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Governmental and Not-for-profit Accounting - Financial Reporting

Question 1 -
In 1999, GASB introduced a new financial reporting model for state and local governments. As a result, there were significant changes made in the format and content of government financial reports. Briefly describe at least two changes. Why were these changes initiated? Do you believe these changes have achieved their intended purpose? What limitations to transparency still remain under the new reporting model?
GASB Statement No. 14 states that the financial reporting entity of a government should consist of a primary government and any component units. In your opinion, what is the most significant difference between a primary government and component unit? What criterion exists for determining whether to combine a primary government and component unit? For components included what criterion should be used to determine whether the component unit should be presented discretely or blended? Despite the guidance provided by Statement No. 14, what might be the three reasons that drive inconsistent application?

Question 2 -
GASB refers to accountability as the cornerstone of financial reporting for governments. "Financial accountability" is a term used to describe a relationship between two entities. Do you think an organization can be financially accountable for another in government? Explain how it is possible by giving at least two examples. In your opinion, how does the concept of financial accountability compare to that of consolidation? Explain your response.

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Solution Preview

Question 1 -
Two of these changes are the requirement for inclusion of the management's discussion and analysis (MD&A) and government-wide financial statements.
The MD&A tells management's insights on the government's financial performance for the year and thus allows the users of the financial statements to communicate, in a way, with the people running the government. Requiring that government-wide financial statements be included provides users a bird's eye view of the government's financial performance.
In ...

Solution Summary

This solution provides a discussion regarding governmental and not-for-profit accounting.