Question 1

The GASB considers accountability as an important objective of financial reporting.

Accepted Answer

The GASB considers accountability to be the paramount objective from which all other objectives must flow.

Question 2

Basic financial statements consist of government-wide financial statements and fund financial statements for governmental funds, proprietary funds, and fiduciary funds.

Accepted Answer

Basic financial statements consist of government-wide financial statements and fund financial statement as described above.

Question 3

Minimum financial reporting requirements for general purpose external financial reports consist of an introductory section, government-wide financial statements, fund financial statements, and notes to the financial statements.

Accepted Answer

Minimum financial reporting requirements for general purpose external financial reports consist of MD&A, government-wide financial statements, fund financial statements, notes to the financial statements, and required supplementary information (other than MD&A).

Question 4

An example of a state's ability to impose its will on the operations of a legally separate toll road is its ability to approve the road's proposed increases in toll rates

Accepted Answer

A primary government can impose its will on an organization if it can significantly influence the programs, activities, or level of services it provides. For example, a mayor can impose his or her will on an organization if he or she has the ability to remove members of the organization's governing board at will, modify or approve its budgets, modify or approve the rates or fees it charges for services, veto or modify decisions of the governing body, or hire or dismiss persons responsible for the day-to-day operations of the organization.

Question 5

The relationships between two primary governments and a third organization may be such that the third organization can be a component unit of both primary governments.

Accepted Answer

One of the requirements of financial accountability is that the primary government appoint a voting majority of the component unit's governing body. A voting majority can be appointed by only one government.

Question 6

Only general-purpose governments, like states, cities, counties, towns, and villages can be primary governments. Special purpose governmental entities, like school districts and hospitals, can never be primary governments.

Accepted Answer

A special purpose government is a primary government if it has a separately elected governing body, is legally separate, and is fiscally independent of other state and local entities. To be fiscally independent, a government must be able to determine its budget, levy taxes or set user charges, and issue bonded debt, without approval of another government.

Question 7

Management's Discussion & Analysis, one of several items of required supplementary information, requires a government's financial managers to provide an objective analysis of the government's financial activities and financial position.

Accepted Answer

MD&A is part of required supplementary information. MD&A should be prepared by management and be an objective analysis of a government's financial activities and financial position.

Question 8

An important part of management's discussion and analysis is management's forecast and projections regarding what could occur in the future if certain current unknown, but plausible, events occur.

Accepted Answer

Governments should describe facts, decisions, or conditions known to management as of the date of the auditor's report that are expected to significantly affect the government's financial position (net position) or results of operations (revenues, expenses, and other changes in net position). MD&A does not include projections about unknown events.

Question 9

Governments should prepare financial statements by major funds in both governmental and proprietary funds.

Accepted Answer

Major fund reporting applies to governmental funds and Enterprise Funds. Major fund reporting does not apply to Internal Service Funds-one type of proprietary fund.

Question 10

When preparing governmental fund financial statements for a city, the General Fund is considered a major fund.

Accepted Answer

Cities use the General Fund as their primary operating fund. The GASB states that it is considered a major fund.

Question 11

Financial information for each major fund is presented in a separate column of the fund financial statements.

Accepted Answer

In the governmental fund and proprietary fund financial statements, financial information for each major fund is presented in a separate column.

Question 12

Financial statements for fiduciary funds require major fiduciary funds to be reported in separate columns and all nonmajor funds to be reported aggregately in one column.

Accepted Answer

Financial statements for fiduciary funds require separate columns for Pension and Other Employee Benefit Trust Funds, Investment Trust Funds, Private-Purpose Trust Funds, and Custodial Funds.

Question 13

The amounts reported for assets and liabilities in the total column for the combining balance sheet for nonmajor governmental funds are also reported in the other governmental funds column of the governmental funds balance sheet.

Accepted Answer

The amounts reported as assets and liabilities in the other governmental funds column of the governmental funds balance sheet are the amounts that are reported as cumulative totals for each of these items in the combining balance sheet for nonmajor governmental funds.

Question 14

Notes are an integral part of the financial statements because they contain information needed for fair presentation of the basic financial statements that is not displayed on the face of the statements.

Accepted Answer

Notes contain information needed for fair presentation of the basic financial statements that is not displayed on the face of the statements. They, therefore, are an integral part of the financial statements, as indicated by the notation "See accompanying notes" at the bottom of each statement.

Question 15

A discussion of accounting policies regarding individual assets and liabilities is included in the significant accounting policies section of the notes to the financial statements.

Accepted Answer

The summary of significant accounting policy provides the government's accounting policies for its individual assets and liabilities, net position, and fund balances, such as definition of cash and cash equivalents, restricted cash and investments, capitalization policies and estimated useful lives of capital assets, and fund balance classifications.

Question 16

Required supplementary information for a state or local government may include budgetary comparisons, pension and other employee benefit information, and combining fund financial statements.

Accepted Answer

Required supplementary information for a state or local government may include budgetary comparisons, pension and other employee benefit information, and infrastructure asset information. It does not include combining fund financial statements.

Question 17

Budgetary comparison schedules for the General Fund and each Special Revenue Fund that has a legally adopted budget must be presented as required supplementary information.

Accepted Answer

The statement is incorrect for two reasons. First, budgetary comparisons are prepared for major Special Revenue Funds-not for all Special Revenue Funds. Second, a government may present its budgetary comparisons either as required supplementary information or as a statement with the basic financial statements.

Question 18

The statistical section of the CAFR includes information about five categories of data: financial trends, revenue capacity, debt capacity, demographic and economic information, and operating data.

Accepted Answer

The CAFR's statistical section includes information about financial trends, revenue capacity, debt capacity, demographic and economic information, and operating data. This information is generally presented in the form of tables.

Question 19

Which of the following is not listed by the GASB as an objective of governmental financial reporting?

Accepted Answer

The GASB does not have financial reporting objectives that deal with internal controls over financial reporting.

Question 20

In Management's Discussion and Analysis (MD&A), what is the basic purpose of analyzing the government's overall financial position and results of operations?

Accepted Answer

The objective of analyzing the government's overall financial position and results of operations is to help users assess whether and why the government's financial position improved or deteriorated as a result of the year's operations.

Quiz 9: Reporting Principles and Preparation of Fund Financial Statements