CGFO Governmental Accounting & Financial Reporting 3 ā Questions and Answers
Question 1: Under GASB Statement No. 68, how should a government employer report its proportionate share of a cost-sharing multiple-employer defined benefit pension plan?
- Only in footnotes; no balance sheet recognition is required
- As a net pension liability on the government-wide statement of net position (Correct answer)
- As an off-balance-sheet contingency
- As a memorandum only item in the general fund
Correct answer: As a net pension liability on the government-wide statement of net position
GASB 68 requires employers to recognize their proportionate share of the collective net pension liability on the face of the government-wide financial statements.
Question 2: Which of the following is classified as a fiduciary fund under GASB standards?
- Internal Service Fund
- Special Revenue Fund
- Pension (and Other Employee Benefit) Trust Fund (Correct answer)
- Capital Projects Fund
Correct answer: Pension (and Other Employee Benefit) Trust Fund
Pension trust funds are fiduciary funds that hold assets in trust for pension plan participants and beneficiaries, not for the government's own programs.
Question 3: What does the 'economic resources measurement focus' mean in the context of government-wide financial statements?
- Only current financial resources are reported
- All assets and liabilities, including long-term, are reported and measured (Correct answer)
- Only cash and cash equivalents are tracked
- Budgetary comparisons replace accrual statements
Correct answer: All assets and liabilities, including long-term, are reported and measured
The economic resources measurement focus includes all assets and liabilitiesāboth current and long-termāproducing a comprehensive view similar to private-sector accounting.
Question 4: A government transfers resources from the General Fund to a Debt Service Fund to pay principal and interest. How is this recorded in the General Fund?
- As an expenditure
- As an operating transfer out (other financing use) (Correct answer)
- As a reduction of revenue
- As an interfund loan receivable
Correct answer: As an operating transfer out (other financing use)
Transfers between funds are recorded as Other Financing Sources or Uses, not as revenues or expenditures, because they do not represent transactions with external parties.
Question 5: Under GASB 87, a government that is a lessee under a lease agreement with a term greater than 12 months must recognize which of the following on day one?
- An expenditure equal to total lease payments
- A right-to-use lease asset and a corresponding lease liability (Correct answer)
- Only a footnote disclosure with no balance sheet impact
- A deferred inflow of resources
Correct answer: A right-to-use lease asset and a corresponding lease liability
GASB 87 requires lessees to recognize a right-to-use intangible asset and a corresponding lease liability at the present value of future lease payments.
Question 6: Which fund type uses the accrual basis of accounting and the economic resources measurement focus, making it most similar to private-sector accounting?
- Governmental Funds
- Proprietary Funds (Correct answer)
- Budgetary Funds
- Special Revenue Funds
Correct answer: Proprietary Funds
Proprietary funds (enterprise and internal service) use full accrual accounting and the economic resources measurement focus, like private-sector businesses.
Question 7: What is the purpose of a reconciliation schedule between governmental fund statements and government-wide statements?
- To eliminate all interfund transactions from both statement sets
- To explain the differences arising from different measurement focuses and bases of accounting (Correct answer)
- To convert enterprise fund data to modified accrual
- To present budgetary versus actual comparisons
Correct answer: To explain the differences arising from different measurement focuses and bases of accounting
The reconciliation bridges differences caused by items like long-term debt, capital assets, and accruals that are treated differently under modified accrual vs. full accrual.
CGFO Governmental Accounting & Financial Reporting 3
Under GASB Statement No. 68, how should a government employer report its proportionate share of a cost-sharing multiple-employer defined benefit pension plan?