How to Understand and Prepare the Entity-Wide Financial Statements PowerPoint Presentation, PPT - DocSlides

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Slide1

How to Understand and Prepare the Entity-Wide Financial Statements

Slide2

Why are we here today?

Slide3

WHY?

New auditing standards require Skills, Knowledge, and Experience (SKE) sufficient to understand the statements Save money on your audit by preparing your ownBecause it’s fun!!!

SKE is the KEY!

Slide4

I HEAR AND I FORGET.

I SEE AND I REMEMBER.

I DO AND I UNDERSTAND.

-CONFUCIUS

Slide5

MY HEAD IS FULL OF STUFF I DO NOT UNDERSTAND

-RANDOM TEXT MESSAGE

Slide6

Presenters

Susan Barkley CPAAssistant DirectorDistrict Support

Kentucky Department of Education

Edward D. Muns CPA

Director of Accounting

Jefferson County Public Schools

Slide7

Introduction to the Entity-Wide Statements – Structure and Theory

Slide8

Slide9

One Picture – Two Views

Fund StatementsSeparate funds

Modified accrual

Fiscal accountability

Entity-Wide Statements

Integrated reporting unitFull accrualOperational accountability

Slide10

Structure

Governmental Activities

Governmental funds

Business-Type Activities

Enterprise funds

Fiduciary Funds are not incorporated into the

entity-wide statements

Slide11

Conversion

Fund statementsGovernmental – current financial resourcesProprietary funds – economic resourcesEntity-Wide statementsAll information is economic resources

Requires converting governmental funds information to economic resources measurement focus

Slide12

The Big Differences

Capital AssetsPurchaseDepreciation

Long-term Debt

Issuance

R

epayment

Slide13

Example: Capital Assets

Gov’t FundsNo assetPurchase = expenditure in that

year

No depreciation

Entity Wide

Purchase = assetExpense is only annual depreciation

Slide14

Terminology

Current Financial Resources

Revenue or Other Financing Source

Expenditure or Other Financing Use

Economic Resources

Revenue

Expense

I love

accounting

Slide15

When is revenue recognized?

Modified Accrual When earned IF

Measurable and

Available

Collectible within the current period or soon enough thereafter to use for liabilities of current period

AccrualWhen earned

MAMA

Slide16

When is expenditure/expense recognized?

Modified AccrualWhen liability is incurred EXCEPT

Unmatured

debt

Accrued interest

InventoriesPrepaidsCertain accrued liabilities not expected to be liquidated with expendable available financial resourcesAccrual

When liability is incurred

Slide17

Statement of Activities

Presents the cost of providing services Expense – Revenue = Net ChangeUpper section shows program costs and program-specific revenueLower section shows additional revenue needed to support the programs

Minimum level of expenditure detail is function

Slide18

Revenues

Program RevenueCharges for ServicesOperating Grants & ContributionsCapital Grants & ContributionsGeneral Revenues

Examples: Property taxes, SEEK, grants that are not program-specific

Slide19

Reconciliations

The “map”Between government funds statements and entity-wide statementsListing of the conversion items to produce the entity-wide statements

Slide20

Conversion Process

MUNIS = governmental funds statementsEntity-wide is prepared off-systemExcel spreadsheetQuickbooks

sort of software

Slide21

Slide22

Exercise

Small Group Quiz: Entity-Wide Statements

Slide23

Conversion Entries:

Governmental Funds to Entity-Wide

Slide24

Gather Documents

Prior year entity-wide statementsCurrent year governmental funds statements (Munis)Long-term debt informationRefunding bondsCapital asset information

Materials from this class

Slide25

PY Entity-wide statements

Enter the ending balances of the accounts that appear ONLY on the entity-wide statementsIncluding net assets (position)These provide a beginning balance for the current year conversion activityAccounts in ALL CAPS

Slide26

CY fund statements

All other beginning balances in trial balance come from funds statementsAccounts in upper/lower caseBe sure debits and credits net to zero

Slide27

Conversion entries

Begin listing the conversion entriesNeed guidance?PY financial statementsResources from this classGFOA blue book

Slide28

Conversion entries

Do not enter the conversion entries into MunisThe conversion is performed off-system

Slide29

Capital assets

CY additionsCY depreciation expenseCY disposalsAccumulated depreciation on CY disposalsCan group these together or perform 4 separate conversion entries

Slide30

CY additions

Recorded as expenditure in the fundsWill be an asset in entity-wideDr. CAPITAL ASSETS

Cr. Expense

ENTRY A

Slide31

CY depreciation

Is not recorded at all in the fundsWill be expense in entity-wideDr. Expense

Cr. ACCUMULATED DEPRECIATION

ENTRY B

Slide32

CY disposals

Not recorded in the fundsWill be a reduction of an asset in entity-wideDr. Expense Cr. CAPITAL ASSETS

ENTRY B

Slide33

Accumulated depreciation on CY disposals

Not recorded in the fundsWill be a reduction of accumulated depreciation in entity-wideDr. ACCUMULATED DEPRECIATION

Cr. Expense

ENTRY B

Slide34

Long Term Debt

Bond proceedsBond principal paymentsRefundingsDeferred outflows/inflowsAccrued interest

Premiums and discounts

Slide35

Bond proceeds

Recorded as Other Financing Source in fundsWill be a LT liability in entity-wideDr. Other Financing Source

C

r

. LT BONDS PAYABLE

ENTRY F

Slide36

Bond principal payments

Recorded as expenditure in the fundsWill be reduction of liability in entity-wideDr. LT BONDS PAYABLE

Cr. Expenditure – debt principal

ENTRY G

Slide37

Refundings

Is recorded as Other Financing Source and Use in fundsWill be eliminated in entity-wideDr. Other financing source

C

r

. Other financing useENTRY F, G

Slide38

Deferred outflows/inflows

New with GASB 65Analyze all outstanding refundingsPrior period adjustment requiredRecord the CY net savings/cost as a revenue

Amortize the total remaining lifetime savings/cost as an expense

Remainder is deferred outflow/inflow

Slide39

Deferred outflows/inflows

Sample shows a CY net cost:Dr. ExpenseDr. Miscellaneous revenue

Cr. Deferred outflows

ENTRY C

Slide40

Accrued interest

Not recorded in fundsWill be a liability in entity-wideRecord the change in the balanceDr. Expense – interest

Cr. ACCRUED

INTEREST PAYABLE

ENTRY E

Slide41

Premiums/discounts

Recorded as Other financing source/use in fundsWill be eliminated in entity-wideDr. Other financing source (premiums)

Cr. Other revenue

Dr. Other revenue

Cr. Other financing use (discounts)

ENTRY D

Slide42

Other LT debt

Vacation leave, sick leave, otherNot recorded in fundsWill be liability in entity-wideRecord the change in the account balance

Dr. Expense

Cr. LT liability (for an increasing balance)

ENTRY

H,

M

Slide43

Transfers

Funds include transfers within governmental activitiesEliminate them on entity-wideDr. Transfers in

Cr. Transfers out

ENTRY J

Slide44

Due to / Due from

Funds include amounts owed between governmental fundsEliminate for entity-wideDr. Due to other funds

Cr. Due from other funds

ENTRY K

Slide45

Indirect costs

Funds include indirect cost amounts among governmental fundsEliminate for entity-wideDr. Other revenue

Cr. Other expense

ENTRY

I

Slide46

Revenues

Revenues classified by source in fundsDifferent categories on entity-wideDr. Other local revenue

Cr. CHARGES FOR SERVICES

Dr. Federal source revenue

Cr. OPERATING GRANTS & CONTRIBUTIONSENTRY L, O

Slide47

Function 4XXX

Expenditures are shown by function in funds Different presentation in entity-wideEliminate balance in this functionDO THIS LAST

Dr. Expense (other functions)

Cr. Expense (function 4XXX)

ENTRY Q

Slide48

Additional Entries

Your district may have additional entries

Slide49

Post to Trial Balance

Once all conversion entries are listed, post the amounts to an off-system trial balanceEntry reference letterBe sure total debits = total credits

Resulting

entity-wide balances are shown in the two far right columns

Slide50

Ending Net Position

Calculate the amount of revenues over (under) expenses from the entity-wide balances in the two far right columnsAdd this amount to beginning net position to arrive at ending net position

Slide51

Reconciliations

Must show how to get from:Balance sheet to statement of net positionStatement of revenues, expenditures and changes in fund balances to statement of activitiesConversion entries will help you complete the reconciliations

Slide52

Slide53

Game

Brain-teaser

Slide54

Excel Template

Slide55

PY Statement of Net Position

Need for beginning balances in ENTITY-WIDE accounts

PY

Stmt

net position TAB

1

Slide56

Balance Sheet

CY balance sheetAgrees to MunisGovernmental funds informationAccounts in red box provide beginning balances

Balance sheet TAB

2

Slide57

Statement of Revenues, Expenditures, and Changes in Fund Balances

CY “income statement”Agrees to Munis

Governmental funds information

Accounts in red box provide beginning balances

Stmt

rev

exp

TAB

3

Slide58

Capital Assets

Information needed to prepare note CY depreciation expense by function (from Munis)

Capital assets TAB

4

Slide59

LT Liabilities

Information needed to prepare noteDifference between short-term and long-termChanges in balances

LT liabilities TAB

5

Slide60

Deferred Outflow

Schedule of all refundingsNeed CY total and historical total

Deferred outflow TAB

6

Slide61

Expense Allocation

Systematic approach to spreading costs over each functionUse any reasonable method – be consistent – documentCan use different methods for different costsCapital assets purchases for capital asset costs

Salary expenditure for vacation liability

Expense

alloc

TAB

7

Slide62

Conversion Entries

Listing of all off-system entries needed to get from fund statements to entity-wide

Conv

entries TAB

8

Slide63

Trial Balance

The HubFill in beginning balances“Post” entries Two right columns show entity-wide statementsChange in net assets calculated at the bottom

Trial balance TAB

9

Slide64

Slide65

Reconciliation – Balance Sheet

Listing of all the items that change between the balance sheet and the statement of net position“map”

Recon

bal

sheet TAB

10

Slide66

Reconciliation – “Income Statement”

Listing of all the items that change between the statement of revenues, expenditures, and changes in fund balances and the statement of activities“map”

Recon rev

exp

TAB

11

Slide67

Statement of Net Position

The entity-wide statement of net positionAll balances come form the trial balanceMust allocate total net position among the classificationsNet investment in capital assets

Restricted

Unrestricted

Net position TAB

12

Slide68

Statement of Activities

All balances for governmental activities come from the trial balanceBusiness-type activities are the same as fund statements

Stmt

of activities TAB

13

Slide69

Sample School District - Walkthrough

Slide70

Questions

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