Archive for January, 2009

Governments often have other receivables reported on their statement of net assets representing money owed to them for reasons other than the main revenue categories mentioned earlier. The same principles generally apply to these other types of receivables, although grant revenue receivable and revenue recognition can be more complex. Grants are also “nonexchange” transactions which are more fully described in Chapter 6. Grants may be from the federal government, a different level of government (such as a state providing a grant to a city), or from private (i.e., nongovernmental) sources. (more…)

These are two very simplistic examples that are meant to demonstrate a concept. In practice, particularly for commercial enterprises, revenue (and receivable) recognition issues can be quite complex and have been the cause of more than one accounting scandal in recent years. (more…)

These types of receivables occur from exchange transactions—the government is not just collecting a tax or a grant, it is providing specific services in exchange for money.

There are two basic considerations that the nonaccountant should understand about accounts receivable. First, a receivable (and the related revenue) should not be recorded until the organization actually earns the revenue and the right to receive the money from the entity to whom they are selling services. Second, not all receivables are ultimately collected. (more…)

Chapter 9 discusses the accounting for investments by governments, so not much space will be spent here discussing investments. Suffice it to say that most investments (most stocks, bonds, and other debt instruments) are reported in the statement of net assets at their fair value (fair market value is an older term
for what is now referred to as fair value). Changes in the fair value of investments from year to year are reported in the government’s statement of activities as part of overall investment earnings (or losses). (more…)

The term cash equivalents refer to investments that are so close to being realized as cash that they are viewed essentially as the equivalent of cash. The definition of what is considered a cash equivalent originated in the rules for preparing statements of cash flows (which will be discussed in Chapters 4 and 6). These rules for determining what can be considered a cash equivalent were promulgated by GASB Statement No. 9, “Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That (more…)

Cash is a fairly obvious asset. It represents the balances in the government’s bank accounts. The presentation of cash represents the book balances of the bank accounts, not the amounts reported on the bank statements. The book balances are similar to what individuals keep as balances in their own checkbooks, that is, checks that have been written and deducted from the balance but that have not yet cleared the bank. Similarly, deposits that have been received but have not yet cleared the bank are also included in the balance. (more…)

Let us start by looking at the GAAP definition of an asset. The FASB provides a useful definition of assets that will be examined below. There is no direct equivalent of this definition in the GASB world—do not panic; it is fine to use the FASB’s words to provide a basic understanding of assets (and later) liabilities. (more…)

The current financial resources measurement focus is used only in the fund financials by funds that are governmental funds, which basically are the funds that are not proprietary funds. (For simplicity, a group of funds called fiduciary funds are being left out of this discussion. Accounting for these funds is discussed in
later chapters.) (more…)

If the basis of accounting describes when transactions are recorded, the measurement focus can be viewed as defining what transactions are recorded. There are two different measurement focuses that are used in the preparation of financial statements for governments. They are the economic resources measurement focus and the current financial resources measurement focus. The economic resources measurement focus is used in the preparation of the government-wide financial statements and in the fund financial statements (more…)

The budgetary basis of accounting refers to the accounting principles that a government uses to prepare its budget for its main operating fund, the general fund, as well as certain other funds called special revenue funds. Sometimes governments use generally accepted accounting principles to prepare their budgets for these funds, in which case the budgetary basis of accounting would be the same as the basis of accounting required for fund financial reporting for these funds, which would be the modified accrual basis of accounting. (more…)