CGFO Governmental Accounting & Financial Reporting 2 — Questions and Answers
Question 1: Under GASB Statement No. 34, which financial statements are required for governmental funds?
- Statement of Net Position and Statement of Activities
- Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances (Correct answer)
- Statement of Cash Flows and Income Statement
- Statement of Fiduciary Net Position only
Correct answer: Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances
GASB 34 requires governmental funds to present a Balance Sheet and a Statement of Revenues, Expenditures, and Changes in Fund Balances.
Question 2: Which GASB concept distinguishes between 'available' and 'measurable' resources in the modified accrual basis of accounting?
- Revenue recognition criteria requiring resources to be both measurable and available to finance current-period expenditures (Correct answer)
- The full accrual basis requirement to recognize all economic resources
- The cash basis requirement to recognize only actual receipts
- The budgetary basis requiring appropriation before recognition
Correct answer: Revenue recognition criteria requiring resources to be both measurable and available to finance current-period expenditures
Under modified accrual, revenues are recognized when they are both measurable and available (collectible within 60 days after year-end by convention).
Question 3: A government issues general obligation bonds to finance a capital project. In which fund type should the bond proceeds be recorded?
- General Fund
- Debt Service Fund
- Capital Projects Fund (Correct answer)
- Enterprise Fund
Correct answer: Capital Projects Fund
Bond proceeds for capital acquisitions are recorded in a Capital Projects Fund, which accounts for financial resources restricted to capital outlays.
Question 4: What is the primary purpose of the Management's Discussion and Analysis (MD&A) in a government's CAFR?
- To present detailed footnotes on accounting policies
- To provide an objective, easily readable analysis of the government's financial activities (Correct answer)
- To replace the auditor's report with management's opinion
- To disclose pension liability calculations
Correct answer: To provide an objective, easily readable analysis of the government's financial activities
The MD&A provides management's analytical overview of the government's financial activities, serving as an introduction to the financial statements.
Question 5: Under GASB 54, which fund balance classification is used for amounts that have been formally committed through the highest level of decision-making authority?
- Restricted
- Committed (Correct answer)
- Assigned
- Nonspendable
Correct answer: Committed
Committed fund balance requires formal action by the government's highest level of decision-making authority (e.g., an ordinance or resolution by the governing board).
Question 6: Which statement best describes infrastructure assets reported under the modified approach allowed by GASB 34?
- They must be depreciated over their useful lives like all other capital assets
- They are not reported on the government-wide statements
- They are not depreciated if the government meets preservation condition documentation requirements (Correct answer)
- They are expensed immediately when purchased
Correct answer: They are not depreciated if the government meets preservation condition documentation requirements
Under the modified approach, eligible infrastructure assets need not be depreciated if the government documents that it is maintaining them at or above a condition level it has established.
Question 7: A city collects property taxes in November for the fiscal year ending June 30. Under modified accrual, when should these taxes be recognized as revenue?
- When the tax lien is established
- In November when collected
- In the fiscal year for which they were levied, provided they are available (Correct answer)
- Only after 60 days have elapsed from collection
Correct answer: In the fiscal year for which they were levied, provided they are available
Property taxes are recognized in the period for which they were levied as long as they are measurable and available to finance current-period expenditures.
CGFO Governmental Accounting & Financial Reporting 2
Under GASB Statement No. 34, which financial statements are required for governmental funds?