Question 1

To what extent should matters affecting the government's future financial position and operating results be discussed in MD&A?

Accepted Answer

Governments should discuss facts, decisions, or conditions known to management as of the date of the auditor's report that are expected to significantly affect the government's financial position (net position) or results of operations (revenues, expenses, and other changes in net position).

Question 2

How is the financial information for individual nonmajor funds displayed in the fund financial statements?

Accepted Answer

Funds that do not meet the definition of major are considered "nonmajor" funds. The totals of each element of the "nonmajor" funds are aggregated and displayed in a single column in the fund statements-one in the governmental fund statements and one in the proprietary fund statements. Combining statements for nonmajor funds are not required but may be presented as supplementary information.

Question 3

How are prepaid items and inventory reported in the fund balance section of governmental funds balance sheets?

Accepted Answer

Prepaid items and inventory are not in spendable form and are reported as part of nonspendable fund balance.

Question 4

Which of the following major captions are not found in the proprietary funds statement of revenues, expenses, and changes in fund net position?

Accepted Answer

The statement of revenues, expenses, and changes in net position should be prepared in a format that distinguishes between operating and nonoperating revenues and expenses, and that provides separate subtotals for operating revenues, operating expenses, and operating income. Investing revenues (expenses) are generally reported with nonoperating revenues and expenses.

Question 5

What is the meaning of the net position component called "net investment in capital assets" (which appears in proprietary fund financial statements)?

Accepted Answer

Net investment in capital assets represents the capital assets of the proprietary funds minus accumulated depreciation and outstanding balances of bonds, notes, or other borrowings attributable to acquiring, constructing, or improving those assets.

Question 6

The GASB requires certain note disclosures regarding cash deposits. Under what circumstances are a government's deposits with financial institutions considered to be exposed to custodial credit risk?

Accepted Answer

Custodial credit risk is the risk that, if a bank were to fail, the government's deposits might not be returned. Deposits with financial institutions are exposed to custodial credit risk if they are not insured and the deposits are either (a) uncollateralized, (b) collateralized with securities held by the financial institution, or (c) collateralized with securities held by the financial institution's trust department or agent, but not in the government's name.

Question 7

Which of the following is a required note disclosure regarding interfund transfers?

Accepted Answer

Regarding interfund transfers, disclosures must be made of: (1) amounts transferred from other funds by individual major fund, nonmajor funds in the aggregate, etc., (2) a general description of the principal purposes of interfund transfers, and (3) the intended purpose and amount of significant transfers that either do not occur routinely or are not consistent with the activities of the fund making the transfer.

Question 8

Which of the following is a required note disclosure regarding long-term debt?

Accepted Answer

For long-term debt (including leases) governments need to disclose beginning and end-of-year balances, increases and decreases during the year, and details of debt service requirements to maturity, including principal and interest requirements, stated separately, for each of the 5 subsequent fiscal years, and in 5-year increments thereafter.

Question 9

Where in the financial report should required supplementary information (RSI) other than Management's Discussion and Analysis be presented?

Accepted Answer

Except for the MD&A, discussed previously, RSI should be presented immediately after the notes to the financial statements.

Question 10

Which of the following items (where applicable) is required to be reported as required supplementary information (RSI)?

Accepted Answer

The schedule that is described in b. is required.

Question 11

In the debt capacity section of the Statistical tables, which of the following ratios is not considered a valid measure of the ability of the taxpayers to finance the government's outstanding debt?

Accepted Answer

Debt as a percentage of governmental revenues does not provide a measure of the ability of taxpayers to finance a government's debt. For general governments, taxes generally are the predominant revenue source, but other revenues often are available. Therefore, debt as a percentage of governmental revenues measures more than the ability of taxpayers to service debt.

Question 12

What are the GASB's requirements concerning the preparation of a statistical section of a financial report?

Accepted Answer

The GASB does not require a statistical section to be prepared as part of the basic financial statements or as required supplementary information; rather, the statistical section is prepared by governments that choose to issue a CAFR.

Question 13

For each item listed in the left hand column of the table below, choose the letters associated with the financial statement(s) that should be prepared for that item. (Note that the letters may be used more than once.)
 $$\begin{array} { | l | l | } 
\hline \text { Items } & \text { Financial Statem ents } \
\hline \text { General Fund } & \
\hline \text { Government-wide } & \
\hline \text { Pension Trust Fund } & \
\hline \text { Water Enterprise Fund } & \
\hline \text { Permanent Fund } & \
\hline
\end{array}$$ 
a. Statement of Revenues, Expenditures, and Changes in Fund Balance
b. Statement of Net Position
c. Statement of Fiduciary Net Position
d. Statement of Activities
e. Statement of Cash Flows
f. Balance Sheet
g. Statement of Changes in Fiduciary Net Position
h. Statement of Revenues, Expenses, and Changes in Fund Net Position

Accepted Answer

The answer of For each item listed in the left...

Question 14

Which of the following are attributes of a special purpose government that is considered a primary government?
-Another primary government appoints a majority of the special government's board.

Accepted Answer

A special purpose government is considered a primary government if it is financially independent, meaning it has its own elected officials or has the ability to levy taxes. The appointment of its board by another primary government does not determine its status as a primary government.

Question 15

Which of the following are attributes of a special purpose government that is considered a primary government?
-Separately elected governing body

Accepted Answer

A special purpose government is considered a primary government if it has a separately elected governing body, is legally separate, and is fiscally independent of other state and local governments.

Question 16

Which of the following are attributes of a special purpose government that is considered a primary government?
-Legally separate

Accepted Answer

A special purpose government can be considered a primary government if it is legally separate and meets other criteria such as having its own elected governing body, being fiscally independent, and providing services primarily to its constituents.

Question 17

Which of the following are attributes of a special purpose government that is considered a primary government?
-Fiscally dependent on another state or local government

Accepted Answer

A special purpose government considered a primary government must be financially independent, meaning it has its own taxing authority or is otherwise financially autonomous, not fiscally dependent on another government.

Question 18

Which of the following are attributes of a special purpose government that is considered a primary government?
-Independent authority to approve its own budget

Accepted Answer

A special purpose government considered a primary government has independent authority to approve its own budget, among other characteristics, distinguishing it from dependent entities that do not have such autonomy.

Question 19

Which of the following are attributes of a special purpose government that is considered a primary government?
-Authority to issue its own bonded debt

Accepted Answer

A special purpose government can be considered a primary government if it has a separately elected governing body, is legally separate, and has the ability to issue its own bonded debt, among other criteria.

Question 20

Which of the following are attributes of a special purpose government that is considered a primary government?
-Able to levy taxes if approved by another government

Accepted Answer

A special purpose government is considered a primary government if it is financially independent, meaning it has the ability to levy taxes on its own authority, not requiring approval from another government.

Quiz 9: Reporting Principles and Preparation of Fund Financial Statements

To what extent should matters affecting the government's future financial position and operating results be discussed in MD&A?

How is the financial information for individual nonmajor funds displayed in the fund financial statements?

How are prepaid items and inventory reported in the fund balance section of governmental funds balance sheets?

Which of the following major captions are not found in the proprietary funds statement of revenues, expenses, and changes in fund net position?

What is the meaning of the net position component called "net investment in capital assets" (which appears in proprietary fund financial statements) ?

The GASB requires certain note disclosures regarding cash deposits. Under what circumstances are a government's deposits with financial institutions considered to be exposed to custodial credit risk?

Which of the following is a required note disclosure regarding interfund transfers?

Which of the following is a required note disclosure regarding long-term debt?

Where in the financial report should required supplementary information (RSI) other than Management's Discussion and Analysis be presented?

Which of the following items (where applicable) is required to be reported as required supplementary information (RSI) ?

In the debt capacity section of the Statistical tables, which of the following ratios is not considered a valid measure of the ability of the taxpayers to finance the government's outstanding debt?

What are the GASB's requirements concerning the preparation of a statistical section of a financial report?

Which of the following are attributes of a special purpose government that is considered a primary government? -Another primary government appoints a majority of the special government's board.

Which of the following are attributes of a special purpose government that is considered a primary government? -Separately elected governing body

Which of the following are attributes of a special purpose government that is considered a primary government? -Legally separate

Which of the following are attributes of a special purpose government that is considered a primary government? -Fiscally dependent on another state or local government

Which of the following are attributes of a special purpose government that is considered a primary government? -Independent authority to approve its own budget

Which of the following are attributes of a special purpose government that is considered a primary government? -Authority to issue its own bonded debt

Which of the following are attributes of a special purpose government that is considered a primary government? -Able to levy taxes if approved by another government