Exam (elaborations)
CMFO FUND FINANCIAL REPORTING I
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CMFO FUND FINANCIAL REPORTING I
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CMFO FUND FINANCIAL REPORTING IWhat are the three groups of primary users of external financial reports identified by
GASB? - Answers- i. Citizens
ii. Legislative and oversight bodies
iii. Investors and creditors
What is each groups basic information needs? - Answers- i. Citizens need to know the
consistency achieved between the actual financial transactions of the government and
the legally adopted budget, the overall financial condition of the government, and the
efficiency and effectiveness of government operations.
ii. Legislative and oversight bodies need to monitor budget compliance, and they need
to know whether the government is complying with laws, roles, and regulations related
to financial matters and grants.
iii. Creditors and investors most critically need to keep informed of the financial
condition of the government; they are also interested in its efficiency and effectiveness.
According to GASB, what are the six basic characteristics that financial reports must
have? - Answers- 1. Understandability
2. Reliability
3. Relevance
4. Timeliness
5. Consistency
6. Comparability
What is understandability? - Answers- Understandability is the concept that users with
a reasonable understanding of public financial activities will be better equipped to
comprehend the financial statements.
What is reliability? - Answers- The financial data presented in the financial statements
should be reliable − verifiable and free of bias.
What is relevance? - Answers- Financial data must be relevant to financial statement
users. Information that is insignificant or trivial is of no use to financial statement users
and only reduces the relevance of the financial data as a whole.
What is timeliness? - Answers- Financial statements must be issued timely enough to
provide decision makers with valuable information for the decision-making process.
What is consistency? - Answers- Consistency in presentation of financial data is crucial
to providing adequate trend data and meaningful financial analysis.
, What is comparability? - Answers- Comparability is important to ensure events and
transactions are viewed similarly − "apples to apples" − when compared to other
entities.
What does the goal of Understandability and Relevance entail? - Answers- 1. Financial
reporting should assist in fulfilling government's duty to be publicly accountable and
should enable users to assess that accountability by:
a. Providing information to determine whether current-year revenues were sufficient to
pay for current-year services.
b. Demonstrating whether resources were obtained and used in accordance with the
entity's legally adopted budget and demonstrating compliance with other finance-related
legal or contractual requirements.
c. Providing information to assist users in assessing the service efforts, costs, and
accomplishments of the governmental entity.
What does the goal of Timeliness and Consistency? - Answers- 2. Financial reporting
should assist users in evaluating the operating results of the governmental entity for the
year by:
a. Providing information about sources and uses of financial resources.
b. Providing information about how it financed its activities and met its cash
requirements.
c. Providing information necessary to determine whether its financial position improved
or deteriorated as a result of the year's operations.
What does the Reliability and Comparability entail? - Answers- 3. Financial reporting
should assist users in assessing the level of services that
can be provided by the governmental entity and its ability to meet its obligations as they
become due by:
a. Providing information about its financial position and condition.
b. Providing information about its physical and other nonfinancial resources having
useful lives that extend beyond the current year, including information that can be used
to assess the service potential of those resources.
c. Disclosing legal or contractual restrictions on resources and the risk of potential loss
of resources.
What are the most frequently used accounting reports for governments and why are
they important? - Answers- Internal Financial Statements/Internal Reports. They are
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