BASIS of accounting for various funds

Governmental Proprietary Fiduciary GOVERNMENT-WIDE

1. General2. SRF3. CPF4. DSF5. PERMANENT

"modified-accrual"

1. Enterprise2. Internal Service

"full-accrual"

1. Agency2. Trust

"full-accrual"

New GAS 34requirement(Chapter 14)

Worksheets to convert GOVTLto GOV-Wide

"full-accrual"

requires non-funds:1. GCA2. GLTLwhich basically arefull-accrual.

Information from non-funds is used extensively in Govt-Wide

Assets are capitalized in the GCA, and reported in Govt-Wide

Liabilities are set-up in GLTL and reported in Govt-Wide

General Capital Assets

Dr. Cr.Increase Decrease

Cost of GCAacquired

Cost of GCAdisposed of

RECORDED AT: Historic Cost.

ESTIMATE OF acc/dep ACCEPTABLE for GASB.

1. Calculate current REPLACEMENT COST. $160,000 (assume)

2. DEFLATE current cost using price indexes toacquisition year. Suppose prices have risen 60%in last 5 years since asset was purchased. $160,000/1.60 = $100K

3. If asset is a 10-year asset, then retroactiveaccumulated depreciation is: $100,000/10 = $10,000 per yr

$10,000 x 5 yrs = $50,000 acc/dep

ESTIMATE OF COST ACCEPTABLE for GASB.

4. If the asset's value is estimated before closing entries in year 5then this entry would catch things up:

Asset...................$100,000Net Assets-Invested in GCA.....$100,000

Net Assets-Invested in GCA….. $50,000Accumulated Depreciation………$50,000

This is done in the GCA non-fund, and NOT the GL.

CLASSIFICATIONS

LAND $ paid for land, and costs incidental to its acquisition,and expenditures to prepare land for its use.

BUILDINGS/IMPROVEMENTS

$ paid for permanent structures used to house persons/property AND fixtures that are permanently attached.

INFRASTRUCTURE Long-lived improvements (other than buildings) thatadd value to land. (bridges, sidewalks, streets, dams,tunnels).

MACHINERY/EQUIPMENT

Moveable machinery and equipment.

CONSTRUCTION INPROGRESS

expenditures for construction work undertaken but incompleteat balance sheet date.

Are long-lived assets that normally are stationary in nature and normally can bepreserved for significantly greater number of years than most capital assets.

OLD RULES

Did not require capitalization.

NEW (GAS 34) RULES

1. Requires that SLGs capitalize MAJOR infrastructure NETWORKS (e.g., highways) and SUBSYSTEMS (e.g., interstate highways).

Exemption:

If infrastructure asset is obtained earlier than June 30,1980.

Smallest of SLG not required to do retro-active capitalization either.

subsystem cost at least 5% of total GCA.

network cost at least 10% of total GCA.

OLD RULE: Did NOT have to capitalize.

NEW RULES: DO have to capitalize major infrastructure.

Infrastructure assets (IA) that are part of a network/subsystem ARE NOT required tobe depreciated provided (2) requirements are met:

1. Asset management program in place to oversee IA.

2. Documentation that IA are being preserved at/or above givencondition level.

If modified approach is used, expenditures made for IA are EXPENDED

Additions/improvements to IA that increase capacity/efficiency (rather thanjust extend useful life) should be capitalized.

WORKS OF ART AND HISTORICAL TREASURES

RULE: Capitalize at their historical cost or FMV at date of donation whetherindividual items or held as a collection.

EXCEPTION: NOT required to capitalize (donated or purchased) if a collectionis INEXHAUSTIBLE.

WORKS OF ART AND HISTORICAL TREASURES

IF COLLECTIONS CAPITALIZED

in GCA accounts:

ASSETS…….$XX.XXDONATION REVENUE..$XX.XX

IF COLLECTIONS NOT CAPITALIZED

in GCA accounts:

PROGRAM EXPENSE(NET ASSETS)……..…….$XX.XX

DONATION REVENUE..$XX.XX

GENERAL FUND

Cash……….. $850Other Financing Source-sale of equip…… $850

GENERAL CAPITAL ASSET NON-FUND

Vending Machine……………… $5,000 (CR for cost)

Accumulated Depreciation………. $2,500 (remove it)

Net Assets…………………………. $2,500 (book removed)

GAIN OR LOSS?

BookvsCash received

$2,500

$850

LOSS……. $1,650

Suppose that a vending machine with a cost of $5,000and accumulated depreciation of $2,500 is sold for $850.

Suppose instead that the vending machine with a cost of $5,000and accumulated depreciation of $2,500 is traded in on a new vending machinecosting $8,500. A trade-in allowance of $1,200 is given on the old vending machine.

GENERAL FUND Cost of new $8,500 - $1,200 trade-in = $7,300 cash paid.

EXPENDITURES-VENDING MACHINE……$7,300CASH………………………………………….$7,300

GENERAL CAPITAL ASSETS NON-FUND

OLD VENDING MACHINE… $5,000

ACCUM. DEP….. $2,500

NET ASSETS……. $2,500

To remove old asset from non-fund records

NEW VENDING.. $8,500NET ASSETS……$8,500

To record entry of new machineat FULL COST

OUR TEXT IS SILENT ON GAINS/LOSSES WITH REPLACE-MENTS.

Suppose instead that the vending machine with a cost of $5,000and accumulated depreciation of $2,500 is retired and sold for salvage value of $500.Costs to ship the vending machine to buyer were paid by seller and amounted to $150.

GENERAL FUND EXPENDITURES (SHIPPING)…..$150CASH…………………………….$150

To record shipping costs

CASH……. $500EXPENDITURES (SHIPPING)……………….. $150OTHER FINANCING SOURCES-SALVAGE..$350

To record net proceeds from salvage

GCA-NONFUND NET ASSETS………. $2,500ACC/DEP………….. $2,500

VENDING MACHINE………$5,000

LOSS equals:

BOOK.. $2,500- SALV.. 500--------------------

$2,000 + ship.. 150---------------------- LOSS $2,150

Cost Acc/Dep BOOK

$1,500 $500 $1,000$10,000 $4,000 6,000---------- -------- ---------$11,500 $4,500 $7,000

* Suppose that the FMV of this equipment was $10,000. Transfer at lower ofbook vs fmv.

PROPRIETARY FUND

Accumulated Depreciation.. $4,500Equipment…………………$11,500

Capital Contributions……. $7,000

NOT called "transfer".

GCA-NONFUND

EQUIP…. $11,500 ACC-DEP…………...$4,500 NET ASSETS……… $7,000

PROPRIETARY GENERAL FUND

Cost Acc/Dep BOOK

$1,500 $500 $1,000 $10,000 $4,000 6,000

---------- -------- ---------$11,500 $4,500 $7,000

* Suppose that the FMV of this equipment was $10,000. Transfer at lower ofbook or "use value"to proprietary fund.PROPRIETARY FUND

Equipment……… $7,000 (assume use value > or = book) Capital Contrib… 7,000

NOT called "transfer".

GCA-NONFUND

ACC/DEP…. $4,500NET ASSETS..7,000

EQUIP…….$11,500

GENERAL FUND PROPRIETARY

PURPOSE? Account for resources held in TRUST by the governmentfor the benefit of the government (or its citizenry).

REQUIREMENTS? Principal of the trust must be maintainedintact.

STATEMENTS? Same as other governmentals:1) Balance Sheet, 2) Statement of Revenues, Expenditures and Changes in Fund Balance

EXPENDABLE VS NONEXPENDABLE

GAS 42 (NEW)

As a SIGNIFICANT, UNEXPECTED, DECLINEin the service utility of a capital asset.