Governmental Accounting: Fundamental Principles (Portfolio 5140)

Bloomberg Tax Portfolio 5140-3rd, Governmental Accounting: Fundamental Principles (Accounting Policy and Practice Series), provides a comprehensive discussion on the fundamentals of governmental accounting.

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Bloomberg Tax Portfolio 5140-3rd, 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.

This Portfolio may be cited as Bloomberg Tax Portfolio 5140-3rd, Khumawala and Berman, Governmental Accounting: Fundamental Principles (Accounting Policy and Practice Series).


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.

Table of Contents

Detailed Analysis

I. Governmental Accounting- An Overview

A. Definitions and Organization of Governmental Accounting

B. Acceptance of GAAP Published by the GASB

C. Why Is Governmental Accounting Important?

D. Purpose of the Portfolio

E. 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 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 Assets

b. The Statement of Revenues, Expenses, and Changes in Fund Net Assets

c. The Statement of Cash Flows (Direct Method)

3. The Financial Statements for Fiduciary-Type Funds

a. The Statement of Fiduciary Net Assets

b. The Statement of Changes in Fiduciary Net Assets

4. Defining Major Funds

5. Component Units

6. Additional Issues

IV. The Entity Wide Financial Statements

Introductory Material

A. Statement of Net Assets

1. Classification of Net Assets

a. Invested in Capital Assets, Net of Related Debt

b. Restricted Net Assets

c. Unrestricted Net Assets

2. Differences From For-Profit Accounting

3. Long Term Assets and Debt

a. Future Revenues and Deferred Revenue

(1) Deferred Revenues or Deferred Inflows of Resources

(2) Future Revenues

b. Capital Assets, Depreciation, and the Modified Method

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

4. 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. Other Liabilities

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

VI. States and Other Large or Special Purpose Governments

A. States

1. States and Their Relationship to Component Units, GASB GAAP, Municipalities, and the Federal Government

a. States' Relationships With Municipalities and the Federal Government

2. Decentralization and Systems Needed to Prepare Financial Statements

3. Special Focus Areas Where States Differ States From Other Governments

a. Medicaid

b. Food Stamps

c. Unemployment Compensation

d. Lotteries

e. Escheat (Abandoned) Property

f. State Tuition Programs

g. Multi-State Legal Settlements Including Tobacco Settlement Resources

B. Authorities and Other Special Purpose Governments Commonly Found in States

1. Public Institutions of Higher Education and Their Component Unit Foundations and Activities

a. Tuition and Fees, Discounts and Allowances

b. Endowments

c. Expense Classifications

d. Federal Unrelated Business Income Tax and Public Institutions of Higher Education

e. Component Units of Public Institutions of Higher Education

f. Grants, Medicaid, and Public Institutions of Higher Education

g. Auxiliary Businesses

2. Pension and Other Post-Employment Benefit Plans

3. Public Utilities

a. FASB Standards That Apply Under GASB 34

b. AICPA Pronouncements That Apply Under GASB Statement No. 20

4. Risk Pools

5. External Investment Pools

6. Specialized Guidance for Airports, Housing Authorities, Transportation Entities, and Infrastructure Finance Authorities

Working Papers



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 Assets

Worksheet 9 Pension Trust Funds-Combining Statement of Plan Net Assets and Combining Statement of Changes in Plan Net Assets

Worksheet 10 Agency Funds-Combining Statement of Changes in Assets and Liabilities

Worksheet 11 Balance Sheet-Governmental Funds

Worksheet 12 Statement of Net Assets

Worksheet 13 Statement of Activities

Worksheet 14 Reconciliation Schedule-Governmental Funds Balance Sheet to the Statement of Net Assets

Worksheet 15 Reconciliation Schedule-Statement of Revenues, Expenditures, and Changes in Fund Balance (SRECFB) to the Statement of Activities

Worksheet 16 Note on Capital Assets

Worksheet 17 Note on Infrastructure Assets

Worksheet 18 Note on Long Term Debt

Worksheet 19 Complete Statistical Section