CGFM Governmental Financial Reporting Standards 1 — Questions and Answers
Question 1: Which body establishes generally accepted accounting principles (GAAP) for state and local governments in the United States?
- FASB
- GASB (Correct answer)
- OMB
- GAO
Correct answer: GASB
The Governmental Accounting Standards Board (GASB) establishes GAAP for state and local governments.
Question 2: What is the primary financial reporting document required for state and local governments under GASB Statement No. 34?
- Comprehensive Annual Financial Report (Correct answer)
- Single Audit Report
- Budget Comparison Statement
- Fund Financial Statement
Correct answer: Comprehensive Annual Financial Report
GASB Statement No. 34 requires state and local governments to produce a Comprehensive Annual Financial Report (CAFR), now called the Annual Comprehensive Financial Report (ACFR).
Question 3: Under GASB standards, which basis of accounting is used for governmental funds?
- Full accrual basis
- Cash basis
- Modified accrual basis (Correct answer)
- Budgetary basis
Correct answer: Modified accrual basis
Governmental funds use the modified accrual basis of accounting, recognizing revenues when measurable and available and expenditures when the liability is incurred.
Question 4: Which GASB concept requires governments to report infrastructure assets in their government-wide financial statements?
- GASB Statement No. 25
- GASB Statement No. 34 (Correct answer)
- GASB Statement No. 45
- GASB Statement No. 54
Correct answer: GASB Statement No. 34
GASB Statement No. 34 introduced the requirement to report infrastructure assets at historical cost, net of accumulated depreciation, in government-wide statements.
Question 5: What does the Management's Discussion and Analysis (MD&A) section of a government's financial report provide?
- A budget vs. actual comparison
- An analytical overview of the government's financial activities (Correct answer)
- A list of all capital projects
- An audit opinion letter
Correct answer: An analytical overview of the government's financial activities
The MD&A provides management's analytical overview of the government's financial activities based on currently known facts, decisions, or conditions.
Question 6: Under GASB Statement No. 34, government-wide financial statements are presented using which basis of accounting?
- Modified accrual
- Cash basis
- Budgetary basis
- Full accrual (Correct answer)
Correct answer: Full accrual
Government-wide financial statements use the full accrual basis of accounting to present a comprehensive economic view of the government's financial position.
CGFM Governmental Financial Reporting Standards 1
Which body establishes generally accepted accounting principles (GAAP) for state and local governments in the United States?