GAC Financial Analysis & Reporting 4

Question 1

Under GASB Statement No. 68, which amount must be recognized on the face of a government's financial statements for defined benefit pensions?

Accepted Answer

Net pension liability

Answer

GASB 68 requires governments to report the net pension liability (total pension liability minus plan fiduciary net position) on the Statement of Net Position.

Question 2

A government's enterprise fund reports operating income of $1.2M but net income of $800,000. The most likely explanation is:

Accepted Answer

Non-operating expenses such as interest expense reduce net income

Answer

Non-operating items like interest expense on revenue bonds are excluded from operating income but deducted when calculating net income, creating the $400,000 difference.

Question 3

Which condition must be met for a government to include a legally separate entity as a blended component unit?

Accepted Answer

The entity exclusively serves the primary government or its component units

Answer

A component unit is blended when it provides services entirely to the primary government or its component units, making it essentially indistinguishable from the primary government.

Question 4

When analyzing trends in a government's revenue structure, an increasing reliance on intergovernmental revenues is generally considered:

Accepted Answer

A vulnerability because it depends on decisions made by another government

Answer

Heavy dependence on intergovernmental revenues creates fiscal vulnerability because the funding level is controlled by another government that can reduce or eliminate grants.

Question 5

Which statement about fiduciary funds is CORRECT under GASB reporting standards?

Accepted Answer

Fiduciary funds are reported only in fund financial statements, not government-wide statements

Answer

Fiduciary funds are excluded from government-wide statements because those resources are held for others and cannot be used to support the government's own activities.

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC Financial Analysis & Reporting 4