Exam (elaborations)
CPA Exam (FAR F9) Questions & Detailed Answers
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- CPA
- Institution
- University Of Texas - Austin
CPA Exam (FAR F9) Questions & Detailed Answers
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CPA Exam (FAR F9) Questions & Detailed AnswersGovernmental Accounting and Reporting Concepts - ANS Governmental financial
reporting is designed to demonstrate the accountability of each org for the
stewardship of the resources in their care. Although the accountability for
privately owned enterprises may be clearly measured in NI of the entity or the
incr'd wealth of its SHs, governmental orgs are focused on providing
efficient/effective delivery of services w/ public resources in compliance w/
applicable laws.
IDing and displaying the accountability objs of governmental orgs is integral to
related accting.
F/S focus on timeliness, consistency, and comparability for governmental orgs.
Foundational to governmental accting is the concept of fund accting (legal
restrictions). It enables service and mission-driven orgs to easily monitor and
report compliance w/ spending purposes (fund restrictions), spending limits
(budget), and other fiscal acctability objs.
Govts use fund accting to demonstrate fiscal acctability in their external reporting
and use funds for internal accting (operational acctability). The 2 objs are:
-fiscal acctability for external
-operational acctability for internal.
,Industries That Use Governmental Accounting and Reporting Principles - ANS
Financial control and legal restrictions. Governmental, NFP, and commercial
accting are applied to entities consistent w/ their basis of org and their funding
sources, not their industries.
Book ex: hospitals C/B governmentally funded and accted for using an enterprise
fund, org'd as NFP orgs, or org'd as private businesses that report NI/profitability
to SHs. CPA exam is usually clear abt manner in which an entity is org'd and the
applicable accting principles.
Industries that commonly have the org chars and funding streams that lend
themselves to the acctability objs met by governmental reporting models:
1. Governmental Units: incl fed/state/county/muni/local govt units
(townships/villages/special districts) and entities (hospitals and universities) that
are run by govts and use governmental accting and reporting principles. The Govt
Accountability Office (GAO) prescribes auditing stds (single audit act).
2. Colleges and universities: may be governmental or nongovernmental,
depending on whether they're financially acctable to a primary govt. Also, some
colleges/universities are orgs op'd to earn a profit (for-profit entities), so they
follow FASB std for commercial entities rather than the stds for governmental or
NFP entities.
3. Health care orgs: orgs that provide health care services to indivs incl hospitals,
nursing care facilities, home health agencies, and clinics. Health care providers can
be org'd as governmental, NFP, or commercial entities. If a health care entity is
financially acctable to a primary govt, it C/B classified as a component unit of the
,govt. If a health care entity is org'd as a NFP or commercial org, it follows
applicable FASB stds rather than GASB stds.
NFP orgs not run by govts (hospitals, univs, voluntary health and welfare orgs, and
research orgs) don't use governmental accting and
Generally Accepted Accounting Principles for Governmental Entities;
Governmental Accounting Principles and Standards - ANS Govt = GASB, NFP =
FASB.
The GASB (governmental counterpart of FASB) est accting/reporting stds for govts.
The hierarchy of GAAP as it relates to govts was est by GASB 55 as follows:
-GASB stmts and interpretations (most authoritative - Category A).
-GASB technical bulletins, AICPA industry audit guides, and AICPA stmts of position
(Category B).
-AICPA practice bulletins (Category C).
-GASB implementation guides (least authoritative - Category D).
Generally Accepted Accounting Principles for Governmental Entities; GASB
Conceptual Framework - ANS The GASB has outlined its conceptual FW for
governmental FR in GASB concept stmt nos 1-6. These est the objs/concepts that
underlie governmental FR but don't est stds for governmental FR. According to the
conceptual FW, governmental FR comms fin info to users and fulfills a govt's duty
to be publicly acctable.
, F/S are a part of the overall FR done by govts. The info needs of users of
governmental fin reports incl:
-GASB 34 reporting rqmts: basic F/S (incl notes) and req'd supplementary info.
-gen purpose external FR: incl all above and comprehensive annual fin reporting.
-all fin reporting: incl all above and budgets/other special purpose reports (like to
grantor agencies).
-and other info (like economic indicators).
FR objs ID'd by the FW pertain to gen purpose external FR, which incl the basic F/S
and req'd supplementary info, as well as comprehensive annual FR (CAFR).
FR objs ID'd by the FW may not fully address budgets, other special purpose
reporting, or other info (like stand-alone budget docs or reports to grantor
agencies).
Govt entities engage in both governmental-type and bus-type activities. Each type
reqs accting and reporting stds that address their indiv chars and user needs.
The 3 groups of primary users of govt fin reports are:
1. citizens, incl taxpayers/voters/recipients of services/media/researchers, etc.
2. legislative/oversight bodies, incl state legislators/county and city
commissioners/execs w/ oversight auth.
3. investors and creditors, incl institutional investors/bond rating agencies/bond
insurers/fin institutions, etc.
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