CGFO Fin Rpt Ch. 6-7 Blue Book

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CGFO Fin Rpt Ch. 6-7 Blue Book
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2013-11-12 04:54:25
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CGFO CPFO Blue Book Financial Reporting
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CGFO Fin Rpt Ch. 6-7 Blue Book
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  1. True or False-The SEC has the legal authority to set GAAP for state and local governments, though it historically has delegated that power to others.

    False. Federal securities legislation of the 1930's vested the SEC with the legal authority to set financial reporting standards for issuers of publicly traded securities. Those laws, however, expressly exempted state and local governments from all but the anti fraud provisions of that legislation. Decades later, Congress reaffirmed this exemption as part of the legislation that established that Municipal Securities Rulemaking Board in 1975.

  2. True or False-The FAF oversees the FASB, the GASB, and the FASAB.

    False-In 1972, the FAF was established to oversee the setting of accounting standards in the private sectors. In June 1984, the FAF took similar responsibility for overseeing and appointing members to the newly formed GASB. The FASAB, however, does not function under the auspices of the FAF.

  3. True or False-A fundamental purpose of due process is to determine that a majority of interested parties support accounting and financial reporting guidance proposed by the GASB.

    False-The GASB's charge is to make decision based on what the board believes would best serves the needs of financial statement users. Thus, the purpose of due process is not to determine the 'majority view' of constituents, but rather to ensure the board has all the fact it needs to make an informed decision.

  4. Which of the following considerations ultimately defines the scope of the financial reporting entity?
    A. Financial interrelatedness
    B. Financial oversight
    C. Accountability of elected officials
    D. Assumption of risk and benefits.

    C. Accountability of elected officials. The parameters of the financial reporting entity reflect the notion the financial accountability ultimately rests with elected officials

  5. Which of the following is always a primary government?
    A. County
    B. Municipality
    C. School district
    D. All of the above
    E Both A and B

     
    E. Both A and B. Every general purpose government automatically qualifies as a primary government

  6. Which of the following is necessary for a special purpose government to qualify as a primary government?
    A. Separate legal status
    B. Separately elected governing body
    C. Fiscal independence
    D. All of the above
    E. Both A and B

     
    D. All of the above. A special purpose government must meet three criteria to qualify as a primary government: 1) it must have separate legal status, 2) it must have a separately elected governing body, and 3) it must be fiscally independent

  7. Which of the following would potentially meet the board appointment test?
    A. Appointment restricted to a pre-selected list of candidates.
    B. Appointment of simple majority (although 2/3rd majority is required to issue debt)
    C. Both A and B
    D. Neither A nor B

     
    D. Neither A nor B. There is no fiscal accountability if the power of board appointment is more apparent than real (a pre-selected list of candidates). Likewise, financial accountability requires that the votes of the members chosen by the primary government be sufficient, by themselves, to carry a financial decision before the board.

  8. Which of the following is evidence of a financial benefit or burden relationship between a primary government and the appointed governing board of a potential component unit?
    A. The primary government is the largest single customer of the potential component unit
    B. The primary government is entitled to the assets of the potential component unit upon dissolution.
    C. Tax-increment financing of the primary government is used to support the potential component unit.
    D. All of the above.

     
    C. TIF of the primary government is used to support the potential component unit. Exchange and exchange-like transactions are not considered evidence of financial benefit; nor would a residual claim to a potential component unit's assets upon its dissolution (a practical assumption of the going concern assumption) Conversely, TIF is considered evidence of financial burden, because it represents the commitment of the primary government's taxing power.

  9. Which of the following is only relevant to the determination of component unit status after board appointment had been established?
    A. Ability to impose will
    B. Financial benefit
    C. Financial burden
    D. All of the above

     
    A. Ability to impose will. The ability of a government to impose its will does not come into play as a factor for the inclusion in the absence of board appointment. A financial benefit or burden relationship, on the other hand, would be relevant to a potential component unit, even in the absence of board appointment, if the unit was fiscally dependent.
  10. Which of the following is evidence of fiscal dependence?
    A. Another government determines that the budget of a potential component unit complies with the state's balanced budget law
    B. The government is of type which is precluded by state law from issuing long-term debt
    C. Another government must approve the operating budget
    D. All of the above

     
    C. Another government must approve the operating budget. An organization is considered to be fiscally dependent on another government only if the latter can arbitrarily interfere in its financial management approval is necessary for either the budget, tax levies, rates and charges, or the issuance of bonded debt.

  11. Which of the following criteria are relevant to determining whether a legally separate tax-exempt organization is a component?
    A. Direct benefit
    B. Access to resources
    C. Significance
    D. All of the above
    E. Both A and B

    D. All of the above. Legally separate, tax-exempt organizations should be treated as component units if they meet three criteria: 1) the resources are for the direct benefit of the primary government, 2) the primary government has access to the resources, and 3) the resources of a given organization are significant to the primary government

  12. A primary government, as legally defined, has two special revenue funds. It also has a component with a general fund and three special revenue funds. How many special revenue funds would the primary government present in the financial report of the financial reporting entity?
    A. 2
    B. 3
    C. 5
    D. 6

     
    D. 6 - 2 special revenue funds + 3 special revenue funds + 1 general fund reclassified as a special revenue fund for inclusion with the primary government = 6 special revenue funds

  13. Which of the following could qualify as a blended component unit even if its board was not substantially the same as that of the primary government?
    A. Financing authority
    B. Utility
    C. Housing authority
    D. All of the above
    E. None of the above

    A. Financing authority. A financing authority could provide benefit exclusively to the primary government itself rather than to its citizens, which would qualify it for blending.

  14. True or False-If the board member of a primary government serve automatically as the board of another entity, the latter still meets the board appointment test even the board members were not actually appointed.
     
    True-Board appointment is understood to include situations where officials of the primary government serve on potential component unit's governing body as required by law.

  15. True or False A single potential component unit may meet the criteria for being a component unit of more than one primary government
     
    True-A given organization may qualify as a component unit of more than one government, even though ultimately it can be reported as such by only one of them.

  16. True or False A single component unit may be reported as a component unit of more than one primary government.
     
    False-Only one primary government may include a given organization as a component unit.

  17. True or False One way to meet the requirement to present information for major discretely presented component units is to include combining statements outside the basic financial statements, elsewhere within the financial section of the CAFR.
     
    False-Regardless of whether a government issues a CAFR, data on each separate major discretely presented component unit must be presented within the basic financial statements.

  18. True or False Stand alone financial statements are appropriate for entities other than primary government.
     
    True-As legally separate units, component units often issue their own separate financial reports.

  19. Which of the following operations would be most likely to have a measurement focus different from the others?
    A. Fire dept.
    B. Street dept.
    C. Water dept.
    D. Police dept.

     
    C. Water dept. Activities reported in governmental funds have a different measurement focus than activities reported in enterprise funds. A fire dept., and streets dept, and a police dept. typically would all be reported in a governmental fund, whereas a water dept. would more likely be reported in an enterprise fund.

  20. Which of the following assets, if present will always appear on a statement of position, regardless of measurement focus?
    A. Prepaids
    B. Capital assets
    C. Receivables
    D. All of the above

     
    C. Receivables. Funds that use the current financial resources measurement focus must report all of the financial assets, including receivables, regardless of the timing of related cash flows, just like funds that use the economic resources measurement focus and the government-wide financial statements.

  21. Which of the following liabilities, if present, will always appear on a statement of position, regardless of measurement focus?
    A. Vendor payables
    B. Interest payable
    C. Long-term debt
    D. All of the above
    E. Both A and B

     
    A. Vendor payables. Governmental funds must report liabilities as they incurred unless there is a special provision to the contrary in the authoritative standards. There is no such special provision for vendor payables.

  22. Which of the following, if present, will always appear on a statement of resource flows, regardless of measurement focus?
    A. Capital outlay
    B. Debt service principal payments
    C. Issuance of debt
    D. None of the above

     
    D. None of the above. Funds that use the current financial resources measurement focus report expenditures for capital outlay and debt service principal payments. They also report an other financing source for the issuance of long-term debt. None of these items are reported in funds that use the economic resources measurement focus.

  23. Which of the following would appear in a statement of resource flows prepared using the economic resources measurement focus?
    A. Issuance of debt
    B. Repayment of principal of debt
    C. Capital outlay
    D. Depreciation and amortization

     
    D. Depreciation and amortization. Funds that use the economic resources measurement focus report depr/amort. expense rather than capital outlay expenditures. They do not report either the issuance of debt or the repayment of the principal of debt.

  24. Which of the following would not appear in a statement of resource flows prepared using the current financial resources measurement focus?
    A. Issuance of debt
    B. Repayment of principal of debt
    C. Capital outlay
    D. Depr. and amortization

     
    D. Depr. and amortization. Under the current financial resources measurement focus, the cost of a capital asset is recognized upon acquisition (capital outlay expenditure) rather than over the useful life of the capital asset.

  25. Which of the following would not appear in a statement of resource flows prepared using the economic resources measurement focus?
    A. Revenues
    B. Expenses
    C. Expenditures
    D. None of the above

     
    C. Expenditures. A statement of resource flows prepared using the economic resources measurement focus would report expenses rather than expenditures.

  26. Which of the following would not appear in a statement of resource flows prepared using the current financial resources measurement focus?
    A. Revenues
    B. Expenses
    C. Expenditures
    D. None of the above

     
    B. Expenses. A statement of resource flows prepared using the current financial resources measurement focus would report expenditures rather than expense.

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