Governmental Accounting: Fundamental Principles (Portfolio 5140)

Bloomberg Tax Accounting Portfolio 5140-4th, Governmental Accounting: Fundamental Principles (Accounting Policy and Practice Series), provides a comprehensive discussion on the fundamentals of governmental accounting. To access this Portfolio, take a free trial to the Bloomberg Tax Financial Accounting Resource Center.

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Bloomberg Tax Accounting Portfolio 5140-4th, Governmental Accounting: Fundamental Principles (Accounting Policy and Practice Series), provides a comprehensive discussion on the fundamentals of governmental accounting. This Portfolio gives the user an understanding of the similarities and differences between for-profit and governmental accounting, and a historical perspective on the development of these fundamentals. It analyzes the conceptual framework of governmental accounting, Government Accounting Standards Board (GASB) standards, the hierarchy of governmental generally accepted accounting principles (GAAP), and the financial reporting process including a discussion of the reporting entity and bases of accounting.

The Portfolio also addresses governmental audit agencies, budgets, internal control concepts, fund accounting, the types of funds, and fund financial reporting and preparation. The Portfolio discusses entity-wide financial statements, including the statement of net assets and statement of activities.

A Portfolio on governmental accounting would not be complete without a section on the preparation of the basic financial statements incorporated within the comprehensive annual financial report. The Portfolio must also include sections addressing states and other large governments along with their problems and particular issues. There is a section on special reporting issues, including bond official statements, electronic reporting, and popular financial reports, including citizen's centric reports. Finally, a comprehensive set of worksheets, examples, and a bibliography complete the Portfolio.


Saleha B. Khumawala, Ph.D., CPA

Saleha B. Khumawala, CPA, Ph.D., University of North Carolina, Chapel Hill; B.S., St. Xavier's College; member, American Institute of Certified Public Accountants, Texas Society of CPAs, American Accounting Association, and its Government and Nonprofit and Public Interest Sections. Dr. Khumawala is on the faculty in the Department of Accountancy and Taxation at University of Houston. She teaches and does research in the field of government and nonprofit accounting. A widely published author, her work appears in numerous journals and she is a frequent presenter at national and international conferences.

Eric S. Berman, CPA, CGMA

Eric S. Berman, CPA, CGMA, M.S. Accountancy, Bentley College; B.S., Boston University. Mr. Berman is a Partner at EideBailly LLP. Prior to that, he was the Deputy Comptroller for the Massachusetts Office of the Comptroller, where he is responsible for the Financial Reporting and Analysis Bureau, the Accounting Bureau, and the Federal Cost Accounting Bureau. Mr. Berman is a nationally recognized authority on GASB Standard Nos. 34, 35, 37, 38, and 45. Mr. Berman has been twice nominated for the AICPA Outstanding CPA in Government Award. He also chairs the National Association of State Comptroller's (NASC's) task force on other post-employment benefits (OPEB).

Warren M. Perry, CPA, CFE

Warren M. Perry, CPA, CFE, B.S., University of Maryland, College Park. Mr. Perry is a System Accountant Advisor for Global Computer Enterprises, Inc. (GCE). GCE provides cloud financial management systems to federal and commercial customers that are constantly maintained and updated with best business practices and new accounting standards. Mr. Perry ensures that the financial management system is compliant with accounting standards for GCE clients. He reviews each client's financial system application and verifies that transactions and financial statements are U.S. GAAP compliant.

Tammy R. Waymire, PhD, CPA

Tammy Waymire, PhD, CPA, specializes in governmental and nonprofit accounting topics, both in the classroom and research. These interests were fueled by her background in public accounting where she audited government and nonprofit entities, and subsequent experience as a Medicaid fraud investigator and as a public utility regulator. Her research has been published in the Journal of Governmental and Nonprofit AccountingIssues in Accounting EducationPublic Budgeting & FinanceNonprofit Management & LeadershipJournal of Government Financial ManagementJournal of Accounting Education, and Journal of Public Affairs Education. She is currently the President-Elect of the Government and Nonprofit Section of the American Accounting Association.

Tammy previously served on the faculty at Northern Illinois University where she earned awards for excellence in teaching and research. She earned her bachelor’s degree in accounting from Arkansas Tech University, MBA from Harding University, and PhD from the University of Arkansas. Tammy and her husband, Dennis, a counselor at Riverdale High School, met in the marching band at Arkansas Tech University. They have three boys: Samuel, David, and Jonathan.


Donald R. Deis Jr., Ph.D., CFE, CPA

Dr. Deis earned a Ph.D. in Accounting from Texas A&M University in 1988. He is a Certified Public Accountant (Texas, Active) and a Certified Fraud Examiner. He joined TAMUCC as the Ennis & Virginia Joslin Endowed Chair in Accounting in 2004. He was awarded the Texas A&M University System Regent Professor Award in 2015. Before joining College of Business at Texas A&M University-Corpus Christi, Dr. Deis was a faculty member at Louisiana State University and the University of Missouri-Columbia.


Table of Contents

Portfolio Description
Detailed Analysis
I. Governmental Accounting— An Overview
A. Definitions and Organization of Governmental Accounting
B. Why Is Governmental Accounting Important?
C. Purpose of the Portfolio
D. Intended Users of This Portfolio and Their Needs
II. Perspectives and Overarching Themes of Governmental Accounting
Introductory Material
A. Similarities and Differences Between For-Profit Enterprises and Governments
B. The Hierarchy of Governmental GAAP
C. The GASB GAAP Standards Setting Process
D. Convergence of Standards
E. The Governmental Financial Reporting Process
1. Differences in the Bases of Accounting
2. The Reporting Entity
F. Influential Governmental Agencies and Their Operations
G. Operating and Capital Budgets, Controls, Allotments, and Encumbrances
1. Variation Performance-Based Budgeting
2. Budgetary Reporting for Operations
III. Fund Accounting
A. The Concept of Funds
1. Nonspendable Fund Balance
2. Restricted Fund Balance
3. Committed Fund Balance
4. Assigned Fund Balance
5. Unassigned Fund Balance
6. Fund Balance Disclosures
7. Some Special Issues
8. Reporting of Encumbrances
B. The Types of Funds
1. Governmental Funds
a. The General Fund
b. Special Revenue Funds
c. Capital Projects Funds
d. Debt Service Funds
e. Permanent Funds
f. Analyzing Financial Statements under GASB Statement No. 54
2. Proprietary Funds
a. Enterprise Funds
b. Internal Service Funds
3. Fiduciary Funds
a. Pension Trust Funds
(1) Defined Benefit Plans
(2) Defined Contribution Plans
(3) Other Post-Employment Benefits
b. Investment Trust Funds
c. Private Purpose Trust Funds
d. Agency Funds
C. Fund Financial Statements
1. Financial Statements for Governmental-Type Funds
a. The Balance Sheet
b. The Statement of Revenues, Expenditures, and Changes in Fund Balances
2. The Required Financial Statements for Proprietary-Type Funds
a. The Statement of Net Position
b. The Statement of Revenues, Expenses, and Changes in Fund Net Position
c. The Statement of Cash Flows (Direct Method)
3. The Financial Statements for Fiduciary-Type Funds
a. The Statement of Fiduciary Net Position
b. The Statement of Changes in Fiduciary Net Position
4. Defining Major Funds
5. Component Units
6. Additional Issues
IV. The Entity Wide Financial Statements
Introductory Material
A. Statement of Net Position
1. Differences From For-Profit Accounting
2. Deferred Outflows and Deferred Inflows of Resources
3. Components of Net Position
a. Net Investment in Capital Assets
b. Restricted Component of Net Position
c. Unrestricted Component of Net Position
4. Long Term Assets and Debt
a. Capital Assets, Depreciation, and the Modified Method
b. Service Concession Arrangement
c. Impairment of Assets
d. Intangible Assets
e. Debt and Other Long Term Liabilities
(1) Serial Bonds
(2) Demand Bonds
(3) Bond Anticipation Notes (BANs)
(4) Tax Anticipation Notes (TANs) and Revenue Anticipation Notes (RANs)
(5) Capital and Operating Leases
(6) Refunding Debt
(7) Crossover Refunding Bonds and Notes
(8) Conduit Debt
5. Other Assets and Liabilities
a. Cash and Investments in General
(1) Credit Risk
(2) Concentration of Credit Risk
(3) Custodial Credit Risk
(4) Interest Rate Risk
(5) Foreign Currency Risk
b. Pooled Cash Arrangements
c. Claims, Judgments, and Other Risks
d. Compensated Absences
e. Nonexchange Financial Guarantees
f. Other Liabilities
6. Special Subject Areas
a. Government Mergers, Acquisitions and Disposals
b. Chapter 9 Bankruptcies
B. Statement of Activities
1. Revenue Recognition for Governmental Activities
2. Differences in Revenue Recognition between Governmental Fund Statements and Government-Wide Statements
a. Pass-Through Grants
b. Leases and Sales of Capital Assets
c. The Various Distinctions Between Expenditures and Expenses
d. Prepayments
e. Shared Non-Exchange Items
C. Best Practices in Conversions and Consolidations From Fund Statements
D. Management's Discussion and Analysis
V. Reporting
A. The Comprehensive Annual Financial Report—Basic Financial Statements
1. The Introductory Section
a. Cover and Title Page
b. The Table of Contents
c. Letter of Transmittal
2. Financial Section and Other Supplementary Information (OSI)
a. The Concept of Going Concern
b. OSI
3. The Statistical Section
a. Financial Trend Analyses
b. Revenue Capacity Analyses
c. Debt Capacity Analyses
d. Area Economic or Demographic Analyses
e. Operating Information
B. Other Forms of Reporting
1. Budgetary or Statutory Reports
2. Bond Official Statements
3. Popular Annual Financial Reports
4. Citizens-Centric Reports
5. Electronic Reporting
6. Service Efforts and Accomplishments (SEA) Reporting


Working Papers

Worksheet 1 History of Governmental Accounting
Worksheet 2 Calculation Matrix to Determine Major and Nonmajor Funds
Worksheet 3 Balance Sheet—Governmental Funds
Worksheet 4 Financial Statements of the General Fund— Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance
Worksheet 5 Combining Balance Sheet of Nonmajor Governmental Funds
Worksheet 6 Balance Sheet of the Debt Service Fund
Worksheet 7 Combining Balance Sheet of Other Governmental Funds (Nonmajor Permanent Funds)
Worksheet 8 Internal Service Funds—Combining Statement of Net Position
Worksheet 9 Pension Trust Funds—Combining Statement of Plan Net Position and Combining Statement of Changes in Plan Net Position
Worksheet 10 Agency Funds—Combining Statement of Changes in Assets and Liabilities
Worksheet 11 Statement of Net Assets
Worksheet 12 Statement of Activities
Worksheet 13 Reconciliation Schedule—Governmental Funds Balance Sheet to the Statement of Net Assets
Worksheet 14 Reconciliation Schedule—Statement of Revenues, Expenditures, and Changes in Fund Balance (SRECFB) to the Statement of Activities
Worksheet 15 Note on Capital Assets
Worksheet 16 Note on Infrastructure Assets
Worksheet 17 Note on Long Term Debt
Worksheet 18 Complete Statistical Section