Asked Questions regarding Governmental Accounting Standards Board Statement
No. 34 (GASB No. 34)
Q. What revenue earnings period and sources of revenue should my district include in the implementation calculation required by GASB No. 34?
A. Your district should include revenues for the fiscal year ending June 30, 1999. Sources of revenue are as follows:
Total revenues include only the revenues of the governmental and enterprise funds.
Refer to GASB No. 34, Appendix B, Basis for Conclusions, and the Guide to Implementation of GASB Statement 34 on Financial Statements - and Management's Discussion and Analysis for State and Local Governments (Q. #262 and 264) should your district require additional guidance.
Q. Although the total revenues of our district were under $100 million for the fiscal year ending June 30, 1999, the total may go over the phase 1 implementation amount of $100 million for the fiscal year ending June 30, 2002. Does this mean we will have to implement GASB No. 34 in phase 1?
A. No. The revenues for determining the implementation phase are based on the first fiscal year ending after June 15, 1999. For New Jersey school districts, this is the year ending June 30, 1999. A later increase in revenue does not change that. Revenues include all revenues (not other financing sources) of the primary government's governmental and enterprise funds, except for extraordinary items as defined in paragraph 55. The implementation phase for a component unit is based on the primary government's revenues, not the component unit revenues. A component unit should implement the requirements of GASB No. 34 in the year when the primary government would be required to implement it.
Q. Is the NJ Department of Education (NJDOE) providing training to districts on GASB No. 34, similar to the GAAP training provided in 1993?
A. The transition to GAAP involved major changes at the transaction level of accounting. GASB No. 34 is a statement that primarily affects end-of-year financial reporting. For that reason, the NJ Department of Education plans to provide training on aspects that are specific to New Jersey school districts in April or May 2002, when The Audit Program is released. The NJDOE recommends that district staff gain an understanding of the impact of GASB No. 34 on their district's financial statements prior to that training. There are many opportunities to acquire training on GASB No. 34 through professional organizations. Several training offers can be found on these popular Web sites: www.aicpa.org (video and text), www.gasb.org (text), www.asbointl.org, www.njscpa.org, https://www.njscpa.org/catalog/detail.cfm?code=2011200
Q. Where are capital assets presented in the Governmental Fund Statements?
A. "The financial statements for the governmental funds should be presented using the current financial resources measurement focus and the modified accrual basis of accounting..." (GASB No. 34, paragraph 79). For this reason, the capital (fixed) assets are part of the reconciliation to the Statement of Net Assets (Exhibit A-1) at the foot of the balance sheet (governmental funds statement) and are not a line item in the body of the governmental fund statements.
Q. The sample statement of activities looks a bit unwieldy - is this the preferred format?
A. There are four applicable illustrations for this statement in Appendix C of GASB No. 34. The statement notes that the first exhibit (GASB B-1) illustrates the format that is suitable for most governments. The second illustration includes the column for the allocation of indirect expenses. This is optional and not required. The third illustration uses columns for the functions instead of rows, and is suitable for an entity that has few functions. The fourth illustration uses two pages and provides more space for reporting of greater detail.
The format in the first illustration (GASB B-1) is used in the New Jersey sample statements. However, New Jersey districts have the option to use the allocation of indirect expenses format in the GASB B-2 illustration in the GASB No. 34 Appendix C.
Q. How should depreciation be charged in the statement of activities?
A. Depreciation is charged as a direct expense when the underlying asset can be specifically identified with a function. GASB No. 34, paragraph 44 states, "Depreciation expense for capital assets that can specifically be identified with a function should be included in its direct expenses. Depreciation expenses for 'shared' capital assets... should be ratably included in the direct expenses of the appropriate functions. If a government uses a separate line in the statement of activities to report unallocated depreciation expense, it should clearly indicate the fact that this line item excludes direct depreciation expenses of the various programs."
Q. How should New Jersey districts determine which of their funds qualify for treatment as major funds?
A. GASB No. 34 provides guidance for determining individual fund status. The main operating fund is always considered major. An individual governmental or enterprise fund may be tested by formula as prescribed by GASB No. 34 to determine fund status. Additionally, a government may designate as major any other governmental or enterprise fund it believes is important to the users of its financial statements. NJDOE has elected to require New Jersey districts to treat each governmental fund as a major fund in accordance with the option noted in GASB No. 34, paragraph 76. The NJDOE believes that the presentation of these funds as major is important for public interest and to promote consistency among district financial reporting models.
Q. Are there additional disclosures required by GASB No. 34 for long-term liabilities?
A. Yes. The disclosure for long-term liabilities includes a new column, Amounts Due within One Year. Also, there is a distinct presentation of the liabilities for governmental activities and for business-type activities in the disclosure.
Q. Are New Jersey districts required to present budgetary comparison schedules within their CAFR?
A. Yes. New Jersey districts must report budgetary comparison schedules with the Required Supplementary Information section of their Comprehensive Annual Financial Report (CAFR). The presentation should be a five- column approach including the original budget, budget transfers, final budget, actual results, and variance.