Governmental Accounting Made Easy

317 Pages·2010·1.52 MB·English

by  Ruppel

(continued from front flap) $39.95 USA/$47.95 CAN
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Now with new coverage of accounting for
A hands-on guide to the ins and outs of p
pollution remediation obligations, asset p Second
impairment, and asset classification, as governmental accounting—made easy! e
l
well as revised and expanded discussion
Governmental Accounting
of pension reporting and sales and pledges Governmental Accounting Made Easy, Second Edition equips you with the tools Edition
you need to run the financial and accounting operations within your organization. Made Easy
of receivables and future revenues, Gov-
This complete and straightforward manual covers a broad range of governmental G
ernmental Accounting Made Easy, Second
accounting topics that fall under the Governmental Accounting Standards Board, o Second Edition
Edition is the most helpful single-source
and its recently revised financial reporting model.
v
reference you will find.
Boiling down the complicated details of governmental accounting into manageable e For laypeople and accountants with little
Whether you are a manager, budget prepar- essentials, author Warren Ruppel, a leading authority on governmental accounting, r or no governmental accounting experience,
er, state legislator, comptroller, lawyer, bond offers practical information in easy-to-understand terminology. Even if you do not n Governmental Accounting Made Easy, Sec-
counsel, underwriter of municipal bonds, have a professional understanding of accounting principles and financial reporting, m ond Edition is a complete and easy-to-use
the Second Edition makes it all clear with accounting rules explained in terms anyone
rating agency employee, bond insurer, road map to a broad range of governmental
can understand, to help you better fulfill your managerial and fiduciary duties. e
contractor, or a member of a school board accounting topics, and how these individual
n
Always practical and never over-technical, this helpful guide:
or city council—Governmental Accounting aspects of governmental accounting work
t
Made Easy, Second Edition offers a wealth of • Discusses basic accounting terminology a together under the financial reporting mod-
practical information for putting accounting • Clearly explains fund accounting l el for governments adopted by the Govern-

principles to work for your organization. • Covers the nuts and bolts of governmental financial statements A Governmental mental Accounting Standards Board.
• Equips you to understand the reporting entity
c
Read, interpret, and analyze governmen-
WARREN RUPPEL, CPA, is the author of • Discusses revenues from non-exchange transactions c
tal financial statements—Governmental
four Wiley accounting publications, includ- • Helps you become conversant in various accounting topics o
Accounting Made Easy, Second Edition
ing Wiley GAAP for Governments. He is a The recently adopted reporting model for governments resulted in a radical change u explains everything you need to know. With
partner in the Nonprofit and Government in the way governmental financial statements are presented. Suitable for profes- n
an entirely new chapter on accounting for
Services Group of Marks Paneth & Shron sional managers, budget preparers, school boards, city councils, state legislators, and t
OPEB benefits, the Second Edition offers
LLP in New York. He began his career at comptrollers, Governmental Accounting Made Easy, Second Edition is your essential in just-the-basics coverage of:
KPMG in 1979 and joined Deloitte & Touche guide for a clear, concise, understandable explanation of government finances.
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in 1989 to specialize in audits of not-for- • Basic accounting concepts underlying
profit organizations and governments. Mr. M all governmental accounting and
Made Easy
Ruppel has served as the chief financial offi- financial reporting
cer of an international not-for-profit organi- a • Basic financial statements prepared by
zation and as the Assistant Comptroller for d governments, including government-
Accounting of The City of New York, where e wide financial statements and fund
he was responsible for all aspects of the financial statements
City’s accounting and financial reporting. E
• Note disclosures that accompany gov-
a
ernmental financial statements
s
Jacket Photograph: Vonda Hussey/The Image bank • Complicated accounting issues com-
y
monly found in governmental financial
statements
Second
• Background and definition for under-
Edition
standing the reporting entity
• Accounting requirements for revenues
Warren Ruppel from non-exchange transactions
• Recording and valuing capital assets
(continued on back flap)

Second
Edition
Governmental
Made Easy
Second
Edition
Governmental
Made Easy
Warren Ruppel
JOHN WILEY & SONS, INC.
This book is printed on acid-free paper.
Copyright © 2010 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Cataloging-in-Publication Data:
Ruppel, Warren.
Governmental accounting made easy / Warren Ruppel.—2nd Ed.
p. cm.
Includes index.
ISBN 978-0-470-41150-6 (hardback)
1. Finance, Public—United States—Accounting. 2. Finance, Public—
Accounting I. Title.
HJ9801.R86 2010
657'.835 00973—dc22
2009028342
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
Contents

Preface ix
Chapter 1 Introduction and Background 1
What Are Generally Accepted Accounting Principles? 1
Who Sets Generally Accepted Accounting Principles
for Governments? 5
Do Governments Need to Comply with Generally
Accepted Accounting Principles? 9
Why Is Governmental Accounting and Financial
Reporting Different from Commercial and Not-for-
Profit Accounting and Financial Reporting? 10
To What Entities Do Governmental Generally
Accepted Accounting Principles Apply? 15
Chapter 2 Basic Governmental Accounting Concepts 19
Understanding the Different Bases of Accounting 20
Understanding What Measurement Focuses Are Used
by Governments 26
Defining and Understanding the Nature of Assets 29
Defining and Understanding the Nature of Liabilities 43
Defining and Understanding the Nature of Net Assets 49
Chapter 3 Understanding Fund Accounting 55
Fund Fundamentals 56
Governmental Funds 58
Proprietary Funds 75
Fiduciary Funds 82
Chapter 4 Basics of Governmental Financial Statements 89
General-Purpose Financial Statements 90
Management’s Discussion and Analysis 90
The Basic Financial Statements 94
Required Supplementary Information 137
Comprehensive Annual Financial Report 139
Chapter 5 Understanding the Reporting Entity 147
Background 148
Accountability Focus 149
Financial Reporting Entity Defined 150
Display of Component Units 161
Chapter 6 Revenues from Nonexchange Transactions 169
Classes of Nonexchange Transactions 170
Accounting Requirements 172
Property Taxes 175
Income and Sales Taxes, and Other Derived Tax
Revenues 177
Adjustments for the Accrual Basis of Accounting 180
Grants and Other Financial Assistance 182
Chapter 7 Capital Assets 187
Where Are Capital Assets Recorded in the Financial
Statements? 188
Recording and Valuing Capital Assets 189
Understanding Depreciation 193
Using the Modified Approach in Lieu of Depreciating
Infrastructure Assets 197
The Basics of Capitalized Interest 200
Capital Assets Resulting from Capital Lease
Transactions 206
Intangible Assets 215
Impairments of Capital Assets 217
Chapter 8 Accounting for Pensionsand Other
Postemployment Benefits 225
Requirements for Defined Benefit Pensionand OPEB
Plans 229
Calculation of the ARC 232
Parameters for Actuarial Calculations, Including
the ARC 233
Net Pension or OPEB Obligation 242
Recording Pension-and OPEB-Related Assets,
Liabilities, and Expenditures/Expenses 243
Pension and OPEB Disclosures 245
Employers with Defined Contribution Plans 246
Chapter 9 Sundry Accounting Topics 249
Accounting for Investments 249
Reporting Unrealized Gains or Losses 252
Investment and Deposit Disclosures 253
Compensated Absence Accruals 255
Landfill Closure and Postclosure Care Costs 262
Derivatives, Including Interest Rate Swaps 269
Securities Lending Transactions 281
Chapter 10 Upcoming Developments in Governmental
Accounting 287
Pension (and OPEB) Accounting—Revisited 288
Index 293

Preface

When I first began discussing the concept of a book on governmental ac-
counting for nonaccountants for the first edition of this book, the publisher,
John Wiley & Sons, Inc., asked a good question: “Who would be interested in
a book on governmental accounting who is not an accountant?” The quick an-
swers were obvious—bond underwriters and investors, lawyers, elected offi-
cials, financial and other managers working in government, labor unions, and
so forth. On second thought, anyone who is impacted by a state or local gov-
ernment (this includes virtually everyone in the United States) might have an
interest in understanding what at times seems like the overly complex and con-
fusing world of governmental accounting. Being able to more intelligently
read and understand the financial statements prepared by governments and
understanding some of the key accounting concepts that underlie those finan-
cial statements can help nonaccountants better understand the financial affairs
of governments.
The goal of this book is to provide a broad range of information about
governmental accounting and financial reporting that will be useful to people
who either have no (or very little) accounting background or have some ac-
counting knowledge in the commercial or not-for-profit accounting areas, but
do not understand governmental accounting. Governments have recently im-
plemented a new financial reporting model that has resulted in a radical
change in the way that governmental financial statements are presented.
Frankly, even after several years of experience with the new model, there are
very few people who actually understand what these financial statements are
trying to communicate. This tries to make sense of these financial statements
for the casual reader.
The information in this book is presented in as simple and as understand-
able a format as possible. This book will not make a governmental accountant
out of you, nor will it give you all of the information that you would need to
prepare a set of financial statements for a government. If you want to be a gov-
ernmental accountant or prepare financial statements for a government, you
might be interested in the current year’s edition of GAAP for Governments,
also published by John Wiley & Sons, Inc. and written by me.
The sequence of chapters in the book is designed to gradually build an
understanding of governmental accounting and financial statements. Chapter 1
describes what is meant by governmental accounting and to what types of en-
tities it applies. Chapter 2 discusses some basic accounting concepts underly-
ing all governmental accounting and financial reporting, while Chapter 3 dis-