Question

Financial reporting by general-purpose governments includes presentation of management’s discussion and analysis as

a. Required supplementary information after the notes to the financial statements.

b. A description of currently known facts, decisions, or conditions expected to have significant effects on financial activities.

c. Part of the basic financial statements.

d. Information that may be limited to highlighting the amounts and percentages of change from the prior to the current year.

Answer 1

This Statement establishes new financial reporting requirements for state and local governments. The new annual reports should give government officials a new and more comprehensive way to demonstrate their stewardship in the long term in addition to the way they currently demonstrate their stewardship in the short term and through the budgetary process.

This Statement establishes financial reporting standards for state and local governments, including states, cities, towns, villages, and special-purpose governments such as school districts and public utilities. It establishes that the basic financial statements and required supplementary information (RSI) for general purpose governments should consist of:

• Management's discussion and analysis (MD&A)
• Basic financial statements
• Required supplementary information (RSI)

1. Required supplementary information after the notes to the financial statements:

• To demonstrate whether resources were obtained and used in accordance with the government's legally adopted budget,
• RSI should include budgetary comparison schedules for the general fund and for each major special revenue fund that has a legally adopted annual budget.
• The budgetary comparison schedules should present both (a) the original and (b) the final appropriated budgets for the reporting period as well as (c) actual inflows, outflows, and balances, stated on the government's budgetary basis.
• This Statement also requires RSI for governments that use the modified approach for reporting infrastructure assets.

2. A description of currently known facts, decisions, or conditions expected to have significant effects on financial activities.

• MD&A should provide an objective and easily readable analysis of the government's financial activities based on currently known facts, decisions, or conditions. It should provide an analysis of the government's overall financial position and results of operations to assist users in assessing whether that financial position has improved or deteriorated as a result of the year's activities.
• It should also describe capital asset and long-term debt activity during the year. MD&A should conclude with a description of currently known facts, decisions, or conditions that are expected to have a significant effect on financial position or results of operations.
• Governments should report all capital assets, including infrastructure assets, in the government-wide statement of net assets and generally should report depreciation expense in the statement of activities.
• Infrastructure assets that are part of a network or subsystem of a network are not required to be depreciated as long as the government manages those assets using an asset management system that has certain characteristics and the government can document that the assets are being preserved approximately at (or above) a condition level established and disclosed by the government.
• The net assets of a government should be reported in three categories—invested in capital assets net of related debt, restricted, and unrestricted.
• The government-wide statement of activities should be presented in a format that reports expenses reduced by program revenues, resulting in a measurement of "net (expense) revenue" for each of the government's functions.
• Program expenses should include all direct expenses. General revenues, such as taxes, and special and extraordinary items should be reported separately, ultimately arriving at the change in net assets for the period. Special items are significant transactions or other events that are either unusual or infrequent and are within the control of management.

3. Part of the basic financial statements.

• To report additional and detailed information about the primary government, separate fund financial statements should be presented for governmental and proprietary funds.
• Required governmental fund statements are a balance sheet and a statement of revenues, expenditures, and changes in fund balances.
• Each of the fund statements should report separate columns for the general fund and for other major governmental and enterprise funds.
• Proprietary fund statements of revenues, expenses, and changes in fund net assets should distinguish between operating and non operating revenues and expenses.
• Interfund activity includes interfund loans, interfund services provided and used, and interfund transfers.
• This activity should be reported separately in the fund financial statements and generally should be eliminated in the aggregated government-wide financial statements

4. Information that may be limited to highlighting the amounts and percentages of change from the prior to the current year.

• MD&A should include comparisons of the current year to the prior year based on the

             Government-wide information.

• In addition, it should provide an analysis of significant changes that occur in funds and significant budget variances.