Purpose of Financial Reporting
Generally Accepted Accounting Principles
Characteristics of Governmental Entities
Effects of Characteristics on Financial

Purpose of Financial Reporting
• Private sector
– For-profit entities—provide information for
making investment and credit decisions
– Not-for-profit entities—provide information for
making resource allocation decisions

Purpose of Financial Reporting
• Public sector—governmental entities
– Provide information to assess accountability
• Fiscal accountability
– Complied with the budget and implicit legal and
managerial restrictions
– Short-term focus; implies that we need to separate total resources into individual funds

• Operational accountability
– Efficient and effective use of resources
– Ability to continue to provide services
– Longer-term focus; implies need for information
regarding the overall governmental entity

Generally Accepted Accounting
• What are they?
• Where do they come from?
– Private for-profit and not-for-profit entities
• Financial Accounting Standards Board

– State and local governments
• Governmental Accounting Standards Board

– Federal government
• Federal Accounting Standards Advisory Board

Characteristics of Governmental
• Exist for a purpose other than to make a
• No ownership interests
• Resource providers don’t expect a
proportionate benefit

Effects of Characteristics on
Financial Reporting
• Business—ability to provide a return
– Performance (measured by net income)
– Budget = a financial plan

• Government—ability to provide a service
– Performance (measured by services provided
and compliance with legal requirements)
– Budget = establishes what services are to be
provided and how much can be spent to
provide those services

Reporting Basics
• The Primary Government
– Elected governing board
– Separate legal status
– Fiscal independence

Reporting Basics (continued)
• Component Units
– Legally separate from the primary government
– Tests to determine if an entity is a component
• Primary government appoints the governing board
• Fiscal dependence on the primary government
– Benefit or burden
– Primary government can impose its will

• Exclusion would be misleading

Reporting Component Units
• Blended—when the component unit is an
integral part of the primary government, it
should be combined with that government
– Shared governing body, or
– Benefits of the component unit accrue almost
exclusively to the primary government

• Discrete—disclose the component unit
separately from the primary government

What is a Fund?
• A fund is a fiscal and accounting entity
created for the purpose of conducting and
tracking certain types of activities
• Funds are created as needed (usually as
restrictions are placed on resources)
• Governments are encouraged to minimize
the number of funds to promote efficiency

Types of Funds
• Governmental
– usually tax-supported

• Proprietary
– usually supported by charges for services

• Fiduciary
– involves resources belonging to someone

Measurement Focus
• Economic resources
– Focus on assets and liabilities
– As assets/liabilities change, revenues and expenses
are recognized
– Revenues are recognized when (1) realized or
realizable and (2) earned
– Expenses are recognized as economic resources are
used up or obligations are incurred
– Matching revenues & expenses measures net
income--the return generated during the period

Measurement Focus (continued)
• Current Financial Resources
– Focus on spendable...
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