高級(jí)會(huì)計(jì)學(xué)英文版資料：Chap017 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTS (PART TWO)

1、Chapter 17accounting for state and local GOVERNMENTS (part Two)Chapter OutlineI.This chapter looks at the reporting for a number of significant transactions that are common for state and local governments. For example, these entities often obtain property by lease rather than by purchase.Leases are

2、recorded as either capital leases or operating leases based upon the criteria first established by the Financial Accounting Standards Board (FASB) for the reporting of for-profit businesses. Thus, a lease that meets any one of the following criteria is a capital lease for either a state or local gov

3、ernment or a for-profit business.a.The lease transfers ownership of the property to the lessee by the end of the lease term.b.The lease contains an option to purchase the leased property at a bargain price.c.The lease term is equal to or greater than 75 percent of the economic life of the leased pro

4、perty.d.The present value of minimum lease payments equals or exceeds 90 percent of the fair value of the leased property.B. For a state or local government, the recording of a capital lease depends on the set of financial statements being prepared.a.In government-wide financial statements, a capita

5、l lease is reported as an asset and liability at the present value of the minimum leases payments and then depreciation expense (of the assets cost) and interest expense (on the liability balance) are recognized over time.b.In fund financial statements for the governmental funds, the present value o

6、f the minimum lease payments is recorded as an expenditure and as an other financing source. Eventual interest and principal payments are recorded as expenditures. No depreciation is reported because capital assets are not recognized in the governmental funds.II.Governments often establish solid was

7、te landfills for use by the citizens and businesses. These facilities can be recorded either within the proprietary funds, if a user fee is assessed, or as part of the General Fund if the landfill is open to the public without a charge.A landfill can eventually create a large liability for a governm

8、ent because of closure costs and postclosure maintenance and monitoring.On government-wide financial statements, recognition of this liability is based on accrual accounting and the economic resource measurement focus. Thus, the liability is recognized proportionally as the available space becomes f

9、illed. If the landfill is recorded as an Enterprise Fund, this same reporting is also appropriate for fund financial statements.C.If the landfill is reported within the General Fund, a liability is only reported on the fund statements when a claim to current financial resources comes into existence.

10、 III.Many state and local government entities have defined benefit pension plans for their employees such as school teachers and police officers. Pension trust funds are often set up as fiduciary funds to manage the money and investments held to pay for these pensions. As fiduciary funds, these pens

11、ion trust funds are not included in government-wide financial statements.Government-wide financial statements must now report a net pension liability if the present value of the estimated future payments that relate to past work is greater than the net position of the pension trust fund. That is a n

12、et pension liability.B.GASB requires that in most cases, but not all, the present value of the future benefits is determined based on the estimated long-term investment yield for plan assets. That decision has created a significant amount of controversy because it creates a lower amount of reported

13、debt.C. The components to be recognized as pension expense are the service cost for the current period, interest expense on the total pension liability, and projected earnings on plan investments. In addition, any increases or decreases in the liability caused by changes in benefit terms are also in

14、cluded in pension expense immediately.IV.Works of art and historical treasuresArtworks, historical treasures, and similar assets should be capitalized at cost (or fair value at the date of donation) in government-wide financial statements.B.An expense rather than an asset can be recorded but only if

15、 the item does not generate economic benefits and meets the following three criteria.a.Held for public exhibition, education, or research in furtherance of public service, rather than financial gain.b.Protected, kept unencumbered, cared for, and preserved.c.Subject to the policy that revenues genera

16、ted from sales of items in the collection be used to add to the collection.C.If capitalized, depreciation is not required if this type of asset is considered to be inexhaustible.D. On fund financial statements for the governmental funds, expenditures are recognized for any purchases because the acqu

17、ired property is not a current financial resource.V.Infrastructure Assets and Depreciation Newly-acquired infrastructure assets (such as roads, bridges, and sidewalks) are capitalized at historical cost in the government-wide financial statements and also in fund financial statements for proprietary

18、 funds.In fund financial statements for the governmental funds, these acquisitions are recorded as expenditures.If capitalized, depreciation of all capital assets other than land and inexhaustible artworks is required. Infrastructure assets are also subject to depreciation. However, the “modified ap

19、proach” allows the expensing of maintenance costs in lieu of depreciation for infrastructure assets if specified criteria are met.a.A minimum acceptable condition level is established for a network of infrastructure assets and documentation is provided to verify that this minimum level has been main

20、tained.b.An asset management system must be in place to monitor the condition of the items in this system of assets.VI.Primary governments produce a comprehensive annual financial report (CAFR) which includes general purpose external financial statements. These statements are divided into three dist

21、inct sections.A.Managements discussion and analysis (MD&A) which provides a broad range of information to help decision-makers evaluate the operations and financial position of the government entities. B. Financial statementsa.Government-wide financial statements.b.Fund financial statements.c.Notes

22、to the financial statements.Other required supplementary information.VII.In governmental accounting, a general purpose government (such as a city, town, county, state or the like) is a primary government that must produce a CAFR. In creating this CAFR, the government might also have to include compo

23、nent units which are legally separate organizations or activities. Any agency, board, or the like that meets either of the following two criteria is reported as a component unit within the CAFR of the primary government even though the separate organization is an independent operation. a.It must be

24、fiscally dependent upon the primary organization and the primary government and the component unit must be financially interdependent (there is a relationship of potential financial benefit or burden between the two of them) or b.The primary government must appoint a voting majority of the governing

25、 board and either be able to impose its will on the board or the separate organization provides a financial benefit or imposes a financial burden on the primary government.Once identified, component units can be discretely presented in a separate column on the right side of the government-wide state

26、ments or blended with the primary government as if it made up one of the funds within the primary government.In addition, a special purpose government (such as a school board, university, or water commission) qualifies as a primary government if it meets the following three criteria:a.It has a separ

27、ately elected governing body.b.It is legally independentc.It is fiscally independent of any other state and local governmentsVIII. Government entities will occasionally combine. These transactions can be recorded as acquisitions or as mergers. A. In a merger, significant consideration is not exchang

28、ed. The governments simply come togetheroften to form a new government unit. The net carrying value of all assets, liabilities, deferred outflows of resources, and deferred inflows of resources are retained. No excess consideration is paid nor recognized. B. In an acquisition, significant considerat

29、ion is exchanged. Assets, liabilities, deferred outflows of resources, and deferred inflows of resources are recorded at acquisition valuethe amount required to buy or dispose of the items on that day. Any excess consideration is recorded as a deferred outflow of resources and amortized to expense o

30、ver a period of time determined based on a number of factors.IX.Public colleges and universities are required to meet GASB standards for reporting purposes, whereas private schools are required to use FASB standards.Private colleges and universities generally depend more on tuition and usually have

31、larger endowments whereas governments generally provide a major part of the support for public schools.GASB assumes public colleges and universities are special purpose entities so that they must use the same reporting model as a state or local government. However, many of these schools assume that

32、they function solely as an Enterprise Fund (open to the public for a user charge). Thus, they are allowed to produce fund financial statements (for a proprietary fund) without need for government-wide statements. The government-wide statements are viewed as redundant.Answer to Discussion QuestionIs

33、It Part of the County?In financial accounting for a for-profit organization, the boundary that defines the reporting entity and its various activities (or subsidiaries) is relatively easy to determine. US GAAP provides the basis for inclusion in consolidated financial statements, which includes all

34、entities over which a company has control.In accounting for state and local governments, the distinction is not so clear. What constitutes a reporting entity? Obviously, a primary government such as a city or county is a reporting entity. What about other governmental operations and activities that

35、exist but which are separate from a primary government? When do those operations qualify as special purpose governments and when should they be viewed as component units to be reported along with a primary government? A special purpose government is also a primary government for reporting purposes.

36、To qualify, it must have a separately elected governing body, be legally independent, and also be fiscally independent. The entity can demonstrate its fiscal independence by setting its own budget, levying taxes, and/or issuing bonds without outside approval. Here, the industrial development commiss

37、ion is not fiscally independent of Harland County. Harland County has the ability to impose its will on the separate organization because it has the right to approve the commissions budget. Therefore, the industrial development commission is not a special purpose government. Is the industrial develo

38、pment commission a component unit? An activity is classified as a component unit if it is fiscally dependent on a primary government. In addition, the primary government and the component unit must be financially interdependent (there is a relationship of potential financial benefit or burden betwee

39、n the two of them). Here, because the commissions budget must be approved by the county government and deficits will be covered by the county, the commission appears to qualify as a component unit for Harland County.Can the commission also be a component unit of the state? Fiscal dependence is not p

40、resent but a component unit does exist if the primary government appoints a voting majority of the board and (a) the primary government can impose its will on that board or (b) the separate organization provides a financial benefit for the primary government or imposes a financial burden. The state

41、appoints 15 out of 20 of the board members. Appointment of that number of board members indicates state control. However, no evidence or information is presented here that indicates that the state can impose its will on the board or that the separate organization provides a financial benefit or impo

42、ses a financial burden on the state (as it does on the county). Therefore, unless other information becomes available indicating that one of these requirements is present, the industrial commission is not a component unit of the state. However, because of the appointment of the majority of the board

43、, the commission is a related organization to the state. In that case, the state must disclose the nature of the relationship in its financial statements.Answers to Questions1.GASB has adopted the same rules as FASB to determine whether a lease is viewed as a capital lease or as an operating lease.

44、However, both GASB and FASB are currently studying the possibility of changes in these rules.A lease that meets any one of the following criteria is held to be a capital lease:a.The lease transfers ownership of the property to the lessee by the end of the lease term.b.The lease contains an option to

45、 purchase the leased property at a bargain price.c.The lease term is equal to or greater than 75 percent of the estimated economic life of the leased property.d.The present value of rental or other minimum lease payments equals or exceeds 90 percent of the fair value of the leased property.2.Within

46、government-wide financial statements, the accounting for capitalized leases is the same as for-profit enterprises. The asset and liability are recorded initially at the present value of the minimum lease payments. Accrual accounting and the economic resource measurement basis are appropriately follo

47、wed. The equipment is increased along with the liability obligation. Subsequently, both depreciation expense and interest expense must be recognized. The entries in the fund financial statements are the same if a proprietary fund is involved. The recording of a capital lease in one of the government

48、al funds (within the fund financial statements) involves the following three steps:a.The initial entry reports the present value of the liability as an other financing resource.b.The same present value is also recorded as an expenditure consistent with the current financial resources approach being

49、used.c.When each subsequent lease payment is made, the debt reduction and interest payment are both recorded as expenditures.3.In government-wide financial statements, the lease payment is treated the same as in a for-profit organization: part of the payment is considered interest and reported as an

50、 expense with the rest viewed as a payment of the lease obligation. In fund financial statements for a proprietary fund, the recording is the same as above. However, the recording of a capital lease payment in fund financial statements for governmental funds involves the recording of expenditures fo

51、r both the reduction of the debt and the payment of interest.4.Solid waste landfills can be a significant source of liability for many local governments. The federal government has strict rules on closure of a landfill as well as groundwater monitoring and postclosure activities. All of these legal

52、obligations can necessitate large payments over an extended period of time to close and then maintain the landfill into the future.5.Government-wide financial statements recognize expenses on the accrual and economic resource measurement basis. Therefore, seven percent of the expected landfill closu

53、re liability cost is accrued during the current year as an expense along with the related liability. In the fund financial statements, the entry is the same as above if an Enterprise Fund is involved. In the fund statements, if the landfill is recorded in the General Fund, the only charge to expendi

54、tures is for any current payment or for any claim against current financial resources. The eventual liability is ignored unless it will be paid from current financial resources. 6.Government-wide financial statements recognize expenses on the accrual and economic resource measurement basis. At the e

55、nd of the first year, 11 percent is multiplied times the expected closing and other related costs and that figure is recognized as both an expense and a liability. Current costs are used for this estimation process. At the end of the second year, 24 percent is multiplied times the expected costs (wh

56、ich may have changed since the end of year one) and the liability to be reported is then raised to this new amount. It is the change in the liability that creates the amount of expense reported for the second year.For fund financial statements, assuming the landfill is reported in the General Fund,

57、no recording is made unless (a) an actual payment is made because of the eventual closure or (b) some part of that liability represents a claim to current financial resources in this period. 7.The money set aside by this government for its retirement program is maintained in a pension trust fund tha

58、t will likely have a positive net position because of the money and investments being held for future payments. At the same time, an estimate is made of the future amount of money that will have to be paid as a result of the defined benefit plan. The portion of that total that relates to work that h

59、as already been provided is then determined. The present value of that part of those future cash payments is calculated. If the resulting pension liability is greater than the net position of the pension trust fund, the excess amount is reported in the government-wide financial statements as a net p

60、ension liability.8. For state and local government units, pension expense begins with the service cost for the current year and is increased by interest expense on the amount of the obligation. The resulting figure is then reduced by any projected earnings on plan investments. In addition, any incre