Issues of Reporting, Disclosure and Financial Analysis
Questions for Review and Discussion
1. The key criterion is financial accountability — the primary government either appoints a voting majority of the unit’s governing body or a majority of the unit’s governing body is composed of primary government officials and
• the primary government is able to impose its will upon the potential component unit or
• there is the potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government.
2. Discrete presentation is when one or more component units are reported in ...view middle of the document...
The combining statements provide the details of the nonmajor funds, one column for each of the funds. The totals columns of the combining statements tie into the amounts reported in the nonmajor funds column of the funds statements. Combining statements of nonmajor funds are not required by Statement No. 34; they may be presented as supplementary information.
Internal service funds are presented in the proprietary fund statements in a single column that combines all of the government’s funds of that type. They do not have to be separately reported in the basic fund statements even if they would otherwise meet the criteria for classification as major funds. Therefore, it is appropriate that the internal service funds be reported upon in combining statements.
6. Examples of items to be addressed in the MD&A include:
• a brief description of the required financial statements
• condensed financial information derived from government-wide statements
• an analysis of the government’s overall financial position and results of operations, including impact of important economic factors
• an analysis of balances and transactions of individual funds
• an analysis of differences between original and final budget amounts and between actual and budgeted amounts
• a description of changes in capital assets and long-term debt during the year
• a discussion of the condition of infrastructure assets
• a description of currently known facts, decisions or conditions that have, or are expected to have, a material effect on the financial position or results of operations.
7. Colleges and universities can opt to report as special purpose governments that engage (1) only in business-type activities (2) only in governmental activities, or (3) in both. If they report as entities that engage only in business-type activities then they will report on a full accrual basis. They will have to prepare only a balance sheet, a statement of revenues, expenses and changes in fund balance and a cash flow statement. They will not have to prepare funds statements.
8. The fiscal strength of a government cannot be assessed merely by examining its general...