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Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Introduction to Governmental and
Not-for-Profit Accounting, 7e
Chapter 10: Government-Wide
Financial Statements
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Chapter 10 Topics
• Format of Government-Wide Financial
Statements
• Preparing Government-Wide Financial
Statements
• Creating Government-Wide Financial
Statements from Fund Financial Data:
Comprehensive Illustration
• Capital Assets, Including Infrastructure
Assets
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Overview of Government-Wide
Financial Statements
• To prepare: start with fund-level statements
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Focus and Format of Government-Wide
Financial Statements
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Focus and Format of Government-Wide
Financial Statements
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Remember That
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Format of Government-Wide Financial
Statements: Statement of Net AssetsThe Statement of Net Position
The statement of net position
may have four columns of
financial data:
one for governmental
activities, one for business-
type activities, one for the
total of those two columns,
and one for discretely
presented component units.
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Format of Government-Wide Financial
Statements: Statement of Net Position
• Columns: governmental, business-type,
total, discrete component units
• Assets – Liabilities = Net Position OR
Assets = Liabilities + Net Position
• Report in order of liquidity or classified
• Net position: 3 components:
– Net investment in capital assets, restricted,
unrestricted
• Unrestricted differs from unassigned fund balance
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Format of Government-Wide Financial
Statements: Statement of ActivitiesThe Statement of Activities
shows the extent to which each function is self-financing
(through fees and intergovernmental grants) and the extent to
which it draws on the government’s taxes and other general
revenues.
the statement of activities is presented in two sections:
• The upper portion shows the net expenses of each function
or program
• the lower portion shows the general revenues and the
resulting change in net position for the year.
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Format of Government-Wide Financial
Statements: Statement of Activities
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Format of Government-Wide Financial
Statements: Statement of Activities• Shows extent to which programs are self-
financing
• Columns
– Direct expense for each function/program
• First column
• Indirect may be allocated
– Program revenues
– Net direct expenses against three program
revenue columns
– Separate: interest on general long-term debt
Format of Government-Wide Financial
Statements: Statement of Activities
• Bottom
– General revenues (all taxes)
– Unrestricted grants
– Special items
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Government-wide Statement of
Activities: Reporting Expenses
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Governmental units report expenses by
function or program (such as public safety
and culture and recreation)
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Government-Wide Statement of
Activities: Program Revenues
• Charges for services: fees for specific services – Reported by program that generates them
– Includes fines, forfeitures
• Program specific grants and contributions– Nonexchange revenues restricted for use in a
particular program
• Capital grants and contributions– Contributions of capital assets and grants
restricted to capital purposes
Government-wide Statement of
Activities: General Revenues• General Revenues:
– Reported after net functional expense
– All taxes, even if restricted for a specific
purpose
– All other revenues not restricted for a specific
purpose
• Special and Extraordinary Items
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Preparing Governmental Wide
Statement of Activities
Preparing Statement of Activities
Because of the conversion to the economic resources measurement focus and the
accrual basis of accounting, the governmental activities column of the government-
wide statement of activities will, of course, differ from the total governmental fundscolumn in the funds statement of revenues, expenditures, and changes in fund
balances.
Interfund and Internal Service Fund Balances and Activity
As discussed in previous chapters, fund accounting often results in transfers among,
charges to ,and balances due to and from the various funds. As a general rule, these
types of internal activities and balances—reported in the fund financial statements—
are eliminated when preparing the government-wide statement of net position and
statement of activities. Unless the eliminations are made, totals for the entity as a
whole will be inflated. How are these eliminations made?
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Format of Government-Wide Financial
Statements: Interfund Activity
• Within governmental funds or enterprise
funds
– Eliminate interfund receivables/payables on
government-wide statement of net position
• Between governmental, enterprise funds
– Interfund receivables/payables between
governmental funds and enterprise funds
retained
• Report as internal balances
Government-Wide Financial
Statements – Internal Service Fund
Balances/Activities
• Assets/liabilities aggregated with those of
primary activities using ISF services
– Most often with governmental activities
• Eliminate ISF activity — revenues and
expenses/expenditures
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Government-Wide Financial
Statements – Internal Service Fund
Balances/Activities
• Eliminate “artificial” profits generated by
ISFs
– Elimination column of worksheet
Revenues (ISF) 100,000
Expenses (ISF) 95,000
Public safety expenditures 3,000
Recreation expenditures 2,000
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
صوري
Preparing Government-Wide
Financial Statements: Process• Worksheet approach
– Three sets of debit/credit columns
• Starting balances from preclosing trial balances
• Adjustments
– Measurement focus and basis of accounting
adjustments for governmental funds
• Adjusted balances
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Preparing Government-Wide Financial
Statements: Report Capital Assets
• Reinstate prior-year government-wide account
balances for capital ExpendituresCapital assets-equipment 1,000,000
Accumulated depreciation-equipment 400,000
Net position 600,000
• Reclassify current capital expenditures as assetsCapital assets-equipment 200,000
Expenditures-capital outlay 200,000
• Record current depreciationDepreciation expense-equipment 110,000
Accumulated depreciation-equipment 110,000
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Preparing Government-Wide Financial
Statements: Report Long-Term Debt
• Reinstate prior year government-wide account balances for long term debt
Net position 500,000
Bonds payable 500,000
• Record current-year sales of debtOther financing sources-proceeds from
bond issue 200,000
Bonds payable 200,000
• Record debt redemptionBonds payable 100,000
Expenditures-bond principal 100,000
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Preparing Government-Wide Financial
Statements: Accrue Revenue
• Derived tax revenues: when exchange
occurs
– Sales tax, income tax
• Imposed nonexchange revenue: when
levied
– Real property taxes, fines
• Deferred revenues: adjust (removing)
– Beginning- and end-of-year deferrals
Preparing Government-Wide Financial
Statements: Accrue Revenue
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• Property-tax adjustments– Reverse revenues applicable to 2012 but recognized
in fund statements during 2013
Revenues-property taxes 10,000
Net position 10,000
– Recognize additional revenues from 2013 property
tax levy by removing deferral
Deferred property tax revenues 15,000
Revenues-property taxes 15,000
10-*
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Preparing Government-Wide Financial
Statements: Accrue Expenses• Stub period interest
– Interest between last interest payment in one
fiscal year and the fiscal year end
• Record beginning of year interest liability:Net position 2,000
Accrued interest payable 2,000
• Adjust balance to end-of-year liability:Accrued interest payable 500
Expenditures—interest on bonds 500
• Record expenses, not expenditures
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Preparing Government-Wide Financial
Statements: Accrue Expenses
• Adjust other expenditures to expenses
– Use “expense” for government-wide
• Fund-level: recognized when due
• Government-wide (full accrual): recognize
when incurred
– Regardless of when cash is paid
• Common adjustments: compensated
absences, judgments, claims, pension and
other postemployment benefits
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Creating Government-Wide Financial
Statements: Additional Entries Illustrated
• Adjust for loss on capital assetsAccumulated depreciation-capital assets 16,000
Other financing sources-sale of assets 1,000
Loss on sale of assets 3,000
Capital assets 20,000
• Reverse prior year revenues in current year fund-level statements
Revenues-property taxes 10,000
Net position 10,000
• Recognize current year revenues using accrualDeferred tax revenues 18,000
Revenues-property taxes 18,000
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Creating Government-Wide Financial
Statements: Additional Entries Illustrated
• Record beginning balance of accrued
compensation, adjust for current yearNet position 4,000
Accrued compensated absences 4,000
Compensated absences expense 1,000
Accrued compensated absences 1,000
• Eliminate interfund transfersTransfer in from General Fund 65,000
Transfer out to Debt Service Fund 65,000
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Preparing Government-Wide Financial
Statements: Required Reconciliations
• Reconcile governmental fund statements
to government-wide statements
• In summary form
• 2 reconciliations required:
– Reconcile financial position statements
– Reconcile operating statements
• Appear at bottom of statements or in
separate schedules
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Capital Assets: By Fund Type
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Capital Assets:
Infrastructure Assets
• Very long-lived, stationary
• Examples: roads, tunnels, drainage/
water/lighting systems
• Not buildings
– Unless they are ancillary to infrastructure
• Must capitalize
• Must depreciate OR use modified
approach
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Capital Assets: In General
• Report historical cost, including ancillary
costs
– All costs to get ready for use
• Depreciated over estimated useful life
– Unless inexhaustible, such as land
– OR infrastructure assets: use modified
approach
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Capital Assets: Infrastructure
Assets, Modified Approach
• Not required to depreciate IF:
– Asset management system in place
– Assets preserved at established & disclosed
condition level
• Expense any expenditures to preserve
– Additions and improvements are capitalized
• Improvements increase capacity or efficiency
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
Capital Assets:
Capital Asset Accounting
• Capital Investment Account Group (CIAG)
– Journal entries related to investments in
capital assets:
• Acquisitions, depreciation, disposals, debt related
to acquisitions
• To improve internal control over assets
• To assist in preparing government-wide
statements
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 10-*
All rights reserved. No part of this publication may be
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