GASB 34/35 Asset Accounting ProcessRequirementGovernmental Accounting Standards Board (GASB) Statement Number 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments, establishes new reporting requirements for state and local governments while maintaining much of what is already required for annual reports. GASB Number 35 extends these requirements to public colleges and universities. One of the most significant new requirements is to prepare government- or university-wide financial statements using the accrual basis of accounting, in addition to the modified accrual-based fund statements already required. The challenge presented by GASB 34/35 is to produce these accrual and modified accrual statements simultaneously from the same financial records. Show
Nowhere is this challenge more acute than in the area of asset accounting. Capital acquisitions, accounted for and reported as expenditures in the fund statements, must be accounted for and reported under GASB 34/35 as assets and depreciated in the government- or university-wide statements. OverviewThe objective of GASB 34/35 is to enhance the understanding and usefulness of the general purpose external financial reports of state and local governments, and public colleges and universities. GASB 34/35 asset accounting enables users to simultaneously report capital acquisitions as expenditures in fund statements and depreciating assets in the new government- or university-wide statements required by GASB while continuing to charge these acquisitions to expense accounts in Oracle Purchasing and Oracle Payables. Standard consolidation and allocation functionality in Oracle General Ledger can be used to copy account balances from the modified accrual ledger to a new, full accrual ledger, reclassifying certain expense account balances to asset accounts to reflect the change in accounting basis. Standard copying functionality in Oracle Assets can be used to set up a second asset book that automatically calculates depreciation for the full accrual ledger. Note: The relationship between the depreciation asset book and the expenditure asset book is analogous to the relationship between the tax asset book and the corporate book for commercial organizations. GASB 34/35 SetupGASB 34/35 asset accounting setup requires the following:
GASB 34/35 Asset Accounting ProcessThe GASB 34/35 process consists of the following parts:
Financial StatementsGASB 34/35 statements can be prepared using General Ledger’s Financial Statement Generator provided that the user has an appropriately structured chart of accounts. Assumptions and DependenciesThe following assumptions and dependencies apply to the GASB 34/35 asset accounting feature:
ReferencesFor information on setting up GASB 34/35 asset accounting, see Oracle Public Sector Financials Setup Overview and GASB 34/35 Asset Accounting Setup. For information on using the GASB 34/35 asset accounting feature, see GASB 34/35 Asset Accounting Procedure. For information on using the Financial Statement Generator, see Overview of the Financial Statement Generator, Oracle General Ledger User Guide and Using Financial Statement Generator, Oracle General Ledger User Guide. GASB 34/35 Asset Accounting Process FlowchartThe diagram below shows an overview of the integration between Payables, Assets, and General Ledger under the GASB 34/35 asset accounting process as described in the GASB 34/35 Asset Accounting Process table. GASB 34/35 Asset Accounting Process Flowchart GASB 34/35 Asset Accounting ProcessThe table below describes the GASB 34/35 asset accounting process. GASB 34/35 Asset Accounting Process
Modified Accrual Versus Accrual Asset Accounting ExampleThe example below shows how the differences between modified accrual and accrual accounting affect the respective balance sheets. This example depicts the accounting treatment of the same series of business transactions using the modified accrual and accrual bases of accounting. The basis for the modified accrual accounting shows a Fund Balance of $157,500 and the basis for the accrual accounting shows Net Assets of $239,500. Capital expenditures, which are expensed in modified accrual accounting, are recorded as assets and depreciated in accrual accounting. Asset disposals are also accounted for differently. The reconciliation of the Fund Balance to Net Assets takes the Fund Balance of $157,000, adds the Fixed Assets value of $90,000, and deducts the Accumulated Depreciation of $8,000. This equals the Net Assets value of $239,500. Modified Accrual Versus Accrual Asset Accounting Example What is modified accrual accounting for government?Modified accrual is a combination of cash basis and full accrual basis. Revenues are recognized when they are both measurable and available. Measurable — the cash flow from the revenue can be reasonably estimated. Available — the revenue is available to finance current expenditures to be paid within 60 days.
Which of the following funds of a government uses the modified accrual basis of accounting?Modified accrual basis accounting is used for all governmental funds (general, federal special revenue, other special revenue, general debt service, debt service, and capital projects).
What is accrual basis of government accounting?Under accrual accounting, governments recognize all assets and liabilities including financial assets (such as equities), non-financial assets (such as land and buildings), and liabilities other than debt securities and bonds (such as payment arrears and pension obligations).
Under which basis of accounting for a government should revenues?Revenues of governmental funds are recognized on a modified accrual basis of accounting. Under this basis of accounting, amounts must be earned, measurable, and available.
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