Question

I. Answer the following question each in 200 words.

1. What is the primary government and Component Units

II. Answer for the following questions each in 300 words

1. Explain Introduction to GASB and Capital Asset of Government Institution.
2. Explain GASP and liabilities of Government institutions.

III. A Case study / Essay – Answer for the following questions each in 400.

1. Explain the concept – Identifying Component Units.
2. Explain the concept – Reporting Component Units

Answer 1

ANSWER I

Primary Government :

Any state government , general purpose local governments or a special purpose state or local government

Special purpose government must :

· have a separately elected governing body

· be legally separate from other primary governments

· be fiscally independent of other governments

· have authority to determine its budgets, levy taxes and issue bonds

Component Unit:

Legally separate government for which elected officials of primary government are financially accountable

Exclusion of component unit might cause the Primary Government’s statements to be misleading,

ANSWER II

GASB Intro:

Governmental Accounting Standards Board (GASB) is the independent, private-sector organization based in Norwalk, Connecticut, that establishes accounting and financial reporting standards for U.S. state and local governments that follow Generally Accepted Accounting Principles (GAAP).

The GASB standards are recognized as authoritative by state and local governments, state Boards of Accountancy, and the American Institute of CPAs (AICPA).

The collective mission of the GASB, the FASB, and the FAF is to establish and improve financial accounting and reporting standards to provide useful information to investors and other users of financial reports and educate stakeholders on how to most effectively understand and implement those standards.

CAPITAL ASSET OF GOVERNMENT INSTITUTIONS:

As per GASB statemnt 34 "land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period. Infrastructure assets are long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets"

Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems

GASP - looks to be a typo.

Liabilities of Government Institutions

Liabilities are present obligations to sacrifice resources that the government has little
or no discretion to avoid.
An obligation is a social, legal, or moral requirement, such as a duty, contract, or
promise that compels one to follow or avoid a particular course of action.Generally, legally enforceable liabilities arise from
legislation of other levels of government or contractual relationships.Examples of legally enforceable liabilities arising from contractual
relationships include salaries payable, accounts payable for goods and services received,
and bonds and notes payable. An example of a legally enforceable liability arising from
legislation is certain pollution remediation obligations.
For an obligation to be a liability, it should be a present obligation. The event that
created the liability has taken place.

ANSWER III

Identifying Component Unit:

If the primary government appoints a voting majority of another unit’s governing body and

· It is able to impose its will on that unit OR,

· There is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on primary government.

The other government shall be Component unit

The primary government is able to impose its will on potential component unit if it satisfies any one of the following

· Can remove appointed members of governing board

· Has the authority to modify or approve budgets

· Can approve or modify CU fee charged

· Can veto,overrule or modify decisions of CU’s governing board

· Can appoint , hire,reassign or dismiss CU’s manager responsible for D2D operations

CU is able to provide special financial benefits or impose financial burden if:

· PG is entitled to CU’s financial resources

· Legally obligated or assumed obligation to finance the CU’s deficits or is obligate to support CU’s operations

· Is oblilgated in some manner for CU’s debt

Reporting Component Units:

Discrete presentation

· Default means of reporting

· Reporting units in a single column, separate from the data of the primary government

Blending

· Transactions treated as part of primary government

· Appropriate only in following three conditions :

o CU’s governing body is substantively the same as the governing body of the primary government

o CU provides services solely to the primary government

o Total debt outstanding is expected to be repaid entirely or almost entirely with resources from the primary government.