Accounting for Non-Profit Orgs: Losses, Impairments, and Cash Flows, Ejercicios de Contabilidad

¡Descarga Accounting for Non-Profit Orgs: Losses, Impairments, and Cash Flows y más Ejercicios en PDF de Contabilidad solo en Docsity! Consalidated Financial Statements PARA External veporking OA O Required: Prepare the December 31, Year 1, consolidated financial statements of Gearty Corporation and Oénto Corporation using the Consolidation Eiminating journal Entries example on the previous pages and the intercompany transacion examples from Module 7 (the foctnates refer to the list of explanations of consolidated adjustments, which followsk, Prepared on worksheet Eliminstion 46,000,000) | $1,100,000' Costof goods sold 11,480,000 | 4210000 1,000,000' 40.000" | Dperatrg expenses 550500 | 1330000 12500* 3000] aso | Equity in errar (350,000) a 350,000" a | Irnestrmera income (100,500 a (100,000) Interesa expenses 30.000 150,000 2205000 | Í Gain on faed asserzales | 125000 | 60900) 25000 o| 30,000* | Gain on det e] al 3] 25000 2500 | uetincome SIATO,DOO) | — 5350000) — 51.517,50 | — $1068000 | $1,710500 | Statement ol Retained Earnings RE, 11 Year 1 81,190,000) 3(300,000) $300,000* $11,190,000) [retincame | aro 150.000) | 1517500 | 10500 | Ll AE — = — 2 200.000 | H500000) | 51,817,500 512.900,500) $1,120.000 | 5 520000 1,505,000 1.500.000 275.000 | 1,500,000 Improcess ABD. o a od E 2] Investment ln Sub 270.000 | a Total Asset FIZ590.000 | 4300000 | e ) casa | eran] tamano | usa Ta] 1300.00 12750000) | Common stock (5,009,000) 15.000,000) | 3 ME 11,000,000) | —ascases | (14,990,500) | Acauisitica date Common sioct—sub. "Same altyear Ab acquisiticn debe K a LaS sabi Fair value of subsidiary (B) eegirming recae eamegs go Retalmed earimgs sub. Squeeze backro poa nde dt x Noncontrolling interest % Ps 1 =— Invrestmentin sub. Noncontrolling interest —S> ln consolidated equity E) teamgreranes came == Epa income. Beginning noncomtrolling interest $. - Subsidiarys expenses + NCI share of subsidiary netincome A. "equity" Subsidiary's net income Equity method poo . Sola interese Gets añdea to Na — Nci share of subsidiary dividends S | concept Por NCI Ending noncontrolling interest t Net income attributable to the noncontrlling interest Acquisition Method: Parent Company Internal Entries: Record acquisition for cash DR: Investment in subsidiary CR: Cash Record acquisition for parent common stock (use FV at date transaction closes): DR: Investment in subsidiary CR: Common stock (parent at par) CR: APIC (parent/FV-par) CONSOLIDATED Eliminating JE: DR: Common stock - subsidiary DR: APIC- subsidiary DR: Retained earning - subsidiary CR: Investment in subsidiary 9 : Balance sheet adjustments to FV : Identifiable intangible assets to FV : Goodwill OR CR: Gain EE 2/5 l5 Record the acquisition price and legal fees: DR: Investment in subsidiary DR: Legal expense CR: Common stock - par value Then the eliminating entries from above Record contingent consideration: DR: Investment in subsidiary CR: Estimated liability for contingent consideration 'ommon stock PIC Then the eliminating entries from above Change in contingent consideration: DR: Expense - increase in estimated contingent consideration CR: Estimated liability for contingent consideration Adjusting entry to reflect final fair values: DR: PP8E DR: Goodwill CR: In-process RED INTERCOMPANY TRANSACTIONS: Balance Sheet Eliminations: Eliminate 100% of all intercompany payables and receivables: Materiality and relevance are both defined by what influences or makes a difference to a decision maker FASB Accounting Standards Codification - single source of authoritative nongovernmental U.S. GAAP Managerial accounting not required to follow GAAP, Financial accounting must follow GAAP Net realizable value appropriate measurement basis because ending operations and disposing of assets When a fixed asset is sold, the gain or loss is treated as part of income from continuing operations Minimum operating cycle for prepaid expenses is 12 months Costs to expense: selling, general 8, administrative costs, wasted labor 8, material costs, and costs tied to satisfied performance obligations Lease: repurchase for less than the original selling price Financing arrangement: repurchase for equal to/more than the original price + Recognize the asset, recognize a financial liability for any consideration received from the customer, and recognize as interest expense the difference between the amount of consideration received from the customer and the amount of consideration to be paid by the customer Sale with a right of return - no economic incentive Discontinued operations are reported separately on the income statement, net of tax + Report for the entire year even if they decided to discontinue on like 10/1 Asset held-for-sale + Will be valued at the lower of its book value or net realizable value (fair value less the costs to sell) + Areno longer depreciated + Current asset if sale will occur in less than a year Prospective Application: + Changes in accounting estimate + Change in current period and continue in future periods + Reportasa component of income from continuing operations e Ifitis impossible to determine between change in estimate or change in principle, consider a change in estimate Retrospective Application: + Changes in accounting principle o Ifitis considered impractical to accurately calculate this cumulative adjustment, then the change is handled prospectively (i.e., change to LIFO would be impractical € the beginning inventory dollar amount becomes the first LIFO layer, no cumulative adjustment is made) o Adjust beginning retained earnings in the earliest period presented o Forinventory, RE statement contains the ending balance of PY if no comparative FS + Changes in accounting entity o IFRS does not include the concept of a change in accounting entity o Restate the financial statements of all prior periods presented + |FRS requires to present 3 balance sheets (end of current period, end of prior period, beginning of prior period) and two of each other financial statement (current and prior period) (Comprehensive income, income statements, cash flows, changes in equity) €. related notes, including comparative information Prior Period Adjustment: e Error correction o Change from cash basis to accrual basis (cash basis is not GAAP) O Gets reported as an adjustment to beginning retained earnings, not as an item of net income Ending Inventory that is overstated implies that COGS ¡is understated by the same amount. So COGS will reduce pretax income Unrealized gains/losses resulting from changes in market value of available-for-sale debt investments should be reported as a component of other comprehensive income in shareholders' equity. + Unrealized gains/losses on debt investments held for trading debt securities and equity investments would be included in net income Transaction price = cost x 1 (1 + discount rate)Y**s Impairment loss = Fair value (less costs to sell) - Carrying value Impairment loss = FMV - Book Value Units of Production Depreciation: Cost - Salvage Value = Rate per unit Estimated units or hours Rate per unit X Hof units produced = Depreciation Expense (or hour) (or hours worked) Other Comprehensive Income - PUFIER + Represents all changes in stockholders' equity that come from_nonowner sources + Stockholders' equity section on the BS Pension Losses Unrealized Gains/Losses (available for sale securities) - trading securities go directly to IS Foreign Currency Items Instrument-Specific Credit Risk Effective Portion of Cash Flow Hedges Revaluation Surplus (IFRS Only) NSF checks not included in cash balance Cash in a bond sinking fund is restricted cash End Bal, Allow. Uncoll. Accts Allowance method: match expenses with revenues 8: to record the proper carrying amount for AR. + Accrual accounting e %ofSales e %OfAR e Aging Allowance for doubtful accounts - increase by a Credit e Contra-asset account, therefore still an asset Direct write off: not GAAP, but used for federal income tax purposes + Net Income reduced Factoring receivables is the process by which a company converts its receivables to cash by assigning them to a factor, either with or without recourse Factoring receivables without recourse is a sales transaction. + Deduct the amount factor retained and the commission on the gross amount Factoring without recourse transfers the risk of uncollectible accounts to the buyer FOB Shipping Point e Title passes to buyer when the seller delivers the goods to a common carrier FOB Destination e Title passes to the buyer when the buyer receives the goods from the common carrier Reversal of inventory write-downs e US=NO e IFRS=YES Lower of Cost and NRV (IFRS 8 GAAP) - FIFO 8 WA e FIFO: lower COGS, higher ending inventory Lower of Cost or Market (GAAP) - LIFO 8, Retail / Moving Average e LIFO: most closely approximates the current cost for COGS 8. ending inventory o Lower ending inventory, lower income tax payable + Permanent declines in inventory market value should be reflected in interim financial statements in the period incurred (inventory losses generally should be recognized in the interim statements + — Replacement cost should be between ceiling (NRV) 8. floor(NRV-Profit) DR Inventory Loss due to decline in market value CR Inventory Periodic - basically don't touch inventory in AJE until periodic count e Gross profit method Perpetual - AJE contain inventory when purchase/sale occurs **COGS understated, leads to overstated net income, leads to overstated retained earnings** Current market value is less than the fixed purchase price in a purchase commitment + The loss must be recognized at the time of the decline in price e Liability must be recognized on the balance sheet and a description of the losses must be described in the footnotes *Amount to recognize as a liability is equal to the amount committed for purchase the following year less the new market value at year-end Performance of an impairment test on fixed assets held for use or disposed of begins with a recoverability test + Recoverability test is only performed on intangible assets with a limited life Reported as a component of income from continuing operations before income taxes, unless impairment loss is related to discontinued operations GAAP Intangibles with finite life 1. Carrying amount of asset is compared to the sum of undiscounted cash flows expected to result from the use of the asset and its eventual disposition 2. IfCV > cash flows, then asset is impaired. a. Thenrecord an impairment loss equal to the difference between the carrying amount of the asset and its fair value l Add disposal costs for a total impairment loss (technically subtract out to make a larger loss) Intangibles with indefinite life 1. Compare carrying value with fair value. CV > FV = impairment loss 1FERS uses one-step model: + Compare carrying value with recoverable amount O Recoverable amount is the greater of e Fair value less costs to sell e Assets value in use (present value of future cash flows expected from the intangible asset) + Allows for reversal of impairment losses Under GAAP, long-lived assets that are impaired can only have their carrying value restored if they are held for disposal. Carrying amount of fixed assets should be tested for recoverability at least annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable M7, question 51 8. 52 NRV = net selling price - costs to complete 8. dispose of Market floor = NRV - Profit Face value of the note +|Interest on note to maturity Payoff value of note at maturity Periodic inventory system: Beginning Inventory +Purchases Cost of goods available for sale - Ending inventory Cost of goods sold **COGS should subtract purchase discounts **COGS should add freight-in B Beg Bal, Allow. Uncoll. **COGS should add transportation to consignees Accts A Ú ll. Accts E: Price Index = Ending Inventory at current year cost nncol. feels Expense Ending Inventory at base year cost Ss Accts written off E End Bal, Allow. Uncoll. Gross Profit Method: Accts Sales x COGS% = COGS (COGS %= 1- GP %) DEPRECIATION Cost Model carrying value = Historical cost - A/D - Impairment "Fair value at" revaluation date - Subsequent A/D -Subsequent impairment Revaluation Model carrying value **same model applies to intangibles/amortization Sum of the years digits: straight declining on graph (Cost - Salvage Value) X_Remaining life of asset Sum-of-the-years' digits Double Declining balance: curved declining on graph 2 X 1 X (Cost - A/D) = Depreciation expense N Units of Production Depreciation: Cost - Salvage Value_ = Rate per unit Estimated units or hours Rate per unit X Htof units produced = Depreciation Expense (or hour) (or hours worked) Depletion Base: Cost to purchase property +development costs to prepare the land for extraction +any estimated restoration costs -residual value of land after the resources are extracted Unit depletion rate = Depletion base Estimated recoverable units Total depletion = Unit depletion rate X Number of "units extracted" Amortization for software is greater of: F3, M7 451 Percentage of revenue = Total capitalized amount X Current gross revenue for period Total projected gross revenue for product Straight line = Total capitalized amount Estimate of economic life Trading securities e Held for purpose of selling them + Reported at fair value, with holding gains and losses including in earnings + Reflect all realized and unrealized gains and losses in earnings (if AFS transferred to trading, would recognize in earnings immediately) Available-for-sale + When determined to be impaired (FV declined to below amortized cost), the asset must be written down to the lower fair value by recording a credit los that is recognized on the IS + Unrealized gains/losses shown in OCI (net of tax) Held-to-maturity + Reported at amortized cost Equity securities + Reported at fair value through net income (FVTNI) + Unrealized gains/losses included in earnings as they occur e Include brokerage commissions in gain/loss Fair value method: + Dividend revenue should be recognized to the extent of cumulative earnings since acqui that point e Leases not eligible ¡on and return of capital beyond Derivative financial instrument + Contact between parties based on an underlying financial asset; value is driven by the value and activity of the underlying asset o Examples: options, forwards, futures, and swaps Impairment of debt securities e Acredit loss is recognized as a current period expense on the income statement and as an offsetting allowance on the balance sheet e Credit loss = PV - Amortized cost o PV=PVof both interest and principal States ordinary annuity, use that percentage for the interest Impairment on available-for-sale securities is accounted for differently from impairment on held-to-maturity securities, because the investor has the option to sell an available-for-sale security if the loss on the sale will be less than the expected credit loss. + Asaresult, the credit loss reported in net income on an available-for-sale security is limited to the amount by which fair value is below amortized cost O Any additional loss is reported as an unrealized loss in other comprehensive income + When making changes to CV of the security: o Unrealized G/L uses valuation account o ECLuses allowance for credit losses Concentration of credit risk is required to be disclosed in the financial statements Equity method: + Change in market value not reported in income e Dividends received not reported in income e Receive a 2% stock dividend, should be recorded with a memorandum entry that reduces the unity cost of all stock owned + Preferred stock dividends are accounted for using the FV method 8: recorded as dividend revenue O Ifa question states the net income make sure to subtract out the dividends Stock dividends are not reported as dividend income e Liquidating dividend is a reduction to investment account €: not income Significant influence: 20 - 50% + Required to disclose the company's accounting policy for the investment in the financial statements + Cannot be exercised by holding non-voting stock Payables and Accrued Liabil Gross Method: + Records purchase without discount Net Method: + Records purchase with discount Sales taxes are not an expense to employer All deferred tax assets and liabilities are reported as non-current Can refinance a loan then report as a long-term liability as long as before issuance of financial statements (can be after year end) + Unless lender is not expected to be capable of paying Exit and disposal activities: costs to relocate employees + Obligating event has occurred + Event results in a present obligation to transfer assets or to provide services in the future e Entity has little of no discretion to avoid the future transfer of assets or providing of services Liability that requires period payment of interest should be classified as an accrued liability or debt Liability that is secured by collateral should be classified as a loan payable Accrued: incurred but not paid + Services already rendered + Obligation relates to vested or accumulated rights o Vested: not contingent on an employee's future service + Payment can be reasonably estimated + Payment is probable IFRS requires the accrual of sick pay benefits as services are rendered by employees Asset Retirement Obligation (ARO) + Legal obligation associated with the retirement of a tangible long-lived asset that results from the acquisition, construction or development, and/or normal operation of a long-lived asset, except for certain lease obligations + Any change in the value of the liability after the property has been fully depreciated will be recognized in profit or loss e IFRS calls it a decommissioning liability, measured at the best estimate of the expenditure required to settle the obligation O Remeasured each period for changes in the amount or timing of cash flows AND changes in the discount rate + GAAP requires measurement at Fair Value O Remeasured each period for changes in the amount or timing of cash flows e Accretion (interest) expense: increase in liability due to passage of time. ARO initially recorded at a discount amount (PV) so by time liability is satisfied, it is reported at its total non-discounted value + ARC gets depreciated (asset retirement cost): therefore deduct depreciation expense from ARC amount **Pass Key: Cumulative accretion expense + Cumulative depreciation expense = Total Asset retirement obligation Contingencies € Commitments Contingency: an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss that will ultimately be determined when a future event occurs or fails to occur + Gains not recognized O Not recognized in the financial statements and are recorded when the gain is realized O Ifthere is an appeal, must wait until appeal is done O Note disclosure only o Ifreasonably possible (or probable) then disclose in a note to F/S that does not give impression that realization of a gain is likely + Losses depend on if future events will confirm the contingent loss o Probable - Record (must be probable and reasonably estimated) e Record minimum amount in a range if no other amount given e If not reasonably estimated, disclose only Lawsuit Loss (expense) Lawsuit liability O Reasonably possible - Disclose (IFRS states this probably will not occur) o Remote (slight chance) - Ignore e Disclose "guarantee-type" remote loss contingencies = DOG- Debts of others guaranteed; Obligations of commercial banks under standby letters of credit; Guarantees to repurchase receivables (or related property) that have been sold or assigned *Contingent liability for a discounted note receivable is the maturity value Conservatism is the underlying concept governing the generally accepted accounting principles pertaining to recording gain contingencies Premiums: offers to customers for the purpose of stimulating sales + Entryto record the estimated liability for outstanding premium claims Premium Expense Premium Liability Warranties: e Seller must create a liability account if the cost of the warranty can be reasonably estimated e Entire liability for the warranty should be accrued in the year of sale to "match" the cost with the corresponding revenue. Accrual should take place even if part of the warranty expenditure will be incurred in a later year Warranty expense Warranty liability Long-Term Liabilities: transactions that result in identical periodic payments or receipts at regular intervals Ordinary annuity: payment at the end of each period + Coupon payments (bonds), Leases Annuity due: payments at beginning of each period Present value of $1: + Amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future + Lessthan a year, select the note amount Future value of $1: e Easily understood as compound interest + Amount that would accumulate at a future point in time if $1 were invested now Liabilities vs. Equity e Liability has an obligation to Any discount resulting from imputing interest on a N/P must be amortized over the life of the note payable using the effective interest method + Method under which each payment on a note (or other loan) ¡is allocated to interest and principal as though the note had a constant effective stated rate of interest o Interest applied to most recent CV, net the interest with current payment to get to principal paid, deduct that from the most recent CV to get to new CV. Repeat. CV will be zero once done e Discount is added to the N/P when reported on B/S (disclose payable in notes to F/S) Creditors use debt covenants in lending agreements to protect their interest by limiting or prohibiting the actions of debtors that might negatively affect the positions of the creditors Imputed interest on non-interest bearing note is reported as interest expense + Thenote is reported at the face amount minus a discount calculated at the imputed interest rate **Bonds or notes due within one year are shown as "noncurrent" if the issuer has the intent and ability to refinance with a new issuance of long-term debt; with separate disclosure of the note refinancing *Impute interest on the non-interest bearing note will result in a discount *Purchase commitment (contract) will result in the recognition of a deferred charge + Question gives future amounts, asks what annual deposits to make to accumulate $$; use "Future amount of annuity in advance of 1 at 10% for 4 periods + Question what is interest expense; use accrued amount. Present value = Future value X Present value of $1 for appropriate n and r Present value = Future value (1+r)" Future value = Present value X Future value of $1 for appropriate n and r Future value = Present value X (1+ r)” Present value of ordinary annuity = Annuity payment X Present value of ordinary annuity of $1 for appropriate n and r PV factor for ordinary annuity =[1- (1/(1+r)”)]/ rate Present value of annuity due = Present value of ordinary annuity X (1 + r) Future value of an ordinary annuity = Periodic payment X Future value of an ordinary annuity Of $1 for appropriate n and r FV factor for ordinary annuity = [ (1 + r)”-1]/r INCOME TAXES Intraperiod: + Income from continuing operations Discontinued operations Accounting principle change (retrospective) Other Comprehensive Income (PUFIER) Components of stockholders' equity Accounting for income taxes: + Recognize the amount of deferred tax liabilities and deferred tax assets reported for future tax consequences Temporary difference: e Deferred tax asset o Future tax accounting income < Future financial accounting income + Pay taxes early + Reversal results in deductible amounts 8. year 1 profit Revenues or gains included in taxable income before financial accounting income Expenses or losses included in taxable income after financial accounting income Valuation allowance: recognized in income from continuing operations Ex: accrued warranty costs; prepaid rent e Deferred tax liability o Future tax accounting income > Future financial accounting income + Pay taxes later + Whenever income is recognized in the financial statement before it is reported as taxable income, a DTL should be reported O Revenues or gains included in taxable income after financial accounting income o Expenses or losses included in taxable income before financial accounting income o Ex: depreciation of tangible assets; prepaid insurance; rent receivable e TIP: If you have to subtract from financial income to get to taxable income, that is a DTL (debit income tax expense-deferred) + Both reported as non-current on the BS and netted to one amount o o o o **Use the tax rate in effect when the temporary difference reverses itself** Enacted tax rate is used as the rate for temporary differences GAAP uses asset 8: liability approach Effective tax rate = income tax expense / pretax income Dividend received deduction: + Ownership 0-19% : 50% exclusion + Ownership 20-80% : 65% exclusion + Ownership over 80% : 100% exclusion Operating lease: lower expense in earlier years, higher in later years the balance sheet will reflect a right-of-use (ROU) asset and lease liability; both will be amortized over the life of the lease using the effective interest method ROU Asset Lease liability 12/31 Lease Expense Lease liability Cash Accumulated amortization Finance lease: higher expense in earlier years, lower in later years ROU Asset Lease liability Cash (if annuity due 8: payments already made) 12/31 Interest expense (expenses control for govt lease) Lease liability (principal payment) Cash/lease payable Amortization expense Accumulated amortization At the inception of a finance lease, the residual value expected to be owed at the end of the lease term should be included as part of minimum lease payments at present value * Cashflows from operations are negatively impacted by variable lease payments not included in the lease liability ** Overall expense total across the entire lease will be the same under both lease types Sales-type lease: Lessee gains control; recognize gain immediately Lease expense (initial direct costs) Residual asset (PV of Future value) Lease receivable (PV of payments) Cash (initial direct costs) Gain plug Truck (carrying value) Direct financing lease: Lessee does not gain control; any gain deferred and amortized over the life of the lease, loss recognized immediately Residual asset (PV of future value) Lease receivable (PV of future payments plus initial direct costs) Truck (fair value/carrying value) Cash (initial direct costs) 1stpmt Cash (payment given) Interest Income (int% X res asset + lease rec) Lease receivable + Components of a lease receivable = minimum lease payments plus residual value Operating lease: Cash Rental Income Depreciation expense Accumulated depreciation Projected Benefit Obligation (PBO) Uses only an assumption as to future compensation levels DBO (IFRS) = PBO (GAAP) GAAP net periodic pension cost (pension expense): SIR AGE AGE = unamortized is in AOCI Current Service Cost (put in compensation cost) represents increase in the PBO resulting from employee services rendered during the year Interest Cost (beg. PBO X discount rate) do not use prime or market rate; increase in PBO due to passage of time Return on Plan Assets O Actual return on plan assets (can vary year to year) o Expected return on pan assets (beg. FV of plan assets X expected rate of return) e Ifexpected return is used, the difference between actual and expected must be recognized in OCI each period then amortized to net periodic pension cost over time with any actuarial gains or losses + Under IFRS, past service cost is not booked to OCI. Prior cost = expense now Gains and Losses o GAAP: recognize on IS in period incurred OR in OCI in period incurred then amortize unrecognized to net periodic pension cost over time using corridor approach o Corridor approach: unrecognized gain/loss amortized over the employees' average remaining service period IF as of beginning of the year, this amount exceeds 10% of the greater of beginning balances of: + Market related value of plan assets = Assets + Projected benefit obligation = Liabilities Amortization of Existing Net Obligation or Net Asset at Implementation o PBO-FV Plan Assets = Initial unfunded obligation O Divide by greater of 15 years OR average employee job life Pension Plan Asset (Non-current) Overfunded (FV of plan assets > PBO) Pension Plan Liability (Current, Non-current, or Both) Underfunded (FV of plan assets < PBO) Prior Service Cost and Pension Losses: Recognition in period incurred DR: OCI CR: Pension benefit asset/liability Amortization to Net Periodic Pension Cost DR: Net periodic pension cost CR: OCI *Extensive pension plan footnote disclosures required Common stock: Basic ownership interest, bear the ultimate risk of loss and receive ultimate benefits of success O Not guaranteed dividends or assets upon dissolution Control management, right to vote, right to share in earnings of the corporation, right to share in assets upon liquidation after claims of creditors and preferred shareholders are satisfied **if no par value, use the stated value Preferred stock: May include preference relating to dividends cumulative or noncumulative participating or nonparticipating No voting rights Cumulative feature: dividend not paid accumulates and must be paid before any common stock (accumulated amount = dividends in arrears) O Nota legal liability, but must be disclosed or in footnotes O Stock owner who receives the dividend would include in income from continuing operations Book value per common share = Common shareholders' equity Common shares outstanding Total shareholders' equity - Preferred stock outstanding (at greater of call price or par value) -Cumulative preferred dividends in arrears Common shareholders' equity outstanding Net Income/Loss - Dividends (cash, property, 8. stock) declared +/- Prior period adjustments +/- Accounting changes reported retrospectively Change in Retained Earnings Beg. Projected Benefit Obligation + Service cost + Interest cost + Prior service cost from current period plan amendments + Actuarial losses incurred in the current period - Actuarial gains incurred in the current period - Benefits paid to retirees Ending Projected Benefit Obligation Current Service Cost + Interest Cost (Return on Plan Assets) + Amortization of Prior Service Cost (beg./avg ser. Life) (Gains) and + Losses + Amortization of Existing Net Obligation or Net Asset Net Periodic Pension Cost Beg. Fair value of plan asset + Contributions + Actual return on plan assets -Benefits paid to retirees Ending fair value of plan assets Unrecognized gain or loss 10% of PBO OR Market related value) --greater Initial unfunded obligation Divide: average remaining service life Amortization of unrecognized gain or loss Projected benefit obligation FEV plan assets Initial unfunded obligation Divide: 15 years OR Average employee job life (greater) Minimum amortization of Existing Net Obligation or Net Asset at Implementation Earnings per share: + Must be presented on the face of the income statement o EPS (basis and diluted) for income from continuing operations and for net income o If the entity reports a discontinued operation, EPS (basis and diluted) will be presented on either the face of the IS or in the notes e Disclosures required for all public entities or entities that have made a filing for public offering Stock dividend or stock split must be treated retroactively and as if it occurred at the beginning of the year Contingent shares: e Issuance of a patent + Passage of a specific period of time e Achieving a specific net income target + NOT exercise of a stock option Dilutive EPS: e Factorin "possible conversion" effects EPS = Income available to common shareholders Weighted average number of common shares outstanding Statement of Cash Flows Reconciles cash and cash equivalents amount presented on the beginning balance sheet and ending balance sheet Operating: e Fromtransactions reported on the IS and current assets and current liabilities (excluding current NP and current portion of LT debt) + Involve producing goods and delivering services to customers + Charitable contributions 8 disbursements) (NFP) e Direct method (encouraged by GAAP 8. IFRS) o Reconciliation in a supplemental schedule o Major classes of cash receipts and disbursements are presented in their gross amounts and totaled to arrive at "net cash flow provided by (used in) operating activities" o Reconciliation of net income to net cash provided by operating activities (different from indirect) (required under GAAP but not IFRS) (this section not required for NFP) Report separately: 1-5 inflow / 6-10 outflow Cash received from customers Interest received Dividends received Other: insurance proceeds, lawsuit settlements Sales of securities classified as trading securities Cash paid to suppliers and employees Interest paid Income taxes paid Cash paid to acquire securities classified as trading securities Other operating cash payments oo0o0ooooooooo e Indirect method (most commonly used) o Reconciliation in body of formal statement O Net income is adjusted to arrive at net cash flows o Supplemental disclosure of cash paid for interest and income taxes is required (different from direct) e Interest (net of amount capitalized) e Incometaxes o Ex:increase in A/R, A/R collections, tax refund O Assets are opposite (increase then subtract, decrease then add), liabilities the same O Pass key for adjustments: CLAD e Current assets and liabilities, Losses and (gains), Amortization and depreciation, Deferred items + Losses on sale get added to NI, gains subtracted + Impairment of goodwill added, increase in prepaid subtracted, increase in A/P added, increase in Allow. for uncollectible accounts o Unamortized bond discount account decreased = addition to NI **Net cash provided by operating activities is the same result but different format for both methods + Supplemental information should disclose conversion of debt to equity Investing: *e Fromnon-current assets e Ex: purchase of long-term investments, sale of PP8:E, capital expenditures, payment received on note for sale of plant, payment for purchase of company(net of cash acquired/only use cash pmt amount not N/P), collection of a note receivable from a related party e Ex: purchasing or disposing of trading securities, available-for-sale securities, and held-to-maturity securities Financing: + From debt, including non-current liabilities (creditor-oriented) and equity (owner-oriented) + Bank overdrafts (excluded from cash) e Ex: issuance of bonds payable, payment of dividends, issuance of common stock (proceeds amount), principal payments Under capital lease obligation, note payable *purchase a treasury bill that is considered a cash equivalent, therefore not reported on statement of cash flows Revenues = Increase in receivables Salaries and wages expenses + Decrease in receivables Increase in wages payable + Increase in Unearned revenue + Decrease in wages pavable - Decrease in unearned revenue Cash paid to employees Cash received from customers Other operating expenses - Decrease in prepaid expenses + Increase in prepaid expenses + Decrease in accrued liabilities - Increase in accrued liabilities Cash paid for other expenses Cost of goods sold + Increase in inventory - Decrease in inventory - Increase in accounts payable + Decrease in accounts payable Transaction ES Interest Received CFO crO(apcA! Interest Paid | cFO | CFO(BpCFF Dividends Received cFO CFO(op)cE! Dividends Paid CFF CFO(OD)CFF Taxes Paid CFO CFO, CFI, CFF *Requirement for reporting expenses: functional classification in the statement of activities and natural classification analyzed by function in the notes to the financial statements + Netassets characterized as residual interest Internal board-designated funds are net assets without donor restrictions Construction in progress not depreciated Reports investments in F/S: e Fair value with gains and losses reported in statement of activities as increases or decreases in net assets without restrictions unless otherwise stipulated by donor or by law. O Inthe event restrictions are associated with earnings on investments restricted in perpetuity, losses are absorbed by the endowment Marketable securities reported at market value as of the balance sheet date Financially interrelated: + Showreceipts as a change in interest in the foundation on the statement of activities Not-for-Profit Revenue Recognition: Revenues from exchange transactions are classified as increases to net assets without donor restrictions Cash contributions: Received = Revenue Asset (at FV) Contribution Support Revenue Promises to Give (Pledges): Pledge = Revenue Unconditional Pledges: + Assured of collection and may be recognized as either with or without donor restrictions Conditional Promises: Earned = Revenue + Good faith deposits that accompany a conditional promise are accounting for as a refundable advance in the liability section of the statement of financial position e Notthe same as donor restrictions Cash Refundable advance Multiyear Pledges: NPV + Future collections considered donor-restricted and net assets (time-restricted) Split-Interest Agreements: + Measured at their fair values at date of acquisition e Estimated based on the present value of the estimated future distributions e Displayed as donor-restricted Donated Services: SOME (Fair Value) Recognize: Specialized skills are required and possessed by the donor Otherwise needed by the organization Measurable Easily (at fair value) Expense or asset Contributions-without donor restrictions Donated Materials: Revenue at FV Asset Contribution-support Donated material that pass through the organization to an ultimate beneficiary: Expense Contributions-supplies *Cash contributions and unconditional pledges are recognized as contribution revenue in the eyar in which the cash or pledge is received Contributions without Donor Restrictions: Unconditional promises: PV Pledges without donor restriction (implied time restriction) Pledge receivable Allowance for doubtful accounts Contributions-with donor restriction (NRV) Later, when collected: Cash-with donor restriction Pledge receivable-with donor restriction Satisfaction of time restriction-with donor restriction Cash-with donor restriction Assets without donor restrictions: Cash-without donor restriction Satisfaction of time restriction-without donor restriction Donor Restricted Support (Contributions with Donor Restrictions): Increases to net assets with donor restrictions: PV Pledge receivable-with donor restrictions Allowance for doubt accounts Donor-restricted support Later, after receivable is collected and when money is spent on restricted purpose, net assets with donor restrictions will be reduced: Reclassification-satisfaction of donor restriction Cash-with donor restrictions Net assets without donor restrictions are simultaneously increased and decreased: Cash-without donor restrictions Reclassification-satisfaction of donor restriction Operating expense Cash-without donor restrictions Governmental Accounting: Most important objective is Accountability + Designed to demonstrate the accountability of each organization for the stewardship of the resources in their care Characteristics of financial reporting: U R MICE Understandability Reliability Make a difference - Relevance In Timeliness Consistency year over year Entity-to-entity Comparability + External financial reports used by citizens, legislative/oversight groups, 8: investor/creditors Government: GASB Not-for-Profit: FASB Fund accounting enables service and mission-driven organizations to easily monitor compliance with spending purpose (legal restrictions), spending limits (budget and financial control), and other fiscal accountability objectives + Segregated for the purpose of carrying on specific activities or attaining certain objectives e Will present separate fund financial statements for its governmental and proprietary funds Governmental Funds: (no profit motive) Current financial resources Accounted for using: + Modified accrual basis of accounting O Revenue recognized when measurable 8: available (collectible within current period or within 60 days of year-end) o Expenditures generally recorded when related fund liability is incurred (except for debt service expenditures both principal and interest not recognized until due or paid) + Current financial resources measurement focus (current only; no FA, no LTD) *Balance Sheet AND Statement of Revenues, Expenditures, and Changes in Fund Balance* Fund types: GRaSPP + General Fund: ordinary operations, financed by taxes 8. other general revenue O Revenue from: property taxes + Special Revenue Funds: revenues from specific taxes or other earmarked sources that (by law) are restricted or committed to finance particular activities of government And + Debt Service Funds: account for the accumulation of resources and the payment of interest and principal on all "general obligation debt", other than EFs or by special assessments in another fund. Resources are restricted, committed, or assigned to debt service expenditures + Capital Projects Funds: resources restricted, committed or assigned for the acquisition or construction of major capital assets by a governmental unit, except EF + Permanent Fund: resources legally restricted to the extent that income, and not principal, may be used for purposes supporting the reporting government's programs (benefit of the public) Proprietary Funds: (treat like customer, not citizen) Business-type activities, accounting similar to commercial accounting Accounted for using; + Full accrual basis of accounting O Revenue recognized when earned o Expenses recognized when incurred e Economic resources measurement focus *Statement of Net Position AND Statement of Revenues, Expenses, and Changes in Fund Net Position* Fund types: SE + Internal Service Funds: account for goods and services provided by designated departments on a cost-reimbursement fee basis to other departments and agencies within a single govt unit or other govt units; customers primarily internal o Central motor pool, building maintenance department EX: budgeted $100,000 for purchase of two trucks. Assume purchase order is issued to purchase the two trucks at estimated cost of $45,000 each. Invoice received for one truck at $44,000 Set up encumbrance and budgetary control in budgetary accounts in GF: DR: Encumbrance (PO amount) 90,000 CR: Budgetary control 90,000 Reverse estimated encumbrances in budgetary accounts: DR: Budgetary control 45,000 CR: Encumbrances 45,000 Record the actual expenditures: DR: Expenditures 44,000 CR: Vouchers payable (or cash) 44,000 Close outstanding encumbrances at year-end and reserve the fund balance: DR: Budgetary control 45,000 CR: Encumbrances 45,000 Close budgetary accounts related to outstanding purchase orders: DR: Unassigned fund balance (year-end surplus) CR: Fund balance, committed Accounting in following year Record receipt of last year's item and pay for it: DR: Expenditure - prior CR: Vouchers payable **General Fund encumbrance account includes outstanding purchase order amounts Interfund Activity: + Reciprocal: exchange-type transactions between funds O Interfund Loans: temporary extensions of credit to other funds that are expected to be repaid and are accounted for as interfund receivables and payables (due from/due to). Unrealizable balances reclassed as transfers O Interfund Services Provided and Used: sales and purchases between funds at external pricing e Ex: sales of water and sewer services by an EF to the city and ISF activities e Transactions accounted for as revenues and expenses/expenditures + Nonreciprocal: represents non-exchange transactions between funds o Interfund Transfers: flows of assets between funds without the exchange of equivalent value + Normally displayed as OFS or OFU after nonoperating revenues and expenses (for govt funds), simply interfund transfers for proprietary funds e This doesn't apply in cases like "general fund purchases utilities from enterprise fund" O Interfund Reimbursements: payments of expenses by one fund on behalf of another fund; expenditure originally made is reimbursed by the fund actually responsible Special items: unusual OR infrequent Extraordinary items: unusual AND infrequent Deferred outflows of resources: positive effect on net position 8 reported following assets but before liabilities Deferred inflows of resources: negative effect on net position 8 reported following liabilities but before equity Salaries 8. wages: DR: Expenditures control CR: Vouchers payable Net investment in capital assets: + Longlived assets netted with associated debt o Does not include inventory Categories of Fund Balance: NU CAR AA —— The following items are accrued as receivable and revenue when time requirements are met, subject to the: yl E criteria: Billed/Recorded (= Revenue) Imposed non-exchange revenues + Real estate taxes (due) + Fines and penalties Received (= Revenue) corbni Pe (may not be measurable + Income taxes + Sales taxes Earned (= Revenue) + Revenue collected in advance, unearned when collected + Real estate taxes paid in advance (unearned) + Restricted grants (garned when spent) + Deferred inflows of resources are recognized in some instances where assets are recorded but related revenues are not eligible for recognition (not avallable or fails time requirements). Purchase (LE Buying item 1 Expenditure «4— When | 70 Supplies inventary EXE Vouchers payabiePomght 77 Vouchers payable Use ofitem No entry o EX xpenditure q — When consumed 1550 Supplies inventory On-hand at yeor end | [FF Supplies inventory No entry* Nonspendable fund balance—inventor — A a— Not used, still on hand *Regardiess of the method us2d inventory asset amounts must be balanced with a nonspendable fund balance account to ensure the unassigned fund balance represents available resources. The purchase method assumes adjustment at year-end, and the consumption method, as presented, assumes perpetual inventory maintenance along with related adjustments to fund balance classifications, such that no entry is specifically required at year-end. e Expenditures extending over more than on period may be allocated between or among accounting periods. Non spendable current resources such as inventory or prepaid may be recorded using either the consumption or purchases method Government Leases: Short-term leases: (operating) + Max term of 12 months + Similar accounting treatment in both governmental 2, proprietary funds + Lessees recognize expenditures or expenses based on payment provisions of contract. None recognized during rent-free periods e Lessors recognize rent revenue based on the payment provisions of lease contract. None recognized during rent- free periods. Contracts that transfer ownership: (sale-type) + Finance by lessee and sale by the lessor *e Lessee Accounting - Governmental funds: o lessee accounts for acquisition of non-current assets with non-current financing as a capital outlay expenditure and other financing source (Modified Accrual) Record lease at beginning of the year DR: Expenditure - capital outlay CR: Other financing sources (Not LTD) Record the first payment on the least at end of the year DR: Expenditure - principal DR: Expenditure - interest CR: Cash *could also debit Expenditures Control + Lessor Accounting - Governmental funds: o recognizes deferred inflows as revenue over time Record lease at beginning of the year: DR: Lease receivable CR: Revenue (to extent measurable 8. available) (equal to first year of principal paid) CR: Deferred inflows of resources Record first receipt on the lease at end of year: DR: Cash CR: Lease receivable CR: Interest receivable + Lessee Accounting - Proprietary €: Fiduciary Funds and Govt Wide Presentation : o Account for acquired asset and associated lease obligations consistent with commercial accounting, Full Accrual + Lessor Accounting - Proprietary € Fiduciary Funds and Govt Wide Presentation : o Derecognize the asset sold, record a receivable and recognize revenue consistent with commercial accounting + Special purpose local governments - SELF o Separately Elected governing body oO Legally separate o Fiscally independent Special purpose governmental units that are financially accountable to a primary govt are not primary govts + Component unit Blended presentation: + Board of the component unit is substantively the same as primary govt OR + Component unit serves the primary govt exclusively or almost exclusively + Component unit not a separately legal entity **During Exam, questions regarding component units, assume discrete presentation unless the fact pattern specifically provides evidence that the blended criteria have been met Discrete presentation: + Component units in different columns + FSprovide overview of entity based on financial accountability Not-for-profit organizations that provide ongoing support to a primary govt or component unit of that govt, may be a component unit of that govt + EX: private foundations associated with state universities, private foundations associated with public health care facilities Government-Wide Financial Statements: Statement of Net Position: Net position 3 components: + Net Investment in Capital Assets O All capital assets, net A/D, reduced by outstanding balances of bonds, mortgages, notes, or other borrowings attributable to those assets + Restricted (externally imposed) o Restricted assets reduced by liabilities 8 deferred inflows of resources related to those assets; restrictions imposed by external activity e Unrestricted (everything else) O Net amount of assets, deferred outflow of resources. Liabilities 8 deferred inflows of resources not included in the other two Sections: e Assets e Deferred Outflows of Resources e Liabilities e Deferred Inflows of Resources + Net Position (NRU) Columns: + Governmental Activities Business-type Activities Total Component Units Govt may elect not to capitalize works of art if ALL are met: + Held for public exhibition, education, or research + Protected, kept unencumbered, card for, and preserved + Subject to an organizational policy that requires the proceeds from sales of collection items to be sued to acquire other items for collections Statement of Activities: Program Revenue: + Charges for Services + Operating Grants and Contributions + Capital Grants and Contributions Special Items: unusual or infrequent, not both Internal transactions that artificially "double up" on activity should be eliminated e Interfund services such as water 8: utilities, NOT eliminated + Internal activity associated with blended component units should be reclassed to interfund activity + Internal activity associated with discretely presented component units should be reported as external transactions GWS - operating statement of the government Net program cost format generally is not used in commercial accounting and reporting Sections: e Functions/Programs: Primary Government + Governmental + Business-type Total Primary Government Component units Columns: e Expenses e Indirect Expense Allocation Program Revenues + Charges for Services + Operating Grants and Contrib. + Capital Grants and Contrib. Net (Expenses) Revenues and Changes in Net Position Primary Govt Governmental Activities Business-type Activities Total Component Units Expenses (deductions): + Relate to the specific purpose of the trust and may relate to benefits or administrative charges + Capital gains/losses are recorded as adjustments to income/expense * Govt sponsored defined benefit and defined contribution plans and other employee benefits such as postretirement and health care benefits Revenues (additions): + Employer and employee contributions + Income from investments is recorded as an addition Record the receipt of money from other funds (additions, not revenue, nor OFS) DR: Cash CR: Additions: employer contributions-restricted Other fund contributing money to pension fund: DR: Expenditures(govt) OR Expenses(prop./fiduc.) CR: Cash Expenses (deductions): + Benefits payments, refunds, and administrative expense Total pension liability -fiduciary net tion (FPL. Net pension liability (NPL) Actuarial valuations of total pension liability must be performed every 2 years Rule: employees should disclose employer and employee obligations to contribute to the plan, a brief statement about the plan, and employee eligibility requirements + Identify in the notes to financial statements the types of employees covered and the employer's and employees' obligations to contribute to the fund Pension transactions accounted for as deferred outflows and inflows in governmental entities are similar to transactions accounted for in other comprehensive income in commercial settings, including: Amortization of plan amendment costs (unearned benefits associated with prior service); * Aueráge service tien of eraployes (6) Actuarial gains and losses; * Average service life of employee Actual earnings different from projections; and * Five years Employer contributions subsequent to the NO . e measurement date * Recognized in following year to the pension plan from the employer subsequent to the measurement date of the net pension llability and before the end of the reporting period should be reported as a deferred outilow ol resources. General Fund: Revenues: e Taxes: revenue when recorded/billed (and owned) o Mostly property taxes. Can include franchise 8: public service taxes + Public safety and regulation: fees € fines o Also include license €, permit revenues + Intergovernmental: shared or grant revenues from over govts Charges for services: exchange revenues that support general fund activities + Other revenues: investment earnings(interest) £. miscellaneous earnings Expenditures: General fund usually has most expenditures in a governmental unit General govt Public safety Culture € recreation Significant repairs to a building damaged by a natural disaster, such as the flooding of a nearby river, that are not properly classified as extraordinary (both unusual and infrequent) would be reported as an expenditure + Routine employer contributions from GF to Pension Trust Fund Balance Sheet: Current ONLY No FA No LTD e Assets e Liabilities + Fund balances Statement of revenues, expenditures, and changes in balance: + Revenues + Expenditures (no depreciation expense) + Other financing sources (uses) o Transfers and bond proceeds +. Special item o Proceeds from sale of land? Balance Sheet (current assets and deferred outflows = current liabilities and deferred inflows + fund balance) Statement of revenues, expenditures, and changes in fund balance Bond premium/discount not amortized in governmental funds o Matured bonds payable o Matured interest payable + Deferred inflow of resources o Unavailable revenues - special assessments + Fund balance o Restricted for debt service Statement of revenues, expenditures and changes in fund balance: + Revenues (interest earnings) + Expenditures (principal € interest if currently due) + Other financing sources (uses) o Transfers in *underwriter fee and debt issue costs = Debt Service Expenditures Beginning restricted fund balance Revenue Expenditures—interest Expenditures—principal Subtotal Interfund transfer from capital projects fund—bond premium Interfund transfer from special revenue fund Interfund transfer from capital projects fund—interest income Ending restricted fund balance 3 439,000 36,000 (30,000) 1250,000; 195,000 80,000 250,000 40,000 $ 565,000 Capital Projects Fund: Construction, purchase, or leasing of significant fixed assets used by govt funds only e Life is short; limited to construction period of 1-3 years + Convention center, municipal stadium, county courthouse, construction fund accounting for a special assessment project (streets € street lights benefiting only those certain property owners who will pay for them) Capital grants: (recorded as liability) + Restricted = reported as "Revenue" when earned * Unrestricted = recognized immediately *Includes grants for rehabilitation of drug addicts Record unrestricted govt grant: DR: Cash CR: Revenue Record restricted govt grants: (revenue when spent) DR: Cash CR: Revenue collected in advance Recognize revenue when spent by cost reimbursement contract: DR: Expenditure CR: Vouchers payable/Cash AND DR: Revenue collected in advance CR: Revenue (reverse 1st restricted entry) Record a GF or SRF interfund transfer: DR: Cash (or due from "other" fund) CR: Interfund transfers Special assessments: taxes or fees levied against property owners who will directly benefit from the project + Govt not primarily or potentially liable; associated revenues do not qualify as revenues of the govt o Transactions should be reported in a custodial fund o Assets and liabilities should be excluded from government-wide presentations o EX: levies on affected property owners to install sidewalks + Recorded as Revenue Bond Issue Proceeds: OFS + Premiums and discounts included in OFS and OFU and receive no additional accounting after the year in which they are received; no amortization o Bond par value - separately displayed as bond proceeds (sources) o Bond premiums - separately displayed as a financing source o Bond discounts - separately displayed as a financing use O Other bond issue costs are displayed as a debt service expenditures when they are incurred Encumbrances: + Same entries as F9 Liabilities: + Bond Liability (GWS ONLY) + Short-term borrowing (OFS or Current Liabilities) o Short-term borrowing to be refinanced with long-term debt DR: Cash CR: OFS-debt proceeds o Short-term borrowing to be repaid with revenue: DR: Cash CR: Tax or revenue anticipation note payable CLOSING ENTRIES: (3) Ex: budget was $2,000,000, expended encumbrances were $500,000, and expenditures were $600,000 to illustrate year-end closings Budget is closed: (same amount) DR: Appropriations CR: Estimated OFS Actual activity is closed: (actual amount) DR: OFS-bond issue proceeds 2,000,000 DR: Investment revenue 40,000 DR: OFS-bond premium 80,000 CR: Expenditures 600,000 CR: Interfund transfers (to DSF, invest revenue) 40,000 CR: Interfund transfers (to DSF, bond premium) 80,000 CR: Fund balance, restricted 1,400,000 Encumbrances are closed: (same amount) DR: Budgetary control 500,000 CR: Encumbrances 500,000 Proprietary Funds: + EX: janitorial departments, garages 8 motor pools, printing € duplicating services, purchasing and storage departments, central repair shops, computer processing department, self-insurance Revenues: e Restricted grant revenues: recognized as revenues in the year monies are spent + Operating revenues: billings for services provided, recognized when earned DR: Cash (or due from other fund) CR: Billings to other departments (operating revenue) *nonoperating revenues 8. expenses (interest earnings/expense), are segregated from operating revenues for FS display Interfund transfer: DR: Cash CR: Interfund transfer ISF received cash from GF to capitalize this fund: DR: CR: Transfers Record contribution of assets to a new ISF from GF: DR: Capital assets CR: Contributions Sale of "general obligation bonds" or capital leases: DR: Cash CR: Long-term bond payable Long-term payable to another fund: DR: Cash CR: Due to other fund Billings for transportation services provided to other govt units: DR: Due from other funds CR: Operating revenues Statement of Net Position: e Current assets Non-current assets (carries FA) Current liabilities Non-current liabilities (carries LTD) Net Position (net investment in capital assets, restricted for debt services, unrestricted) EX: sold asset for $5,000. Cost was $6,000 with carrying value of $4,000. DR: Cash 5,000 DR: A/D 2,000 CR: Equipment 6,000 CR: Gain 1,000 + Usedto account for operations that are financed and operated in a manner similar to a private business enterprise o Financed with debt that is secured solely by a pledge of the net revenue from fees and charges O Laws and regulations require that the cost of providing services be recovered through fees o Pricing policies of the activity establish fees and charges designed to recover ¡ts costs e EX: public utilities, public hospitals, public universities, landfill, state operated lottery, operation of water supply plant, operation of bus system + Governmental facilities intended to be primarily self-supported by user charges (>50%) Revenues: + Operating revenues: main purposes of the fund + Non-operating revenues: earnings or non-exchange transactions (taxes 8, certain fees and charges) O Shared revenues received by an EF of a local govt for operating purposes O Receiving state appropriations Order of reporting: INCASET + Income (operating) Nonoperating income and expense Capital contributions and Additions to endowments Special items (unusual or infrequent) Extraordinary items Transfers Capital contributions (nonreciprocal interfund activity): ¡.e., capital assets contributed to proprietary funds by govt funds DR: Capital assets CR: Capital contributions (equity transfers from other funds would be recorded as interfund transfers) Issue of "general obligation bond" to be paid from proprietary fund revenues: DR: Cash CR: Long-term bonds payable Municipal landfill accounting is governed by Accounting for Municipal Solid Waste Landfill Closure (MSWLF) and Postclosure Care Costs (GASB 18) e Disclose postclosure care (cost of final cover, cost of equipment expected to be installed, cost of gas monitoring) Statement of Net Position: Water and Sewer Fund e Current assets Non-current assets (Carry FA) Deferred outflows of resources Current liabilities Non-current liabilities (Carry LTD) Deferred inflows of resources Net Position (net investment in capital assets, restricted for debt service, unrestricted) Statement of Revenues, Expenses, and Changes in Net Position: Water and Sewer Fund + Operating Revenues + Operating Expenses + Nonoperating Revenues (expenses) Income (loss) before contributions and transfers Change in net position Statement of Cash Flows: direct method required e Cash flows from operating activities e Cash flows from noncapital financing activities + Cash flows from capital and related financing activities e Cash flows from investing activities + Reconciliation of operating income(loss) to net cash provided (used) by operating activities Net cash provided by operating acti *Record and depreciate fixed assets Orientation of accounting and reporting for al proprietary funds of governmental units is: Income Determination Service (internal) fund Balance sheet—statement of net position Income statement—stotement of revenues, expenses, and Full accrual— Chonges ín net position Statement of cash flows Footnotes Enterprise fund Balance sheet—Statement of net position Income statement—Stotement of revenues, expenses, and Full accrual Changes in net position Statement of cash flows Footnotes