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GASB Statements 34/35- Agencies Preparing Financial
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Afternoon Session B |
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April 30 and May 2, 2001 |
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GASB 33
Implementation Issues |
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STARS Changes |
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Internal versus External Activity/Balances |
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Account Code Changes |
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GASB 34 Financial Reporting Issues |
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Adoption of FASB Pronouncements |
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MD&A |
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Statement of Cash Flows |
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Open Forum |
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Effective for the current fiscal year – June 30,
2001 |
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In year of adoption, record cumulative effect of
change in accounting principle |
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Most significant expected changes are with grant
revenues (non-exchange) |
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Nonexchange transaction – transactions in which
the agency gives (or receives) value without directly receiving (or giving)
something of equal value in return |
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Exchange transactions – each party to the
transaction receives and gives up something of essentially the same value |
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Derived tax revenues |
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Imposed nonexchange transactions |
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Government mandated nonexchange transactions |
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*Voluntary nonexchange transactions |
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* Most
significant changes are expected here. |
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Legislative or contractual agreements entered
into willingly by two or more parties |
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Examples |
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non-entitlement grant programs |
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private donations |
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Required characteristics of recipients |
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Provider specifies certain characteristics which
recipient/subrecipient must possess |
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Example |
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The type
of entity eligible to receive the grant funds |
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Time requirements |
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Affect the timing of recognition of nonexchange
transactions |
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Grant provider or legislation specifies time
period during which funds may be spent or when use of funds is first
permitted |
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Example |
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Grant period October 1, 2001 through September
30, 2002 |
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Reimbursements |
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Provider requires a recipient/ subrecipient to
first incur allowable costs in order to qualify for funding |
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Contingencies |
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Provider may require the recipient/ subrecipient
to perform specific actions to qualify for funding |
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Example - matching funds |
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Revenues – once all eligibility requirements
have been met, |
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revenues not received by June 30, report as
grants receivable in the financial statements |
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Grant award less funds received to date =
receivable |
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Received to date includes prior year funds |
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Revenue recognition |
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If governmental or expendable trust funds, funds
must also be available |
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Considered available if received on or before
June 30 or by July 31 |
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Deferred revenue |
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record if grant funds are received prior to
meeting all of the eligibility requirements |
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Expenses/expenditures – recognized once all
eligibility requirements have been met by the recipient/subrecipient |
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payments not made at June 30, report as accounts
payable in the financial statements |
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Grant award less funds paid to date = accounts
payable |
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Paid to date includes prior year funds |
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Do not affect the timing of recognition of
nonexchange transactions |
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Must report the net assets as restricted |
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PRT submits an application for a state park
facility grant (funds are available for the period October 1, 2000 through
September 30, 2005. PRT’s
application and spending plan are approved. |
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Grant award - $5,000,000 |
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At June 30, 2001 - $1,250,000 received |
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On July 20, 2001 – $500,000 is received |
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What amounts should be reported as revenue
and/or grants receivable in the financial statements as of June 30, 2001? |
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A corporation pledges $1,000,000 over 5 years to
a state higher education institution.
The donor card details that the coporation will pay $250,000 each
year for 4 years. Funds received
must be expended in the year of receipt. |
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When should the related revenue/ receivable be
recognized? |
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At time of pledge |
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At time of receipt of annual funds |
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Other period |
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Internal Versus External Activity |
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Government-wide financial statements |
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Requires some internal activity and balances
must be: |
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Reclassified |
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Consolidated |
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Eliminated |
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STARS transactions must segregate between
internal/external activity/balances |
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Internal activity and balances |
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result of resource flows between the funds of a
primary government |
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includes blended components, but not discrete
component units |
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Examples |
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Budget and Control Board |
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SC Retirement Systems |
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Tobacco Revenue Management Authority |
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* Additional
examples in handout – Question # 2 |
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External activity and balances |
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result of resource flows between the primary
government and other external parties |
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i.e. vendors, contractors, legally separate
discretely presented component units, etc. |
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Examples |
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Private vendors |
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Public Service Authority |
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Connector 2000, Inc. |
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ETV Endowment of South Carolina |
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* Additional
examples in handout – Question # 3 |
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Change in Preparation of Journal Vouchers |
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Batch Type “0” only (no other batch entries affected) |
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Addition of an indicator in the document header |
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Will identify JVs as internal or external |
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Required, preferably at top right of document
header |
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“Zero-I” – all lines affect internal
revenue/expenditure objects |
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“Zero-E” – all lines affect external
revenue/expenditure objects |
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“Zero-Blank” – no lines affect
revenue/expenditure objects |
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My agency does not have the resources to program
its JV creation program to automatically print the I/E indicator in
position 164 of the document header.
May I handwrite or stamp the I or E on each document? |
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Yes, preferably in RED, in the document header
area |
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* Handout
Question # 5 |
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Why do we have to do all of this work? |
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GASB 34 requires we distinguish between internal
and external transactions and balances for the elimination/
reclassification of certain internal balances. |
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This change will allow the OCG to obtain this
information for these batch transactions. |
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* Handout
Question # 15 |
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I have a question about whether to use an I or E
on a particular JV. Who can help
me? |
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Prior to July 1, 2001, Bryce Wilson or regular
contact in OCG’s office for each agency. |
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Beginning July 1, 2001, direct all questions to
the Central State Accounting Division |
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* Handout
Question # 16 |
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I need to correct a cash transfer or IDT (Batch
Type 3 or 4). Should the correcting
JV be coded as I or E? |
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This is an “I” transaction as STARS will
automatically code a transfer or IDT as internal. |
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* Handout
Question # 6 |
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During March, I deposited various checks from
non-State parties an various IDT receipts into my agency’s Revenue Clr’g
Subfund. When clearing these
balances out, which indicator should be used? |
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Both – 2 JVs must be prepared: one for the checks and one for the
IDT’s. |
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* Handout
Question # 7 |
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Is there any way to shortcut the work described
in the previous question? |
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May request the OCG to establish a 3555 subfund,
IDT receiving, for use beginning in FY 2002. |
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* Handout
Question # 8 |
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Suppose that in Question 7, I also had deposited
checks from various State agencies into the Revenue Clearing subfund. How should the balances for those
transactions be cleared? |
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* Handout
Question # 9 |
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I need to move the entire balance in a
particular revenue/expenditure object code in my agency’s 3035 subfund from
mini-code 0057 to 0058. How can I
determine whether or how to split the balance between I and E? |
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* Handout
Question # 12 |
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STARS Account Code Changes |
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Identified as of April 2001 |
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Changes required in STARS Object Codes to date
relate primarily to: |
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Capital assets |
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Grant revenues (discussed in previous section) |
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Other changes identified include the deletion of
several revenue codes not used in recent years |
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Capital Assets |
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Changes in revenue codes |
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Changes in expenditure codes |
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does not apply to colleges and universities/
component units |
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* Review
handout attachment |
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Revenue codes |
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Changes relate primarily to sales of capitalized
and non-capitalized assets |
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Separate codes for items over and under the
capitalization limits |
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* Review
handout attachment |
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Expenditure codes |
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Changes relate primarily to purchases of
capitalized and non-capitalized assets |
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Changes for moveable assets and works of art,
historical treasures |
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Changes for purchase or construction of other
depreciable capital assets classes |
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* Review
handout attachment |
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GASB 34 requires grant revenues to be reported
in the following categories: |
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Program revenue – operating grants |
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Program revenue – capital grants |
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General revenue |
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Program revenue |
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restricted for use by a particular agency/
grouping of agencies |
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General revenue |
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all other revenue |
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Capital grants |
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Resources are restricted for capital purposes |
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Operating grants |
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Resources are used for operations or capital
expenditures at the discretion of the Agency |
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Review handout attachment |
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Presentation Format Change |
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Net Assets Classifications |
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Segment Reporting |
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Adoption of FASB Statements |
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Management’s Discussion & Analysis
(MD&A) |
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Statement of Cash Flows |
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Presentation Format Change |
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Treatment of Appropriations |
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Non-Infrastructure Capital Assets |
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Infrastructure |
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Statement of Net Assets/Balance Sheet |
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Statement of Revenues, Expenses, and Changes in
Fund Net Assets/Equity |
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Statement of Cash Flows |
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Classified format |
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Restricted assets should be reported separately |
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Fund net assets/equity-three classifications
replace contributed capital and retained earnings |
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Invested in capital assets, net of related debt |
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Restricted |
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Unrestricted |
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Operating and non-operating distinction |
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Operating expenses classified by object or
functional classification |
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State appropriations classified as non-operating |
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Special (one shots) and extraordinary items |
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Management’s Discussion & Analysis |
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New requirement of GASB 34 |
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Required supplementary information – subject to
“in-relation” audit opinion |
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Provides an objective and easy to read analysis
of financial status and current activities |
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Not required to restate prior years for
comparative purposes – in year of implementation |
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Topics included in GASB 34 intended to be
maximum presentation versus minimum |
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Brief description of basic statements |
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General discussion |
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Analysis of financial position and results of
operations (significant variances) |
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Analysis of budgetary changes and results |
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Significant debt and capital asset disclosure |
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Description of capital asset and long-term debt
activity |
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Description of currently known facts, decisions,
or conditions that are expected to have a material effect on the entity |
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Responsibility for compilation is management’s |
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Adoption of FASB Pronouncements |
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SC’s primary government has elected NOT to adopt
GASB 20, paragraph 7. So
governmental and business-type activities must adopt only |
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GASB pronouncements |
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Other pronouncements issued on or before
November 30, 1989, unless they conflict with or contradict GASB
pronouncements (see handout) |
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Different application of APB 20 (GASB 34,
Footnote 13) |
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Retroactive adoption, except where GASB 34,
paragraphs 146 and 307-309, grants specific relief |
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APB 12 and 21 |
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FASB 23 |
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GASB 34 omnibus expected to change application
of FASB 34 to governmental activities;
FASB 34 still applies to proprietary funds |
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Four categories of cash flows |
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Operating |
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Noncapital financing |
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Capital and related financing |
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Investing |
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Direct method required for operating activities |
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Reconciliation of operating cash flows to
operating income |
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Focus on cash and cash equivalents |
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Original maturities of 3 months or less |
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Cash equivalents readily convertible to cash |
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Insignificant risk of change in value |
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Direct reporting method used |
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Inflows reported by major type |
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Outflows reported by payment type |
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Accrual data converted to cash basis |
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Inflows include: |
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Cash inflows from sales of goods or services |
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Tuition and fees |
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Cash receipts from grants for specific operating
activities |
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Other cash receipts related to operations |
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Outflows include: |
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Payments to vendors or suppliers |
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Payments to employees |
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Payments to faculty, staff, students (CU) |
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Other operating disbursements |
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Noncapital debt and interest payments |
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Proceeds from issuance of non-capital debt |
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Funds held for others (CU) |
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Intergovernmental receipts and payments |
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Endowment gifts |
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Grant proceeds not specifically restricted to
capital purposes |
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Grant payments |
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Capital expenditures |
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Capital appropriations/gifts |
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Proceeds from sales of capital assets |
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Principal and interest on debt – capital
borrowing |
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Proceeds from new issuances of debt – capital
borrowing |
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Do not net related inflow/ outflow transactions |
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Purchase of investments |
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Sales of investments |
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Interest on investments |
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Loan collections (except for program loans) |
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Loans made to others (except for program loans) |
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Do not net related inflow/ outflow transactions |
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Reconcile net operating income (loss) to cash
provided by (used in) operating activities |
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Operating revenues over (under) expenses |
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Add noncash expenses – ie depreciation |
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Plus or minus changes in current assets and
liabilities |
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Disclose noncash transactions |
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Net appreciation/depreciation in value of
investments reported at fair value (not classified as cash/ cash
equivalents) |
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