Encumbrance - Government and Nonprofit Accounting - Lecture Notes, Study notes of Accounting

Download Encumbrance - Government and Nonprofit Accounting - Lecture Notes and more Study notes Accounting in PDF only on Docsity! Chapter 9 – Financial Reporting for State and Local Governments #2 Chapter 10 – Financial Analysis of Governmental Financial Statements Page 1 of 5 I. Class Notes 1. Exam #2 II. Last Time A. Example for prior exam on the closing entries III. Re-establishment of Prior Year Encumbrance See page 131/125 and page196/191 in the current/previous textbook A. Not always allowed to carry forward appropriations and encumbrances – see fn 4 in Chapter 4 B. Steps 1. Re-establish the encumbrance with: Encumbrance DR Fund Balance CR And at same time move the Reserve for Encumbrances out the fund balance to where it was before – sort of just hanging around When the good are received, then just reverse the encumbrance like we did in Chapter 4 – this will liquidate the encumbrance and remove the reserve for encumbrance 2. You then recognize the expenditure as normal. See text for fine points, but this is all that is needed on the exam. IV. Component Units A. Characteristics 1. Legally separate organizations 2. Elected officials of the primary government are financially accountable – others may be accountable as well 3. Exclusion of such organizations from the financial statements of the primary government would or could result in misleading or incomplete financial disclosure on the part of the primary government B. Component unit financial reporting in the basic financial statements 1. Blended 2. Discrete 3. Comments in the footnotes as well 4. See page 357/350 in the text – do not need to know for the exam V. Footnote Disclosure A. Footnote order 1. The first footnote is sometimes called the “pervasive note” in that it covers all aspects of the financial statement but generally does note contain specific information. a. Describes the accounting entity b. States the general accounting polices including the measurement focus and dual tracking 2. Sometimes if there is a significant event it will take precedence over the normal content of the first footnote. For example, if the accounting entity has entered into bankruptcy or if there is a significant change in the scope of its activities such as a merger. In this case the first footnote will include just this disclosure and the second footnote will include what is usually in the first footnote docsity.com Chapter 9 – Financial Reporting for State and Local Governments #2 Chapter 10 – Financial Analysis of Governmental Financial Statements Page 2 of 5 3. The footnotes now generally follow the order of the balance sheet: assets, liabilities, equity/fund balance/net assets. 4. Next the order of the income statement 5. Next “off-financial statement items” such as pension plans, contingent liabilities and subsequent events. VI. Specific Disclosure in the Financial Section - See Chapter Nine A. Auditor’s report B. MD&A C. Basic Financial Statements 1. Government-wide statements a. Statement of activities b. Statement of net assets 2. Fund statements a. Governmental funds b. Proprietary funds c. Fiduciary funds 3. Fund-Government-wide reconciliations 4. Notes to financial statements 5. Required supplementary information and other a. Combining statements b. Budgetary comparisons c. Individual fund statements d. Pension plan funding D. Specific disclosure for the financial statements 1. Chapter Five – capital assets a. Beginning and ending balances and additions and disposals for both cost and accumulated depreciation b. Depreciation expense for the year and where charged – which functions c. Accounting treatment of works of art d. Capitalization policy e. Results of the application of the modified approach E. Chapter Six – Debt 1. Beginning and ending balances and additions and retirements including refundings 2. Future debt service 3. Security for each debt item if it exists such as for revenue bonds 4. Any matters of non-debt compliance 5. A description of the debt by classification including interest rates and amount F. Use of checklists – example on class web page docsity.com