Discussion No. 8
Answer these questions in your original post (please remember to cite in-text using module resources):
1. Why do governments publish audited annual financial statements? Who uses the information in GAAP-based financial reports?
2. What are the common financial statements and what information financial statements should contain?
3. Discuss the differences and connections between the statement of net position and the statement of activities. Comment on the following remark: “A combination of both net assets (net position) and revenue/expense information provides a relatively
complete picture of an organization’s finances.”
4. How does a government’s government-wide statement differ from its governmental
fund financial statement or its propriety funds? Discuss why full accrual used for
government-wide financial statements and modified accrual used for governmental
funds.
Additional Resources:

https://www.youtube.com/watch?v=ooFBuBFYpX8&list=PLxP0KZzCGFYMbs-skJjzcRkVOCXg8gYC&index=10

link for reading material

Reading Governmental
Financial Statements
Professor Yoon-Jung Choi
Basic Financial Statements
Basic Financial Statements
•
All organizations following the GAAP, both public
and private, produce three common financial
statements:
?
?
?
Balance sheet: presents organization’s assets,
liabilities, and net assets at a particular point in time
(snapshot).
Income statement: presents organization’s
revenues, expenses, and changes in net assets
throughout a particular time period.
Cash flow statement: shows how an organization
receives and uses cash to carry out its mission .
Basic Financial Statements
•
Presentation style and terminology can vary depending
on the type of organization that prepared the
statements.
Why Care about Financial Information?
•
For both internal (management) and external
(accountability) uses:
?
?
Internally, it assists the internal users in the planning
and control decision-making process.
Externally, it helps the external users make
decisions: credit terms, investment, and other
decisions. It promotes accountability, transparency,
and provides information for citizens about what
their government is doing.
Overview of Financial Statements
•
•
The GASB Statement
No. 34 reporting model
focuses on the
government-as-awhole (governmentwide) and on the major
individual funds.
Both perspectives allow
the user to address
relevant questions,
broaden the basis for
comparison and
enhance government
accountability.
Overview of Financial Statements
Basis of Accounting
Balance Sheet
Fundamental Equation of Accounting
Assets
=
Liabilities
+
Net Assets
Assets
–
Liabilities
=
Net Assets
What you own
What you owe
What is left
This equation must always be in balance!
Balance Sheet
•
•
•
A snapshot of the resources, obligations, and worth
of an organization at a specific point in time.
Balance sheet reports:
? What valuable resources an organization
controls (assets)
? What it owes to outsiders (liabilities)
? And the portion of the organization’s assets
owned by its owners (net assets; nonprofit, net
position or fund balance; governments)
At a specific point in time, e.g., at the end of the
organization’s FY
Balance Sheet
Cash or cash equivalents
Investments
Current
(can be converted to cash or
Account receivable: property taxes, interest
will be consumed within a year) and penalty receivable
Inventory
Assets
Noncurrent
Restricted cash and cash equivalents
(designated for specific purposes so not
available for immediate and general use)
Capital/fixed assets (e.g., land, buildings,
infrastructure, equipment)
Current/Short-term
(will be paid within a year)
Liabilities
Long-term debt (obligations)
Account payable: wage, claims, interest,
etc.
Due in one year
Due in more than one year
Restricted
Use has been restricted for specific
purpose or time
Unrestricted
Use has NOT been restricted
Net Assets
Meals for the Homeless Balance Sheet
Meals for the Homeless Balance Sheet
Liquidity
Meals for the Homeless Balance Sheet
When Due
Meals for the Homeless Balance Sheet
Statement of Net Position
•
A government’s net position is the difference
between its assets plus deferred outflows of
resources and liabilities plus deferred inflows of
resources.
?
?
Deferred outflows of resources: consumption of net
assets that is applicable to a future reporting period
Deferred inflows of resources: an acquisition of net
assets that is applicable to a future reporting period
Assets + Deferred Outflows
=
Liabilities + Deferred Inflows + Net Position
(Assets + Deferred Outflows) – (Liabilities + Deferred Inflows)
= Net Position
Miami-Dade County Example
7540+1049
-(9286+274)
=
-971
Miami-Dade County Example
Miami-Dade County Annual Comprehensive Financial
Report
• https://www.miamidade.gov/global/finance/annualreports.page
Activity Statement
Activity Statement
•
•
•
The statement of activities presents the change in
net position over the fiscal year being reported.
It lists a government’s revenues and expenses or
expenditures, and the difference between them.
It offers some explanation for how exactly revenues
and expenses are related to net assets.
?
If Revenues>Expenses (surplus), Net Assets increase
?
If Revenues
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