Question 1

Governments offering postemployment benefits to their retired employees must present two financial statements related to their plans:
 the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position,as well as additional required supplementary information.

Accepted Answer

This statement is true. Governments offering postemployment benefits to their retired employees must present these two financial statements and additional required supplementary information.

Question 2

Employers with defined contribution plans will report a pension liability if the required contribution has not been fully paid by year end.

Accepted Answer

Define contribution plans provide an individual retirement account for each participating employee and no obligation exists for pension benefits beyond what has been accumulated in each individual's account.

Question 3

Net pension liabilities are reported in statements prepared using the economic resource measurement focus and accrual basis of accounting.

Accepted Answer

Net pension liabilities are reported using the economic resource measurement focus (which is concerned with the rights and claims to resources, rather than the sources of resources) and accrual basis of accounting (which recognizes revenues and expenses when they are earned or incurred, regardless of when cash is received or paid).

Question 4

Governmental investments in equity securities that have a determinable fair value are to be reported at fair value and any unrealized gains and losses are to be reported separately from realized gains and losses in the governmental operating statements.

Accepted Answer

GASB standards require equity securities that have readily determinable fair values to be reported in the balance at fair value. If a government has sufficient investments in a company to justify the equity method of accounting, then the equity method of accounting would be used. Realized gains and losses are not reported separately from unrealized gains and losses in the Statement of Changes in Fiduciary Net Position.

Question 5

Defined Benefit Pension Plans are required to pay retired employees an amount determined by formula,rather than the amount contributed to the plan.

Accepted Answer

Defined Benefit Pension Plans calculate retirement benefits using a specific formula based on factors such as years of service and salary history, rather than the amount contributed to the plan by the employee or employer.

Question 6

GASB Standards require that IRS 457 Deferred Compensation Plans,if administered by the governmental unit,be reported as pension trust funds.

Accepted Answer

According to GASB Standards, IRS 457 Deferred Compensation Plans administered by a governmental unit should be reported as pension trust funds.

Question 7

Property that has been abandoned or property whose owners cannot be found is turned over to the state government until the legal owners can be found is known as community property.

Accepted Answer

The property described in the statement is actually known as unclaimed property, not community property. Community property refers to a legal term related to the ownership of property by a married couple, where both spouses have an equal interest in the property.

Question 8

Investment pools invested from external parties are recorded in Investment Trust Funds.

Accepted Answer

Investment pools comprised of external party investments, such as those made by individuals or companies, are recorded in Investment Trust Funds. These funds are managed by a trustee and are designed to provide investors with added flexibility and diversification in their investment portfolios.

Question 9

Property that reverts to government ownership upon the death of the owner because of a lack of identifiable heirs is termed Escheat Property.

Accepted Answer

Escheat Property is a term used to describe property that reverts to government ownership upon the death of the owner because there are no identifiable heirs.

Question 10

If a government has a locally administered pension plan for which it is trustee,the government would report the locally administered plan as a pension trust fund in the basic financial statements.

Accepted Answer

As per GAAP, if a government has a locally administered pension plan for which it is trustee, the government would report the locally administered plan as a pension trust fund in the basic financial statements.

Question 11

Agency funds report no revenues,expenses,or fund equity accounts.

Accepted Answer

Agency funds are used to account for resources held by the government in a trustee capacity for individuals or other governments, and therefore do not reflect revenues, expenses, or fund equity accounts.

Question 12

Governments should report the net pension liability in the governmental fund basis statements even if it is not expected to be paid from current financial resources.

Accepted Answer

The net pension liability is the amount that a government anticipates paying to current employees in the future in excess of the resources currently accumulated for that purpose. The government-wide Statement of Net Position reports the net pension liability for employees engaged in governmental and business-type activities. The General and other governmental funds do not recognize long-term obligations. Governmental funds should report a liability for pensions in the fund-basis statements only to the extent the liability is expected to be paid with current financial resources.

Question 13

Escheat property,often collected by the state,is to be reported either in a private-purpose trust fund or in the fund to which the property ultimately reverts.

Accepted Answer

Escheat property, also known as unclaimed property, is usually collected by the state and held until the rightful owner claims it. If the owner cannot be found, the property may be sold or used for public purposes. The proceeds from such sales usually go into a private-purpose trust fund or the fund to which the property ultimately reverts. Therefore, the statement is true.

Question 14

An investment trust fund is used to account for the internal portion of a multi-government investment pool,when the reporting government is trustee.

Accepted Answer

Internal investment pools are not separate funds and the resources continue to be reported by the funds providing the resources.

Question 15

The purpose of the Schedule of Changes in Net Pension Liability and Required Ratios (part of the required supplementary information)is to enable the reader to determine whether the pension plan is sufficiently funded.

Accepted Answer

The Schedule of Changes in Net Pension Liability and Required Ratios provides information about the changes in the pension liability, the assets, the contributions, and the assumptions used to calculate the pension obligations. It also calculates the funded ratio, which is a measure of the plan's ability to meet its pension obligations. Therefore, the purpose of the schedule is to enable the reader to determine whether the plan is sufficiently funded.

Question 16

The purpose of a Statement of Fiduciary Net Position for a defined benefit pension plan is to enable the reader to determine whether the pension plan is sufficiently funded.

Accepted Answer

Determining whether a pension plan is sufficiently funded cannot be determined from the fiduciary fund statement. This information would be found in a disclosure.

Question 17

If a government has no potential liability for payment of special assessment debt in the event of default by the property owners,then an agency fund may be used to account for the proceeds of the special assessment.

Accepted Answer

An agency fund is used to account for resources that are held by a government but do not belong to it. In the case of special assessments, the government is only responsible for collecting the funds and passing them on to a third party (such as a bondholder). If the government has no liability for payment in the event of default by the property owners, then an agency fund may be used to account for the proceeds of the special assessment.

Question 18

Proprietary funds record the net pension liability as a fund liability.

Accepted Answer

Proprietary funds, which are used to account for activities similar to those found in a private business, record the net pension liability as a fund liability instead of as a long-term liability on the government-wide financial statements. This is because proprietary funds report on the business-type activities of the government and are intended to provide financial information to make decisions about pricing, budgeting, and other management-oriented purposes.

Question 19

Governments with defined benefit pension plans will report a net pension liability in the government-wide Statement of Net Position if the amount the government anticipates paying to employees in the future is greater than the net fiduciary position of the pension trust fund.

Accepted Answer

This is correct, as the net pension liability represents the difference between the projected benefit payments to be made by the government and the assets held in the pension trust fund.

Question 20

Pension trust funds are required to present a ten year Schedule of Changes in Net Pension Liability and Related Ratios as required supplementary information.

Accepted Answer

This is required by the Governmental Accounting Standards Board (GASB) Statement No. 68.

Quiz 7: Fiduciary Funds, Inter-fund Transactions

Governments offering postemployment benefits to their retired employees must present two financial statements related to their plans: the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position,as well as additional required supplementary information.