(a) GASB Statement 55 presents four categories which provide the GAAP Hierarchy for state and local governments. The pronouncements with the highest authoritative status are officially issued accounting principles—GASB Statements and Interpretations.
(c) According to the GAAP hierarchy provided in GASB Statement 55, the category with the least authoritative status includes implementation guides (Q & As) published by the GASB staff, as well as practices that are widely recognized and prevalent in state and local government. Answers (a), (b) and (d) are all pronouncements listed in the second highest authoritative category.
(b) The requirement is to identify the accurate statement about service efforts and accomplishments reporting. Answer (b) is correct because the GASB Concepts Statements indicate that service efforts and accomplishments reporting is necessary but not required.
(a) The requirement is to identify the statement that is true about the essential characteristics of an asset. Answer (a) is correct because according to GASB Concepts Statements, assets are resources with present service capacity that the government presently controls.
(a) The requirement is to identify the elements of resource flows statements. Answer (a) is correct because the elements include outflow of resources and inflow of resources. Answers (b), (c), and (d) are incorrect because deferred outflow of resources and deferred inflow of resources are elements of the statement of net position.
(c) The requirement is to identify the true statement about service efforts and accomplishments reporting under GASB Concepts Statements. Answer (c) is correct because GASB Concepts Statements indicate that the objective of SEA reporting is to provide more complete information about a governmental entity’s performance than can be provided in traditional financial statements and schedules. Answer (a) is incorrect because SEA reporting is not required. Answer (b) is incorrect because it is not more appropriate for governmental businesstype activities. Answer (d) is incorrect because the traditional financial statements are more important to investors and creditors.
(a) The requirement is to identify the element that is most like a deferred outflow of resources. Answer (a) is correct because a deferred outflow of resources is a consumption of net position by the government that is applicable to a future reporting period. It is similar to an asset.
(c) GASB 34 (as amended) indicates that the basic financial statements include only the government-wide statements, the fund statements, and the notes to the financial statements.
(d) The concept underlying the definition of the financial reporting entity is that elected officials are accountable to their constituents for their actions. Accordingly, the financial reporting entity consists of (1) the primary government, (2) organizations for which the primary government is financially accountable, and (3) other organizations for which the nature and significance of their relationship with the primary government is such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. Thus, the basic criterion used to determine the reporting entity is financial accountability.
(b) The requirement is to determine how the school district’s financial activity should be reported. The school district is a component unit, which means it is a legally separate organization for which the elected officials of a primary government are financially accountable. Component units can be presented either discretely or blended. If the component unit is so closely tied to the primary government that the activities seem to be indistinguishable, the presentation should be blended. Specifically, the unit is blended if (1) the governing body of the component unit is substantially the same as the primary government, and (a) there is a financial benefit/burden relationship, or (b) there is common management, (2) the services provided are entirely, or almost entirely to the primary government, or (3) the component’s debt will be repaid entirely or almost entirely by the primary government. None of these criteria exist in this situation and, therefore, the school district should not be presented on a blended basis. Its financial information should be presented discretely.
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