Question 1

Which of the following criteria is not required to be met for a government to be considered fiscally independent?

Accepted Answer

Separate legal standing is not a criterion for fiscal independence; fiscal independence is more about financial autonomy, such as budget adoption, issuing debt, and setting fees.

Question 2

Assume that a blended component unit of the town has its own General Fund, Special Revenue Fund, and Capital Projects Fund. All funds meet the major fund criteria. The primary government has a General Fund, three Special Revenue Funds, one Permanent Fund, one Debt Service Fund, and three Capital Projects Funds. All but the Permanent Fund and two Special Revenue Funds of the primary government are major funds. How many fund columns would be presented on the governmental funds' balance sheet?

Accepted Answer

The blended component unit has 3 funds that meet the major fund criteria, and the primary government has 6 major funds (General Fund, 3 Special Revenue Funds, Debt Service Fund, and 2 Capital Projects Funds). Therefore, there are 9 major funds in total.

For each major fund, a separate column must be presented on the governmental funds' balance sheet. Therefore, the total number of fund columns on the balance sheet would be 9.

Question 3

What is the maximum number of columns that could appear on the statement of fiduciary net position in the fund financial statements presented as part of the basic financial statements?

Accepted Answer

The answer of What is the maximum number of columns...

Question 4

In which of the following situations would a component unit be required to prepare a CAFR, not just the basic financial statements?

Accepted Answer

The Comprehensive Annual Financial Report (CAFR) is a thorough presentation of a government entity's financial condition. It goes beyond the basic financial statements required by GAAP. However, GAAP does not mandate the preparation of a CAFR for any entity, including component units. The decision to prepare a CAFR is typically voluntary and based on the entity's desire to provide a higher level of financial transparency and detail.

Question 5

When there are more than two funds of the relevant fund type, combining financial statements would not be required in the CAFR for which types of funds?

Accepted Answer

The answer of When there are more than two funds...

Question 6

The City of Newport appointed the original governing board of the Newport Historical Association, at which point the board became self-sustaining. The city has historically (but voluntarily) provided funding for the Association for the past several years. The city of Newport should

Accepted Answer

The Newport Historical Association should be reported as a discretely presented component unit because it has a separately elected governing board and is financially accountable for its own operations, despite voluntary funding from the city.

Question 7

How should information about each major discretely presented component unit be presented in the financial statements?

Accepted Answer

Each major discretely presented component unit should be reported in a single column in the government-wide statements, with additional condensed financial statements provided in the notes to the financial statements.

Question 8

Whether or not to declare a fund as being major is not optional for

Accepted Answer

The General Fund is always considered a major fund due to its primary role in financing the general operations of a government entity. Other funds, such as Capital Projects, Debt Service, and Enterprise Funds, may be declared as major or not based on specific criteria such as total assets, liabilities, revenues, or expenditures/expenditures in relation to the overall government finances.

Question 9

The governing board of the City of Wheaton is also the governing board of Mosquito Abatement District, a business-type activity. A benefit or burden relationship exists between the city and the district. Which of the following statements regarding the financial reporting options is false?

Accepted Answer

The District, being a blended component unit due to the benefit or burden relationship and shared governing board with the City of Wheaton, is indeed subject to major fund reporting criteria if its financials meet the specific thresholds set for major funds. This makes statement B false as all funds, including blended component units, are evaluated for major fund status based on their financial significance to the reporting entity.

Question 10

If a governmental entity has a blended component unit, the note disclosures should include all of the following except

Accepted Answer

The note disclosures for a blended component unit should include information on how the component unit met the blending criteria, a statement identifying the component unit as being blended, and information on how to access separately issued external financial statements. However, the number of component unit governing board members is not a required disclosure.

Question 11

If a primary government reports a discretely presented component unit, then the primary government must

Accepted Answer

When a primary government reports a discretely presented component unit, the financial information of the component unit should be included in the government-wide financial statements of the primary government. This means that the primary government must prepare consolidated financial statements that include the financial information of the component unit. No separate MD&A or note disclosures are required, but information related to the component unit may be included in the statistical section of the CAFR.

Question 12

Blended and discretely presented component units may issue separate financial statements. Which of the following statements is false related to this provision in GAAP?

Accepted Answer

Blended and discretely presented component units that issue separate financial statements are still required to be reported as part of the primary government's reporting entity to ensure a comprehensive view of the financial position and operations of the entire governmental entity.

Question 13

An entity is a component unit of another entity if

Accepted Answer

A component unit is a legally separate organization that is affiliated with a primary government. An entity is considered a component unit if it meets one of three criteria: (1) the primary government is financially accountable for it, (2) the entity is fiscally dependent on the primary government, or (3) the entity provides services exclusively to the primary government. Option B is correct because it states that the entity is fiscally dependent on the primary government and has a benefit or burden relationship with it.

Question 14

The Mount Pilot Airport Authority is governed by a seven-member board. Four of the board members are appointed by the town of Mount Pilot and the remaining three are appointed by the governing board of Griffith County. Neither the town nor the county share in any profits, nor are required to fund any deficits, of the Authority. The town, however, does approve the Authority's proposed budget. The county may make budgetary recommendations to the Authority, but they are not required to approve the proposed budget. The Authority should be reported as

Accepted Answer

The Authority should be considered a discretely presented component unit of the town because the town has a higher degree of involvement with the Authority, including the appointment of the majority of the board members and the approval of the Authority's budget, which indicates a closer relationship with the town than with the county.

Question 15

In discrete presentation, component unit

Accepted Answer

In discrete presentation, the data of the component unit is presented separately in the government-wide financial statements from the primary government data. This is done to provide a more accurate picture of the financial position and performance of the primary government as a whole. The component unit is not reported as a fund of the primary government (A) and it may or may not have special revenue funds. Including basic financial statements in the primary government's comprehensive annual financial report (D) is a requirement for all types of presentation, not just discrete presentation.

Question 16

Substantively the same governing body means that

Accepted Answer

The answer of Substantively the same governing body means that
...

Question 17

In the basic financial statements, separate sets of fund financial statements should be presented for

Accepted Answer

The answer of In the basic financial statements, separate sets...

Question 18

Which fund type would be reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances?

Accepted Answer

Permanent Funds are governmental funds, and their financial activities are reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances. This statement reflects the financial activities and balances for governmental funds, not for proprietary or fiduciary funds like Enterprise, Internal Service, or Pension Trust Funds.

Question 19

If a state has three discretely presented component units, two of which are "governmental" in nature and one of which is "business-type" in nature, what is the minimum number of discretely presented component unit columns that can be reported in the government-wide statements?

Accepted Answer

The answer of If a state has three discretely presented...

Question 20

Britt County has seven discretely presented component units. Three of the component units are considered "governmental" in nature and the remaining four are considered "business-type" in nature. How many columns for the discretely presented component units would be reported on the General Fund balance sheet?

Accepted Answer

The answer of Britt County has seven discretely presented component...

Quiz 15: Financial Reportingthe Comprehensive Annual Financial Report and the Financial Reporting Entity