高级会计学英文版资料：Chap017 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTS (PART TWO)

1、CHAPTER 17 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTS(PART TWO)Chapter OutlineThis 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 re

2、corded 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 gover

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

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

5、rted as an asset and liability at the present value of the minimum leases payments and then depreciation expense (of the assefs cost) and interest expense (on the liability balance) are recognized over time.In fund financial statements for the governmental funds, the present value of the minimum lea

6、se 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.Governments often establish solid waste landfills for use

7、 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 government because of closu

8、re 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 filled. If the landfi

9、ll is recorded as an Enterprise Fund, this same reporting is also appropriate for fund financial statements.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.Many state and local g

10、overnment entities have defined benefit pension plans for their employees such as school teachers and police officers. Pension trust funds are often setExpenditures.Other financing sources and uses.Special items.A reconciliation between the ending change in fund balances and the ending change in net

11、 position for governmental activities in the government-wide financial statements.Program revenues are those revenues derived from a specific program (such as parks and recreation) or from outsiders seeking to contribute to the cost of that function. They include charges rendered for services, opera

12、ting grants and contributions, and capital grants and contributions.General revenues are those from the population as a whole including property taxes, sales taxes, unrestricted grants, and investment income. They are not traced to any individual program, activity, or function.This distinction is im

13、portant because program revenues are matched with expenses for each activity providing a net expense or net revenue figure to disclose the cost or the benefit of providing that activity.The net expense or net revenue format allows the readers of a governments financial statements to determine the re

14、lative financial burden (or benefit) that each of its reporting functions has on its taxpayers. In other words, the users of the statement can determine what it costs for the government to provide benefits such as public safety or library.On government-wide financial statements, internal service fun

15、ds are combined with the governmental activities (or business-type activities if that connection is more appropriate). Their placement is based on the identity of the functions that they primarily serve. If an internal service fund is mainly used to assist one or more governmental funds, then it sho

16、uld be included with the governmental activities.A combination is viewed as a merger if two legally separate entities are brought together to form a new entity and no significant consideration is exchanged. A merger is also formed if one of those entities ceases to exist while the other continues. I

17、n a merger, the net carrying values for all assets, deferred outflows of resources, liabilities, and deferred inflows of resources are combined. No additional account balances are recognized. However, in an acquisition, a significant amount of consideration is exchanged. For government-wide financia

18、l statements, the acquiring government records all of the acquired assets, deferred outflows of resources, liabilities, and deferred inflows of resources (other than a few specific exceptions such as landfills) at acquisition value. Acquisition value is the market-based entry pricethe amount that wo

19、uld have to be paid to acquire or discharge each item at this time. Any excess consideration is reported as a deferred outflow of resources on the statement of net position. This balance is written off to expense over a period of time that is determined based on several factors including the service

20、 life of capital assets, technology, and contracts acquired. When an acquisition takes place, fund financial statements record all of the acquired current financial resources and claims against those resources at acquisition value.In for-profit accounting, excess consideration paid in an acquisition

21、 is reported as goodwill and then tested periodically for impairment. For a state or local government, excess consideration paid in an acquisition is not reported on the statement of net position as an asset but rather as a deferred outflow of resources. That balance is then allocated toexpense over

22、 a period of time determined by an examination of several factors such as the service life of capital assets and technology.From an external reporting perspective, FASB sets accounting standards for private colleges and universities whereas GASB sets standards for public schools. Operationally, publ

23、ic schools receive signficant funding from the government (usually a state government). Private universities rely more on tuition charges and endowment income. Because of the ability to generate funding from the government, public colleges and universities generally have smaller endowments.Many publ

24、ic colleges and universities make the assumption that they are solely an Enterprise Fund because they are open to the public but have a user charge (tuition and other fees). An Enterprise Fund is a proprietary fund. For proprietary funds, governmentwide financial statements and fund financial statem

25、ents are quite similar. Consequently, authoritative guidelines allow such schools to produce only fund financial statements and avoid the redundancy of also creating government-wide statements.Answers to ProblemsA (Both the asset and liability are reported at the present value of the minimum lease p

26、ayments.)D (Record $49,000 in expenditures on the first day of the capital lease and then $70,000 more in the form of payments made over the life of the lease)B (Only the amount of the initially reported liability is identified as an other financing source)D (Interest is the $69,000 balance times 10

27、 percent.)A (At this time, there is no claim to current financial resources.)DC (The liability must be increased from 8 percent of $1 million to 19 percent. The 11 percent jump is recorded as expense.)C (Same handling as in 7)A (The landfill creates no claim to current financial resources)B (The pre

28、sent value of the pension payments that have been earned to date is $49.8 million. The net position of the pension trust fund is $32.7 million. Thus, the $17.1 million difference is the net pensionliability.)D (Changes in the amount of the pension liability that are necessary because of a change in

29、economic or demographic assumptions are not expensed immediately. Instead, those amounts are recorded as either deferred outflows of resources or deferred inflows of resources and amortized to pension expense over a length of time that is set based on a number of factors.)CABA (Sidewalks do not have

30、 an indefinite life and are depreciated unless the modified approach is used.)DBB (Special purpose governments do not have boundaries in the traditional style.)ACB (In a merger, these assets are combined at their net carrying amounts.)CAACC(12 Minutes) (Accounting for lease on government-wide financ

31、ial statements and fund financial statements)The lease signed by the Enterprise Fund is accounted for in the same way on the government-wide financial statements (as a business-type activity) and the fund financial statements (as a Proprietary Fund).Leased Asset (present value)$28,750 TOC o 1-5 h z

32、Depreciation Expense (6 year life)4,792Accumulated Depreciation4,792Interest Expense (10 percent of $28,750)2,875Reduction in Liability ($6,000payment less $2,875 interest)3,125Liability ($28,750 less $3,125)25,625*The lease signed by the General Fund will be accounted for in the following manner fo

33、r the government-wide financial statements (as a governmental activity).Leased Asset (present value)$33,350 TOC o 1-5 h z Depreciation Expense (5 year life)6,670Accumulated Depreciation6,670Interest Expense (10 percent of $33,350)3,335Reduction in Liability ($8,000payment less $3,335 interest)4,665L

34、iability ($33,350 less $4,665)28,685This same lease will be accounted for in the following manner on the fund financial statements (as a General Fund).Initial Recording:$33,35033,3503,3354,665ExpendituresOther Financing SourcesPayment of $8,000:Expenditures-lnterest (above)Expenditures-Principal (ab

35、ove)(12 Minutes) (Journal entries for lessee on government-wide financial statements and fund financial statements)GOVERNMENT-WIDE FINANCIAL STATEMENTS (the two leases are combined here)January 1, 2015AssetsCapital Lease49,600Capital Lease ObligationDecember 31, 2015Interest Expense ($49,600 x 12%)C

36、apital Lease Obligation ($12,000 $5,952) CashDepreciation ExpenseGovernmental Accumulated Depreciation (10-year life)Depreciation ExpenseBusiness-type Accumulated Depreciation (4-year life)b.FUND FINANCIAL STATEMENTSEnterprise FundJanuary 1, 2015AssetsCapital LeaseCapital Lease ObligationDecember 31

37、, 2015Interest Expense ($30,600 x 12%)Capital Lease Obligation ($9,000 - $3,672) CashDepreciation ExpenseAccumulated Depreciation-(4-year life)General FundExpendituresLeased AssetsOther Financing Sources一Capital LeaseExpendituresInterest ($19,000 x 12%)ExpendituresPrincipal ($3,000 - $2,280)Cash29.

38、(15 Minutes) (Journal entries for lessee on goverr statements and fund financial statements)49,6005,9526,04812,0001,9001,9007,6507,65030,60030,6003,6725,3289,0007,6507,65019,00019,0002,2807203,000 iment-wide financiala.GOVERNMENT-WIDE FINANCIAL STATEMENTSJanuary 1, 2015TruckCapital Lease87,800CashCa

39、pital Lease Obligation22,00065,800December 31, 2015Interest Expense ($65,800 x 8%)Capital Lease Obligation ($22,000 - $5,264)Cash5,26416,73622,000Depreciation ExpenseAccumulated Depreciation (5-year life)17,56017,560December 31, 2016 (obligation is now $49,064 or $65,800 less $16,736)Interest Expens

40、e ($49,064 x 8%)3,925Capital Lease Obligation ($22,000 - $3,925)18,075Cash22,000Depreciation ExpenseAccumulated Depreciationb.FUND FINANCIAL STATEMENTSGeneral FundJanuary 1, 2015ExpendituresLeased AssetOther Financing SourcesCapital Lease17,56017,56087,80087,800ExpendituresLease Obligation CashDecem

41、ber 31, 2015ExpendituresInterest (above)ExpendituresLease Obligation Cash22,00022,0005,26416,73622,00029. (continued)December 31 y 2016ExpendituresInterest (above)ExpendituresLease ObligationCash3,92518,07522,000FUND FINANCIAL STATEMENTSProprietary Fund (should be same as handling in government-wide

42、statements)January 1, 2015TruckCapital LeaseCashCapital Lease Liability87,80022,00065,800December 31, 2015Interest Expense ($65,800 x 8%)Capital Lease LiabilityCash5,26416,73622,000Depreciation ExpenseAccumulated DepreciationDecember 31, 2016Interest Expense ($49,064 x 8%)Capital Lease LiabilityCash

43、17,56017,5603,92518,07522,000Depreciation Expense Accumulated Depreciation17,56017,56030. (20 Minutes) (Journal entries for landfill on government-wide financial statements and fund financial statements)a.GOVERNMENT-WIDE FINANCIAL STATEMENTSAccounted for as an Enterprise Fund (within the Business-ty

44、pe Activities)December 31, 2015ExpenseLandfill Closure (3% of $1.9 million)57,000Landfill Closure LiabilityLandfill Closure LiabilityCashDecember 31, 2016ExpenseLandfill Closure (9% of $2,1 million less $57,000)Landfill Closure LiabilityLandfill Closure LiabilityCash57,00050,00050,000132,000132,0005

45、0,00050,000b.GOVERNMENT-WIDE FINANCIAL STATEMENTS (same as above in a.)Accounted for within the General Fund (part of the Governmental Activities)December 31, 2015Expense-Landfill Closure Landfill Closure LiabilityLandfill Closure Liability CashDecember 31, 2016Expense-Landfill ClosureLandfill Closu

46、re LiabilityLandfill Closure Liability Cash57,00057,00050,00050,000132,000132,00050,00050,00030. (continued)c.FUND FINANCIAL STATEMENTS (same as above in a.)Accounted for as an Enterprise Fund (within the Proprietary Funds)December 31, 201557,00057,00050,00050,000132,000132,00050,00050,000ExpenseLan

47、dfill Closure Landfill Closure LiabilityLandfill Closure Liability CashDecember 31, 2016ExpenseLandfill ClosureLandfill Closure LiabilityLandfill Closure Liability Cashd.FUND FINANCIAL STATEMENTSAccounted for within the General Fund (one of the Governmental Funds)December 31, 2015ExpendituresLandfil

48、l Closure50,000Cash50,000December 31, 2016ExpendituresLandfill Closure50,000Cash50,000There are no other claims to the current financial resources held by the government.(10 Minutes) (Reporting a landfill in both government-wide financial statements and fund financial statements)GOVERNMENT-WIDE FINA

49、NCIAL STATEMENTSDecember 31, 2015Landfill Closure Liability$1,296,000 (54 percent of $2.4 million)ExpenseLandfill Closure $1,296,000 (amount needed to establish above liability)FUND FINANCIAL STATEMENTSDecember 31, 2015Despite the huge eventual liability, nothing is reported at the end of 2015 becau

50、se no claim to current financial resources exists at this time.(15 Minutes) (The reporting of a defined benefit pension plan by a state or local government)To determine the balance to be reported as a state or local governmenfs net pension liability, an estimation is made of the total benefits that

51、will have to be eventually paid. The portion of that amount that relates to employee past performance (or work that has already been done) is then determined. The present value of that part of the future cash flows is calculated. If this amount is greater than the net position reported by any relate

52、d pension trust fund, the excess is reported in the governmentwide financial statements as the net pension liability.For a state or local government, the amount of pension expense to be recognized in the current period is made up of several components including the service cost for the current perio

53、d, interest expense on the debt, and projected earnings on plan investments. Any increases or decreases in the pension liability caused by changes in benefit terms are included in pension expense immediately. Finally, numerous assumptions are also necessary to arrive at a total amount to be paid (su

54、ch as the life expectancy of retired individuals). The impact of any changes in those assumptions and differences between previous assumptions and actual experience is not included immediately within pension expense. Instead, such amounts are recorded as either deferred outflows of resources or defe

55、rred inflows of resources and amortized to pension expense over time (with the number of years based on several factors).Because pension plans often establish payments that will not be made until far into the future, reporting on the fund financial statements for governmental funds is often quite li

56、mited. Monetary amounts transferred to a pension trust fund must obviously be recorded. Otherwise, unless up as fiduciary funds to manage the money and investments held to pay for these pensions. As fiduciary funds, these pension trust funds are not included in government-wide financial statements.G

57、overnment-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 net pension liability.GASB requires that in most cases, but not all, the pr

58、esent 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 debt.The components to be recognized as pension expense are the service cost

59、 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 included in pension expense immediately.Works of art and historical treasuresArtw

60、orks, historical treasures, and similar assets should be capitalized at cost (or fair value at the date of donation) in government-wide financial statements.An expense rather than an asset can be recorded but only if the item does not generate economic benefits and meets the following three criteria