Proprietary funds have the option to apply all FASB Statements and Interpretations, APB Opinions, and ARBs issued after November 30, 1989, except for those that conflict with or contradict GASB pronouncements. (The significance of the November 30, 1989 date is that it is the date of SAS 69 which set the GAAP hierarchy for governments and nongovernments and is discussed in Chapter 1.) Note that once a proprietary fund elects to apply or not apply these FASB and other pronouncements it must be consistent from year to year. A proprietary fund cannot apply the FASB pronouncements one year and not the next. Nor can a proprietary fund pick and choose the pronouncements that it likes to apply and ignore the others. The
election must be applied consistently and uniformly from year to year. The GASB Web site (www.gasb.org) has a useful list of these FASB pronouncements with a brief explanation as to whether they would be applicable to proprietary funds. The list is updated as the FASB issues new pronouncements. The following
sections describe the actual uses of the two types of proprietary funds—enterprise funds and internal service funds.

Enterprise Funds

Enterprise funds are used to account for operations that fall within two basic categories:

1. Activities that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is to finance or recover costs of providing goods or services to the general public on a continuing basis primarily through user charges
2. Operations where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes Enterprise funds are primarily used to account for activities that are financed through user charges. However, the total cost of the activity does not have to be paid for by the user charges. The government (or other governmental entity) may subsidize a significant portion of the costs of the enterprise fund. Typical activities accounted for in enterprise funds include those that are similar to utilities, such as water and sewer funds and electric utility funds. Parking lots operated by governments are another example of proprietary activities accounted for in a proprietary fund.

Taken From : Governmental Accounting Made Easy

This entry was posted on Saturday, February 28th, 2009 at 8:40 am and is filed under All about speed of life. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.