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Flashcards in FAR 70 - Net Position and Fund Balance Deck (19):

Which of the following fund balance classifications is used for budgetary accounting but not for GAAP financial statement reporting?
A. Non-spendable Fund Balance.
B. Unreserved Fund Balance.
C. Committed Fund Balance.
D. Unassigned Fund Balance.

B. GASB Statement No. 54 eliminated the use of "reserve" and "unreserved" fund balances. The appropriate fund balance classifications are Non-spendable, Restricted, Committed, Assigned, and Unassigned.


As of the end of the fiscal year, a Capital Projects Fund has material balances of supplies inventory. Which fund balance classification would reflect the inventory of supplies?
A. Non-spendable.
B. Restricted.
C. Committed.
D. Assigned.

A. According to GASB Statement No. 54, a Non-spendable Fund Balance classification pertains to amounts that cannot be spent either because they are not in a spendable form (e.g., inventory) or are legally or contractually required to be maintained intact.


A Capital Projects Fund has outstanding encumbrances of $250,000 as of the end of the fiscal year. Assume that all resources in the Capital Projects Fund are considered to be committed due to the constraints established by the enabling legislation of the governing body of the government. How should the encumbrances be reported in the year-end external financial statements?
A. As a specific identifiable component of the restricted fund balance.
B. As a specific identifiable component of the committed fund balance.
C. As a specific identifiable component of the Assigned Fund balance.
D. The encumbrances would only be reported in the note disclosures.

D. According to GASB Statement No. 54, outstanding encumbrances are no longer reported as Reserves in the fund balance section, which was the practice prior to Statement No. 54. Significant encumbrances should be disclosed in the notes to the financial statements.


In preparing Chase City's reconciliation of the Statement of Revenues, Expenditures, and Changes in fund balances to the Government-Wide Statement of Activities, which of the following items should be subtracted from the changes in fund balances?
A. Capital Assets Purchases.
B. Payment of long-term debt principal.
C. Internal Service Fund increase in Net Position.
D. Book value of capital assets sold during the year.

D. At the Governmental-Fund level, the entire proceeds from the sale of capital assets is a financial resource of the fund - it is spendable. Only the gain or loss on the sale of capital assets is reported in the Government-Wide Financial Statements. Therefore, the book value of capital assets should be subtracted.


The County Commissioner Board took formal action to dedicate resources to expand the regional fairgrounds (a particular project) in the Capital Projects Fund. Those resources cannot be redirected for another use unless an equivalent formal action is taken. As of the end of the fiscal year, a portion of these resources remain in the fund balance. The proper fund balance classification for these resources would be:
A. Restricted.
B. Committed.
C. Assigned.
D. Designated.

B. According to GASB Statement No. 54, amounts that can only be used for a specific purpose, because of constraints imposed by formal action of the government's highest level of decision making authority, should be reported as Committed Fund Balance.


At December 31, 2005, Alto Township's committed appropriations that had not been expended in 2005 totaled $10,000. The commitment was made by the finance committee. These appropriations do not lapse at year-end. Alto reports on a calendar-year basis.

On its December 31, 2005 Balance Sheet, the $10,000 should be reported as:
A. Vouchers Payable-prior year.
B. Deferred Expenditures.
C. Fund Balance Assigned.
D. Budgetary Fund balance-reserved for encumbrances.

C. $10,000 of the fund balance should be assigned to show that those funds are not available for appropriation in the next fiscal year.


T/F: The sum of restricted fund balance for all governmental funds must always equal the amount of restricted net position for governmental activities on the Statement of Net Position.

To be considered a restriction at the fund level, the constraint on the asset use must be narrower than the general limits of the activity. Therefore the restricted Net position would not include all restrictions from all governmental funds.


T/F: According to GASB Statement #54, encumbrances should be reported as a reserve under fund balance in the balance sheet for a capital project fund.

Encumbrances should not be shown in the FS. If the encumbered amount has not previously been restricted, committed, or assigned it should be included within the committed or assigned fund balance depending on the level of authority used to encumber the amount. GASB states that amount related to encumbrances should be disclosed in the notes to the FS.


T/F: A positive unassigned fund balance can appear only in the General Fund.



T/F: A municipality receives a federal grant that must be spent on a bridge renovation. The proper fund balance classification for these resources is committed fund balance.

classification should be in the restricted fund balance for this grant.


The introductory section of a CAFR typically includes all of the following except:
A. The letter of transmittal.
B. An organizational chart.
C. The independent auditor's opinion.
D. The table of contents.

C. The auditor's report is not part of the introductory section of the CAFR. It is part of the financial section of the CAFR.
Comprehensive Annual Financial Report (CAFR)


Jonn City entered into a capital lease for equipment during the year. How should the asset obtained through the lease be reported in Jonn City's government-wide Statement of Net Position?
A. General Capital Asset.
B. Other Financing Use.
C. Expenditure.
D. Not reported.

A. The Government-Wide Financial Statements will present both the asset and the liability associated with a capital lease asset.


The Comprehensive Annual Financial Report (CAFR) of a state or local governmental unit should include fund-level statements for which fund categories?

Governmental Funds, Proprietary Funds, Fiduciary Funds
The CAFR includes Fund statements from all three fund categories. The government-wide statements include data from the Governmental and Proprietary Funds only.


What are the three standard sections of a governmental comprehensive annual financial report?

The CAFR contains three sections: (1) Introductory, (2) Financial, and (3) Statistical.


Which of the following statements are required to be presented for special-purpose governments engaged only in business-type activities (such as utilities)?
A. Statement of Net Position only.
B. Management's Discussion and Analysis (MD&A) and Required Supplementary Information (RSI) only.
C. The financial statements required for Governmental Funds, including MD&A.
D. The financial statements required for Enterprise Funds, including MD&A and RSI.

D. Special-purpose governments engaged in business-type activities follow the reporting standards required for Enterprise Funds, which are a Statement of Net Position; Statement of Revenues, Expenses, and Changes in Net Position; Statement of Cash Flows; and appropriate disclosures in MD&A, and RSI.


Which of the following is true?
A. A government can issue its CAFR without its basic financial statements, management's discussion and analysis, and other required supplementary information.
B. A government can issue its basic financial statements, management's discussion and analysis, and other required supplementary information without its CAFR.

B. The minimum reporting requirement for a government is a General Purpose Financial Statement, which has three main components: (1) management's discussion and analysis, (2) basic financial statements, and (3) required supplementary information.


T/F: Long-term liabilities are shown at their face value, rather than their present value.

Shown at PV


T/F: The Schedule of Direct and Overlapping Debt is presented in the Statistical Section.



T/F: Both the Government-wide Statements and the Fund Statements are included in the Basic Financial Statements.


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