Government and Not-for-Profit Accounting

Concepts and Practices

Häftad, Engelska, 2022

AvMichael H. Granof,Saleha B. Khumawala,Thad D. Calabrese

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Government and Not-for-Profit Accounting: Concepts and Practices, 9th Edition delivers a comprehensive exploration of accounting and reporting standards and practices. Fully compliant with the latest changes in the GASB, FASB, and AICPA, this practical text encourages critical thinking about the rationale behind the rules and regulations. Issues of critical importance to the public and not-for-profit sectors are discussed at length.

Produktinformation

Utgivningsdatum2022-02-09
Mått203 x 254 x 36 mm
Vikt1 497 g
FormatHäftad
SpråkEngelska
Antal sidor864
Upplaga9
FörlagJohn Wiley & Sons Inc
ISBN9781119803898

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Preface vii1 The Government and Not- for- Profit Environment 1How Do Governments and Not- For- Profits Compare With Businesses? 2In Practice: Why Is State And Local Government Accounting Important? 6What Other Characteristics of Governments and Not- For- Profits Have Accounting Implications? 9How Do Governments Compare With Not-For- Profits? 12What Are The Overall Purposes of Financial Reporting? 14Who are The Users, and What are The Uses of Financial Reports? 14What are The Specific Objectives of Financial Reporting As Set Forth By The GASB and The FASB? 17Example: Clash Among Reporting Objectives 19Do Differences In Accounting Principles Really Matter? 22In Practice: Will Accounting Changes Make A Difference? 24Who Establishes Generally Accepted Accounting Principles? 24In Practice: Assessing the Profitability of An Athletic Program 25In Practice: Governments and Not- For- Profits May Also Be Aggressive In Their Accounting 26Summary 29Key Terms In This Chapter 30Questions For Review and Discussion 30Exercises 31Continuing Problem 33Problems 33Questions For Research, Analysis, And Discussion 372 Fund Accounting 38What is a Fund? 39What are the Key Elements of Government Financial Statements? 39What Characterizes Funds? 41Use of Multiple Funds to Account for An Entity 44Basis of Accounting and Measurement Focus 45Example: Fund Accounting in a School District 46Major VS. Nonmajor Funds 49How Can Funds be Combined and Consolidated? 49What are the Main Types of a Government’s Funds? 59What’s Notable About Each Type of Governmental Fund? 61What’s Notable About Each Type of Proprietary Fund? 64What’s Notable About Each Type of Fiduciary Fund? 70What is Included in a Government’s Annual Comprehensive Financial Report (ACFR)? 71Example: Government-Wide Statement of Activities 74How Do the Funds and Annual Reports of Not-For-Profits Differ From Those of Governments? 75Summary 78Key Terms In This Chapter 80Exercise for Review and Self-Study 80Questions for Review and Discussion 81Exercises 82Continuing Problem 85Problems 86Questions for Research, Analysis, and Discussion 91Solution to Exercise for Review and Self-Study 923 Issues of Budgeting and Control 95What are the Key Purposes of Budgets? 96Why is More Than One Type of Budget Necessary? 96How are Expenditures and Revenues Classified? 98Why are Performance Budgets Necessary? 99What are the Key Phases of the Budget Cycle? 101In Practice: Budgeting In The Midst of a Pandemic 103On What Basis of Accounting are Budgets Prepared? 105In Practice: States Balance Their Budgets the Painless Way 106In Practice: The Cost of GAAP 107In Practice: Balancing the Budget by Selling Assets to Yourself 108What Cautions Must be Taken in Budget-to-Actual Comparisons? 108How Does Budgeting in Not-For-Profit Organizations Compare with that in Governments? 111How Do Budgets Enhance Control? 112What are the Distinctive Ways Governments Record Their Budgets? 114Example: Budgetary Entries 115An Alternative Method: Crediting or Debiting the Difference Between Revenues and Expenditures to “Budgetary Control” 117How Does Encumbrance Accounting Prevent Overspending? 117Example: The Encumbrance Cycle—Year 1 118Example: The Encumbrance Cycle—Year 2 120Example: Impact of Encumbrances on Fund Balance 121Are Budgetary and Encumbrance Entries Really Needed? 124Summary 125Key Terms in this Chapter 125Exercise for Review and Self-Study 126Questions for Review and Discussion 126Exercises 127Continuing Problem 131Problems 131Questions for Research, Analysis, and Discussion 139Solution to Exercise for Review and Self-Study 1394 Recognizing Revenues in Governmental Funds 141Why and How Do Governments Use the Modified Accrual Basis? 141What are the Main Types of Nonexchange Revenues and the Limitations on How and When They Can be Used? 145How Should Property Taxes and Other Imposed Nonexchange Revenues be Accounted for? 146I n Practice: In Practice: Just as it did with individuals, corona viruses make some governmentsfar more sick than others 146Example: Property Taxes 148Example: Fines 153How Should Sales Taxes and Other Derived Tax Revenues be Accounted for? 154Example: Sales Taxes 154Example: Sales Taxes Collected by State 156Example: Income Taxes 157What are Tax Abatements and Why and How Must They be Disclosed? 159How Should Grants and Similar Government-Mandated and Voluntary Nonexchange Revenues be Accounted For? 160Example: Unrestricted Grant with Time Requirement 161Example: Grant with Purpose Restriction 162Example: Reimbursement (Eligibility Requirement) Grant 162Example: Unrestricted Grant with Contingency Eligibility Requirement 163Example: Endowment Gift 163Example: Pledges 163Example: Donations of Land for Differing Purposes 164Example: On-Behalf Payments 167How Should Sales of Capital Assets be Accounted For? 167Example: Sales of Capital Assets 168How Should Licenses, Permits, and Other Exchange Transactions be Accounted for? 169Example: License Fees 169How Should Governments Report Revenues in their Government-Wide Statements? 170Summary 171Key Terms In This Chapter 173Exercise for Review and Self-Study 173Questions for Review and Discussion 174Exercises 174Continuing Problem 178Problems 178Questions for Research, Analysis, and Discussion 184Solution to Exercise for Review and Self-Study 1855 Recognizing Expenditures in Governmental Funds 187Hierarchical Approach to Transaction Analysis 187How is the Accrual Concept Modified for Expenditures? 189How Should Wages and Salaries be Accounted for? 190Example: Wages and Salaries 190How Should Compensated Absences Be Accounted For? 191In Practice: Changing the Pay Date by One Day 191Example: Vacation Leave 192Example: Sick Leave 193Example: Sabbatical Leave 196How Should Pensions and Other Postemployment Benefits Be Accounted For? 197Example: Pension Expenditure 197How Should Claims and Judgments Be Accounted For? 198Example: Claims and Judgments 198How Should the Acquisition and Use of Materials and Supplies Be Accounted For? 200Example: Supplies 200How Should Prepayments Be Accounted For? 203Example: Prepayments 203How Should Capital Assets Be Accounted For? 205Example: Capital Assets 205Example: Installment Notes 206Example: Capital Leases 207How Should Interest and Principal on Long-Term Debt Be Accounted For? 208Example: Long-term Debt 209In Practice: California School Children May Pay for Their Own Education 210How Should Nonexchange Expenditures be Accounted for? 212Example: Unrestricted Grant with Time Requirement 212Example: Grant with Purpose Restriction 213Example: Reimbursement (Eligibility Requirement) Grant 213How Should Interfund Transactions Be Accounted For? 214Example: Interfund Transfer 215Example: Interfund Purchase/Sale 215How Should Revenues, Expenditures, and Other Financing Sources and Uses Be Reported? 218In Practice: Is the Coronavirus Pandemic an Extraordinary or Special Event? 218What is the Significance of the Current Financial Governmental Fund Statements? An Overview 219Summary 220Key Terms In This Chapter 221Exercise for Review and Self-Study 221Questions for Review and Discussion 222Exercises 223Continuing Problem 227Problems 227Questions for Research, Analysis, and Discussion 233Solution to Exercise for Review and Self-Study 2336 Accounting for Capital Projects and Debt Service 236How do Governments Account for Capital Projects Funds? 237Example: Bond Issue Costs 239Example: Bond Premiums and Discounts 239Comprehensive Example: Main Types of Transactions Accounted for in Capital Projects Funds 241How do Governments Account for Resources Dedicated to Debt Service? 245Comprehensive Example: Main Types of Transactions Accounted for in Debt Service Funds 246How do Governments Handle Special Assessments? 250In Practice: Use and Abuse of Special Assessments 252In Practice: What We Might Learn from “Net Investment in Capital Assets” 256Why is Arbitrage a Concern of Governments? 256How can Governments Benefit from Debt Refundings? 258Example: Debt Refundings 258Example: In-Substance Defeasance 260In Practice: Current and Advance Refundings 261Summary 263Key Terms in This Chapter 264Exercise for Review and Self-Study 264Questions for Review and Discussion 265Exercises 265Continuing Problem 270Problems 270Questions for Research, Analysis, and Discussion 277Solution to Exercise for Review and Self-Study 2787 Capital Assets and Investments in Marketable Securities 281What Accounting Practices Do Governments Follow for General Capital Assets? 282Acquiring and Placing Value on Capital Assets 285Example: Trade-Ins 285Why and How Should Governments Report Infrastructure? 287In Practice: Nation’s Infrastructure Earns a Cumulative Grade of C-287In Practice: Fair Values May (Or May not) Facilitate Sales Decisions 292How Should Governments Account for Assets that Are Impaired? 294Example: Restoration Approach 294Example: Service Units Approach 295Example: Deflated Depreciated Replacement Cost Approach 296What Are the Critical Issues with Respect To Marketable Securities And Other Investments? 297Investments Should Be Reported at Fair Values 297Example: Investment Income 300I n Practice: Some Governments May Make Suboptimal Investment Decisions in Order to Avoid Financial Statement Volatility 301Example: Interest Income 303In Practice: One Common-Type Derivative 305In Practice: Investment Debacles 305In Practice: Common Sense Investment Practices 307Summary 307Key Terms In This Chapter 308Exercise for Review and Self-Study 308Questions for Review and Discussion 309Exercises 309Continuing Problem 312Problems 313Questions for Research, Analysis, and Discussion 320Solution to Exercise for Review and Self-Study 3208 Long-Term Obligations 321Why is Information on Long-Term Debt Important to Statement Users? 322Can Governments and Not-For-Profits Go Bankrupt? 322In Practice: It is not So Easy to Declare Municipal Bankruptcy 323How Do Governments Account for Long-Term Obligations? 325Example: Accounting for Bonds in Government-Wide Statements 327In Practice: Valuing a Lottery Prize 328What Constitutes a Government’s Long-Term Debt? 329Example: Demand Bonds 331Example: Bond Anticipation Notes 332Example: Tax Anticipation Notes 333Example: Lessee Accounting 335Example: Lessor Accounting 336Example: Overlapping Debt 343In Practice: 49Ers Score Big in the Financial Arena 346I n Practice: Tobacco Bonds Are Both Risky and Inconsistent with Government Policies 347What Other Information Do Users Want to Know About Outstanding Debt? 347Example: Debt Margin 349What are Bond Ratings, and Why are They Important? 351In Practice: Bond Ratings 352Summary 352Key Terms in This Chapter 354Exercise for Review and Self-Study 354Questions for Review and Discussion 354Exercises 355Continuing Problem 359Problems 359Questions for Research, Analysis, and Discussion 365Solution to Exercise for Review and Self-Study 3669 Business-Type Activities 367What Types of Funds Involve Business-Type Activities? 368Why Do Governments and Not-For-ProfitsEngage in Business-Type Activities? 368Should Business-Type Activities be Accounted for Differently than Governmental Activities? 369What are the Three Basic Statements of Proprietary Fund Accounting? 371What Accounting Issues are Unique to Enterprise Funds of Governments? 377Example: Revenue Bond Proceeds as Restricted Assets 380Example: Landfill Costs in an Enterprise Fund 382Example: Pollution Remediation Costs in an Enterprise Fund 385What are Internal Service Funds, and How are they Accounted For? 386Example: Internal Service Fund Accounting 390In Practice: Full-Cost Pricing May Encourage Dysfunctional Decisions 392Accounting for Insurance Premiums 394Example: Insurance Premiums 395Example: Self-Insurance in a General Fund 396How are Proprietary Funds Reported? 397Example: Eliminating Interfund Balances and Transactions 399PPPs and APAs 403Example: Public-Private Partnership (PPP) 404Example: PPP But Not a SCA 406In Practice: Want to Own a Bridge? 409What Do Users Want to Know About Revenue Debt? 409Summary 411Key Terms in This Chapter 412Exercise for Review and Self-Study 413Questions for Review and Discussion 413Exercises 414Continuing Problem 418Problems 418Questions for Research, Analysis, and Discussion 424Solution to Exercise for Review and Self-Study 42510 Pensions and Other Fiduciary Activities 426Why is Pension Accounting so Important? 426In Practice 428How Do Defined Contribution Plans Differ from Defined Benefit Plans? 429In Practice: Defined Benefit Plans Are More Efficient Than Defined Contribution Plans 430In Practice: Can Defined Benefit Plans Be Saved? 431What is the Relationship Between An Employer and its Pension Plan? 432How Should the Pension Expense in Full Accrual Statements be Determined? 435Example: The Pension Expense 437How Should the Pension Expenditure In Governmental Funds be Determined? 441What Special Problems Do Multiple-Employer Cost-Sharing Plans Pose? 441How Should The Pension Plan be Accounted for? 442What Types of Disclosures are Required? 444How Should Post-Employment Benefits Other Than Pensions (OPEB) be Accounted for? 445What Are Fiduciary Funds? 446I n Practice: Difficulty of Determining Whether an Activity is Fiduciary or Governmental 451Should Investment Income of A Permanent Fund be Reported in the Permanent Fund Itself or The Beneficiary Fund? 454Example: Expendable Investment Income 455Summary 455Key Terms in This Chapter 457Exercise for Review and Self-Study 457Questions for Review and Discussion 458Exercises 458Continuing Problem 461Problems 461Questions for Research, Analysis, and Discussion 466Solution to Exercise for Review and Self-Study 46711 Issues of Reporting, Disclosure, and Financial Analysis 469How Can a Government Prepare Government-WideStatements from Fund Statements? 469Why is the Reporting Entity an Issue for Governments and Not-For-Profits? 471Example: The Reporting Entity 472What Criteria Have Been Established for Government Reporting Entities? 473Example: Financially Accountable Component Units 474Example: Fiscal Dependency 475Example: Blended Component Units 476Example: A Closely Affiliated Organization 479Example: Application of Current Standards 480What Other Elements Make Up the Annual Comprehensive Financial Report? 482What are the Reporting Requirements for Special-Purpose Governments?487How Can A Government’s Fiscal Condition be Assessed? 488I n Practice: Balanced Budget Requirements Don’t Always Result in Balanced Budgets 497Drawing Conclusions 504Summary 509Key Terms in This Chapter 511Exercise for Review and Self-Study 511Questions for Review and Discussion 512Exercises 512Continuing Problem 516Problems 516Questions for Research, Analysis, and Discussion 520Solution to Exercise for Review and Self-Study 52112 Not-for-Profit Organizations 523Who’s in Charge? 523What Should be The Form And Content of Financial Statements? 524In Practice 526What Is An Endowment? 527Reporting Revenues and Expenses 529Example: Reporting Revenues and Expenses 530Reporting Cash Flows 535What are The Main Types of Contributions, and How Should Pledges Be Accounted For? 538In Practice: Even the Very Wealthy Sometimes Renege on Their Contributions 539Example: Pledges 540When Should Use-Restricted (Purpose-Restricted) Contributions Be Recognized? 542Example: Use-Restricted Contributions 542In Practice: A Gift with Strings Attached 543Should Noncash Contributions be Recognized? 544Example: Noncash Contributions 545Example 545Example: Examples of Contributed Services 546In Practice 546Should Receipts of Collection Items be Recognized As Revenues? 547When Should Conditional Promises be Recognized? 547Example: Conditional Promises 548How Should “Pass-Through” Contributions Be Accounted For? 548Example: A Federated Fund-Raising Organization 549Example: A Foundation That Transfers Assets to a Specified Organization 549Example: A Foundation That Supports a Related Organization 549When Should Gains and Losses On Investments be Recognized? 551Example: Investment Gains 551Should Endowment Gains Be Considered Net Additions To Principal Or Expendable Income? 552Example: Investment Gains 553What Are Split Interest Agreements, and How Should They be Accounted For? 554How Should Depreciation Be Reported? 555Example: Depreciation 555What Issues Does A Not-For-ProfitFace In Establishing Its Reporting Entity? 556Comprehensive Example: Museum of American Culture 558How Should The Costs of Fund-Raising Activities Be Determined? 566Criteria for Allocating A Portion of Costs To Program or Management Functions 566Example: Allocating Charitable Costs 568How Can A Not-For-Profit’s Fiscal Condition Be Assessed? 569In Practice: Not-For-Profits, Like Corporations, Tainted by Scandals 571Summary 573Key Terms In This Chapter 574Exercise for Review and Self-Study 574Questions for Review and Discussion 577Exercises 578Problems 582Solution to Exercise for Review and Self-Study 58613 Colleges and Universities 587What Unique Issues do Colleges and Universities Face? 587Standards for Public Colleges and Universities 589Standards for Private Not-For-Profit Colleges and Universities 590Accounting for Revenues and Expenses 597In Practice: Which Set of Standards Do We Follow? 598In Practice: From Public to Private 599In Practice: How Should a University Classify a Gift that May not Be a Gift? 600Example: Tuition and Fee Revenues 600Other Issues 602Example: Grants 603Example: Student Loans 604In Practice: How Auxiliary Enterprises Can Be Misused 605Comprehensive Example: Mars University 606Evaluating The Fiscal Wherewithal of Colleges And Universities 610In Practice: Colleges on the Brink 612Summary 613Key Terms In This Chapter 613Exercise for Review and Self-Study 613Questions for Review and Discussion 616Exercises 616Problems 619Solution to Exercise for Review and Self-Study 62314 Health-care Providers 625In Practice: Hospitals Face Economic Challenges While Also Implementing Policy Changes 626What Unique Issues do Health-Care Providers Face? 627What are the Basic Financial Statements? 628How are Key Revenues and Expenses Recognized? 633Example: Patient Care Revenues 634Example: Implicit Price Concessions 635Example: Capitation Fee Revenues 636Example: Charity Care 637Example: Malpractice Claims 638Example: Retrospective Premiums 639Comprehensive Example: Medical Center Hospital 639How can the Fiscal Wherewithal of Health-Care Organizations be Evaluated? 645In Practice: Financial Problems not Caused by Single Issue 646Summary 648Key Terms in This Chapter 649Exercise for Review and Self-Study 649Questions for Review and Discussion 649Exercises 650Problems 654Solution to Exercise for Review and Self-Study 65815 Auditing Governments and Not-for-Profit Organizations 659How Do Audits Of Governments and Not-For-ProfitsDiffer from Those of Businesses? 660How Has The Yellow Book Influenced Governmental and Not-For-Profit Auditing? 660What Types of Audits Do Governments Conduct? 662What Levels of Standards are Applicable To All Engagements? 662In Practice: To Whom Should a City Auditor Report? 663What are Performance Audits? 667Key Differences Between Financial And Performance Audits 667In Practice: Targeting Seemingly Trivial Activities 670Example: Evidence Gathering 673In Practice: Findings Must Relate to Program Objectives 674How Have The Single Audit Act and Other Pronouncements Influenced Auditing? 675What Approach Do Auditors Take In Performing Single Audits? 676What Reports Result From Single Audits? 679What Unique Ethical Issues Do Governmental and Not-For-Profit Accounting and Auditing Present? 682Example: Ethical Dilemma 684Summary 686Key Terms In This Chapter 687Exercise for Review and Self-Study 687Questions for Review and Discussion 688Exercises 688Problems 690Cases in Ethics 694Solution to Exercise for Review and Self-Study 69616 Federal Government Accounting 697Which Agencies are Responsible for Federal Accounting and Reporting? 700What Constitutes the Federal Budget? 703What Constitutes the Federal Government Reporting Entity? 705What are the Form and Content of Government-Wide Federal Statements? 707What Types of Accounts are Maintained by Federal Entities? 709What Statements are Required of Federal Agencies? 710What are Other Key Features of the FASAB Model? 712Example: Subsidized Loan 721Example: Loan Guarantees 722What Else Constitutes the Federal Government’s Reporting System 724What are the Key International Trends in Governmental Accounting? 725An International Standard-Setting Agency 726Summary 727Key Terms in This Chapter 728Exercise for Review and Self-Study 728Questions for Review and Discussion 729Exercises 730Problems 733Solution to Exercise for Review and Self-Study 73717 Managing for Results 739What Role Do Accountants Play in the Management Cycle of Governments and Not-For-Profits? 740How Can the Limits of Traditional Budgets Be Overcome? 741What are the Characteristics of Sound Operational Objectives? 743What are the Perils of Establishing Operational Objectives? 746I n Practice: A Classic Case of Reliance on Misspecified Objectives (Two Perspectives of the Vietnam War) 747How Do Program Budgets Relate Expenditures to Operational Objectives? 748Advantages and Disadvantages of Program Budgets 753How Should Service Efforts and Accomplishments Be Reported? 755How are Capital Expenditures Planned and Budgeted Within a Framework of OperationalObjectives? 762Example: Benefits Are Cash Savings 764Example: Choosing among Options with Similar Benefits 765In Practice: September 11 Victim Compensation Fund 767Summary 769Key Terms in This Chapter 770Exercise for Review and Self-Study 770Questions for Review and Discussion 770Exercises 771Problem 774Solution to Exercise for Review and Self-Study 778Glossary G-1Value Tables VT-1Index I-1