Governmental and not-for-profit accounting, solution of Accounting for Capital Projects and Debt Ser

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1、Chapter6AccountingforCapitalProjectsandDebtServiceQuestionsforReviewandDiscussion6-27GranofandKhumawala5e,GovernmentandNot-for-ProfitAccounting1.Budgets,andhencebudgetcomparisons,arenotasessentialforcapitalprojectsanddebtservicefundsbecausetheyareoftenonaproject,ratherthananannual,basisandspendi

2、ngistypicallyauthorizedonthatbasis.2.Whenbondsareissuedformorethantheirparvalue,thepremiumcanbeinterpretedasanadjustmentoftheinterestrateandtransferredtothedebtservicefund—thefundinwhichresourcesforthepaymentofdebtwillbeaccumulated.Althoughthesameinterpretationcanbeplaceduponbonddiscounts,therem

3、aybenofundsavailableinthedebtservicefund(oranyotherfund)fortransfertothecapitalprojectsfund.Therefore,theprojectmustbescaledbackoradditionalmeansoffinancingsecured.3.Interest(oninvestments)isgenerallyrecognizedasrevenueisearned,i.e.,onafullaccrualbasis.Interestexpenditure,bycontrast,shouldnotbea

4、ccrued;itshouldbereportedasanexpenditureonlyasdue.Therationaleforrecognizingtheexpenditureonlyastheinterestisdueisthatmostjurisdictionswillnotappropriatetheresourcestopaytheinterest,ortransferthemtothedebtservicefund,untilthen.“Toaccruethedebtservicefundexpenditureandliabilityinoneperiodbutrecor

5、dthetransferoffinancialresourcesfordebtservicepurposesinalaterperiodwouldbeconfusingandwouldresultinoverstatementofdebtservicefundexpendituresandliabilitiesandunderstatementofthefundbalance,”accordingtoGASBstandards.However,iftheresourceshavebeentransferredintothedebtservicefund,theninterestmay(

6、itdoesnothaveto)beaccrued.4.Today,governmentsaccountforspecialassessmentsthesameastheydootherprojects.Thus,theresourcesearmarkedforconstructionareaccountedforinacapitalprojectsfund;thosededicatedfortherepaymentofdebtareaccountedforinadebtservicefund.Thelong-termdebtandtheconstructioninprocessare

7、notgivenfundbalancesheetrecognition.Theyarereportedonlyingovernment-widestatementsandinschedulesoflong-termdebtandcapitalassets.Assessmentsreceivablearereportedinthedebtservicefund.5.Eventhoughthegovernmentmaynot,ineconomics