Implementation Guide - ERIC
GASB35ImplementationGuideQuestions and Answers forPublic Colleges and Universities UsingBusiness Type Activity (BTA) ReportingbyNACUBO 1999-2000 GASB Statement 35Reporting Model Implementation Workshop FacultyandPricewaterhouseCoopers LLPBH HNACUBO
GASB 35Implementation GuideQuestions and Answers for Public Collegesand Universities Using Business Type Activity(BTA) ReportingA Supplement to GASB'sImplementation Guide for Statement 34byNACUBO 1999-2000 GASB Statement 35Reporting Model Implementation Workshop FacultyandPricewaterhouseCoopers LLP
Copyright 2001 by NACUBOAll rights reserved. No part of this book may be reproduced or transmitted in any formor by any means, electronic or mechanical, including photocopying, recording,or by any information storage and retrieval system,without permission in writing from the publisher.National Association of College and University Business OfficersWashington, DCwww.nacubo.orgPrinted in the United States of AmericaDesigned and typeset by AAH GraphicsEditor, Ann HunterProduction Manager, Judith CastagnaPublications Director, Donna KlingerISBN 1-56972-017-7
Acknowledgments, 4Introduction and Overview, 5objectives of GASB 35 Implementation GuideOrganization of GASB 35 Implementation Guide56I - Questions and Answers, 9GeneralEffective Date and TransitionFinancial Statement PresentationStatement of Net AssetsStatement of Revenues, Expenses, and Changes in Net AssetsStatement of Cash FlowsManagement's Discussion and Analysis (MD&A)Exchange/Nonexchange TransactionsScholarshipsComponent UnitsCapital Assets/Infrastructure/DepreciationSegments. .101316212531353840434449II-Summary of Relevant Questions in GASB 34 Guide, 53III-Financials, 57Statement of Revenues, Expenditures,and Other Changes in Fund BalancesStatement of Revenues, Expenditures,and Other Changes in Net Assets—By ObjectStatement of Revenues, Expenditures,and Other Changes in Net Assets—By FunctionBalance SheetStatement of Net Assets,Statement of Cash Flows (Direct Method)585960616263IV-General Guidelines for Statement of Cash Flows, 65operating ActivitiesNoncapital Financing ActivitiesCapital Financing ActivitiesInvesting Activities67686970References, 713
AcknowledamentsThis implementation guide was considerably strengthened by being acombined effort of the faculty of NACUBO's 1999-2000 GASB Statement 35Reporting Model Implementation Workshops; the association's AccountingPrinciples Council; and the accounting firm of PricewaterhouseCoopers LLP.In addition, GASB staff, in particular Joe Blythe and David Bean, providedinput on this document; NACUBO is grateful for their time and effort.The basis for this guide was developed by the 1999-2000 GASBStatement 35 Reporting Model Implementation Workshop faculty: JoeBlythe, David Bosserman, Mary Fischer, Kevin McHugh, Kathleen McNeely,Raymond Pipkin, and Charles Tegen. These individuals are to be commendedfor their dedication to informing their colleagues about GASB Statement 35.Public higher education is in their debt. NACUBO's Accounting PrinciplesCouncil played an important role in reviewing and commenting on variousdrafts of the manuscript. They are William Anderson, David Bosserman, GregBursavich, Aida Diaz-Piedra, Mary Fischer, Joe Gorman, Joyce King, JohnKroU, Kathleen McNeely, Yoke San Reynolds, Charles Tegen, and RickWhitfield.N A C U B O also wishes to thank the accounting firm ofPricewaterhouseCoopers LLP, whose staff contributed considerable amounts oftime and resources at all stages of this project. Many thanks to Edward Chait,Paul Hanley, Michael Lammons, Cheryl Soper, Stefanie McCubbins, and RivaMirvis for their valuable input, technical expertise, broad industry insights,and review and editing skills. This Q&A would not have been possiblewithout their thoughtful comments, invaluable suggestions, and unflaggingsupport. Larry Goldstein and Janice Krogen of the N A C U B O staff alsoprovided a considerable amount of their time working on the guide, whichwould not yet be available without their expertise and management of theproject.
Introduction and OverviewGASB 35 Implementation Guide: Questions and Answers for Public Colleges andUniversities Using Business Type Activity (BTA) Reporting, prepared by theNational Association of College and University Business Officers (NACUBO),as its name implies, primarily addresses those issues that apply to publicinstitutions that elect to use BTA reporting, as discussed further below and inparagraph 15 of GASB Statement 34.Objectives of GASB 35 Implementation GuideThis guide was prepared for public institution business officers as asupplement to the Guide to Implementation of GASB Statement 54 on BasicFinancial Statements—and Management's Discussion and Analysis—for State andLocal Governments, published in April 2000 by the Governmental AccountingStandards Board (GASB) on GASB Statements 34 and 35. Since GASBStatement 35 merely amends GASB Statement 34 to make it apply to publicinstitutions, the GASB Statement 34 implementation guide also addressesStatement 35. The GASB 35 Guide is the product of a joint effort of thefaculty of NACUBO's 1999-2000 Reporting Model ImplementationWorkshops, its Accounting Principles Council, and the accounting firm ofPricewaterhouseCoopers LLP.Generally, GASB Statement 35 permits public institutions, in separatelyissued external financial statements, to use the GASB Statement 34 guidancefor special-purpose governments engaged only in BTA, engaged only ingovernmental activities, or engaged in both governmental and BTA. Underthis guidance, in its separately issued reports, a public institution is requiredto include management's discussion and analysis (MD&A); basic financialstatements, as appropriate for the category of special purpose governmentreporting selected; notes to the financial statements; and requiredsupplementary information other than MD&A, if applicable.Most public institutions are expected to choose to report as specialpurpose governments (described in paragraph 134 of Statement 34) engagedsolely in BTA. GASB Statement 34 provides that enterprise fund reporting(see paragraph 138 of Statement 34) should be used by special purpose
GASB 35IMPLEMENTATION GUIDEgovernments engaged only in BTA reporting. An entity may elect enterprisefund reporting for any activity for which a fee is charged to external users forgoods or services (see paragraph 67 of statement 34). Most public institutionscover a major portion of their costs through external user charges for theirservices. Therefore, these public institutions are permitted to use BTAreporting (see paragraph 44 of Statement 35). NACUBO strongly encouragessuch reporting by public institutions.For other public institutions, it may be more appropriate to report usingthe guidance for special purpose governments engaged only in governmentalactivities or engaged in both governmental and BTA because they operatesimilarly to other governments or governmental agencies. Many two-yearpublic institutions have the power to levy taxes and are subject to the samepublic budget laws as are other special purpose governments engaged only ingovernmental activities or in both governmental and BTA. Those institutionscould follow the reporting standards set forth in paragraph 135 of GASBStatement 34, which provides the financial reporting guidance for specialpurpose governments engaged in more than one governmental program or inboth governmental and BTA.As discussed further below, this implementation guide also addressescertain issues pertaining to GASB Statement 9, Reporting Cash Plows ofProprietary and Nonexpendable Trust Funds and Governmental Entities That UseProprietary Fund Accounting, and Statement 33, Accounting and FinancialReporting for Nonexchange Transactions. GASB has also issued an implementationguide on Statement No. 9, dated June 1992.Organization of GASB 35 Implementation GuideSection I of this guide features questions and answers that expand on thosequestions and answers included in the GASB Statement 34 implementationguide. The questions and answers will help public institution business officersapply the applicable provisions of GASB Statement 34. As noted above, not allparts of GASB Statement 34 are applicable to public institutions that electBTA reporting. Section I of this guide also contains questions and answerspertaining to the statement of cash flows prescribed by GASB Statement 9 andaccounting for nonexchange transactions in accordance with GASB Statement33 (that many public institutions will address for the first time when theyadopt GASB Statement 35).6
INTRODUCTION AND OVERVIEWSection II expands on the table included on page 22 of GASB Statement35, which summarizes the pertinent paragraphs of GASB Statement 34 thatapply to public institutions. The expanded table identifies questions andanswers in the GASB 34 implementation guide that are particularly relevantto institutions selecting BTA reporting. The selection of particularly relevantquestions was made on a judgmental basis and NACUBO recognizes thatsome may consider other questions in the GASB implementation guide to beparticularly relevant. Therefore, public institution business officers shouldconsider all questions in the GASB 34 implementation guide.Section III presents sample financial statements, and Section IV ofifersgeneral guidelines for and examples of the inflows and outflows on thestatement of cash flows.7
Section IQuestionsandAnswers
GASB 35 I M P L E M E N T A T I O N G U I D EGeneralVM What are the reporting requirements forpublic institutions under GASB Statement 34?W Generally, depending on the characteristics of a public institution, the requirements ofGASB Statement 34 permit it to report as: special purpose governments engagedonly in business type activities (BTA); special purpose governments engagedonly in governmental activities; or special purpose governments engaged inboth governmental and business typeactivities (GASB Statement 35,paragraph 26, basis for conclusions).BTAs are those financed in whole or in partby fees charged to external parties for goods orservices (GASB Statement 34, paragraph 15).Governmental activities generally are thosefinanced through taxes, intergovernmentalrevenues, and other predominantlynonexchange revenues.Because many two-year and some four-yearM l ABC University's revenues consist of 5percent special state appropriations earmarkedfor a special public-service-type activity withassociated fees and 95 percent tuition and otherrevenues. ABC University is currently in theplanning phase for implementation of GASBStatements 34 and 35 and is attempting todetermine the appropriate reporting type for itsfinancial statements. What reporting optionsare available to ABC University?10public institutions have taxing authority, theymay choose to report as special purposegovernments engaged in governmentalactivities or both governmental and BTA(GASB Statement 35, paragraphs 27 and 46,basis for conclusions). However, most publicinstitutions regularly receive stateappropriations, and also cover a major portionof their costs through external user charges fortheir services. Therefore, according to basis ofconclusions paragraphs 44-47 of GASBStatement 35 and related paragraph 67 ofGASB Statement 34, these public institutionsmay use BTA reporting. Paragraph 67 ofGASB Statement 34 states: "Governmentsshould apply each of these criteria in thecontext of the activity's principal revenuesources."Additionally, public institutions shouldcontact the appropriate state agency todetermine state-mandated reportingrequirements and transition issues.' * ABC University has the option of reporting as BTA only or may report as governmentaland BTA.Paragraph 15 of GASB Statement 34specifies that "Governmental activitiesgenerally are financed through taxes,intergovernmental revenues, and othernonexchange revenues. These activities areusually reported in governmental funds andinternal service funds. Business type activitiesare financed in whole or in part by fees charged
QUESTIONS AND ANSWERSto external parties for goods or services. Theseactivities are usually reported in enterprisefunds."Paragraph 44 of GASB Statement 35addresses the determination of the appropriatereporting model as follows: "With respect toreporting certain activities as BTAs,respondents point out that most publicinstitutions meet the principal criterionestablished in paragraph 67 of GASBStatement 34. An entity may elect thatreporting, which is available for any activity forwhich a fee is charged to external users forgoods or services. Although most publicinstitutions are regularly subsidized, they alsocover a portion of their costs through externaluser charges for their services. Therefore, thesepublic institutions are permitted to use BTAreporting. An additional advantage cited bysome proponents of BTA reporting for publicinstitutions is that it may enhancecomparability with their not-for-profit andfor-profit counterparts."Additionally, paragraph 67 of GASBStatement 34 provides certain criteria forconsideration in determining whether anactivity is required to be reported as anenterprise fund activity/business type activityunder the new reporting model.It is important to recognize that GASBStatement 34 primarily addressesgeneral-purpose governments. Therefore, inaddition to the guidance provided by GASBStatements 34 and 35, the appendixes of bothstatements as well as GASB's ImplementationGuide should be considered in determining theappropriate reporting type and reportingrequirements for public institutions.[ J Does GASB Statement 34 apply to governmental health care providers affiliated withpublic institutions?guides, "Audits of State and Local Governmental Entities" and "Audits of Providers of HealthCare Services" address the implications ofGASB Statement 34 as they relate to governmental health care providers. Both are beingupdated to reflect the requirements of GASBStatement 34.' * * Yes. GASB Codification Section Ho5 hasbeen revised to require governmental healthcare providers to follow GASB Statement 34.The American Institute of Certified PublicAccountants (AICPA) accounting and auditingW l Does the implementation of GASB Statement 35 have an impact on the previously filedDisclosure Statements (Cost Accounting Standards Board Form DS-2)?Those public institutions that have filedtheir Disclosvire Statements with the federalgovernment must file revisions with regard to: Part I (accrual accounting); and Part III and IV for depreciation, if theinstitution decides to change from theuse-allowance method to depreciation forthe facilities and administration (F&A)cost proposal. The depreciation methodused for the F&A cost proposal must be11
GASB 35 I M P L E M E N T A T I O N G U I D Econsistent with the method used in thefinancial statements. Public institutionsshould also document their depreciationmethod and capitalization policies.W l Should public institutions consult withtheir state comptroller's office (or equivalent)about the implementation of GASB Statement34?in the state's financial statements mayrequire the public institution to provideadditional information (e.g., data oninterfund activities) that could begathered during the implementationprocess; and' * " Yes. This is highly desirable because: first, the effective date for the publicinstitution generally will be the same asthat of the state government (see question8 below); second, the manner of including thepublic institution's financial statementsK v l Are the sample financial statements inGASB Statement 35 prescriptive or illustrative?The sample financial statements are illustrative. However, the minimum informationrequired by GASB Statement 34, paragraphs91-105, must be presented in the financialstatements. Additionally, reporting entities12 third, a state office may have mandatedthat certain GASB Statement 34implementation options are to befollowed by the public institutionswithin the state.should consider information needs of readers indetermining reporting formats and level ofdetail provided, both on the face of the financial statements and in the footnotes. Refer toGASB Statement 35, Appendix D, Illustrations, and GASB Statement 35, paragraph 59,for additional information.
QUESTIONS AND ANSWERSEffective Date and Transitionthan 100 million—should apply therequirements of this Statement forperiods beginning after June 15, 2002;W l What is the effective date for implementation of GASB Statement 35?W There are three effective dates based onthe amount of revenues of an institution assuming that it is a stand-alone entity (instead of apublic institution that is a component unit ordepartment of another entity). GASB Statement 35, paragraph 7, states:For public institutions that are notcomponent units of another reporting entity,the requirements of this Statement are effectivein three phases based on a public institution'stotal annual revenues in the first fiscal yearending after June 15, 1999: Phase 3 institutions—with total annualrevenues of less than 10million—should apply the requirementsof this Statement for periods beginningafter June 15,2003.Public institutions that are componentunits or a department of another entity (e.g., astate) must adopt GASB Statement 34—35 nolater than the same year as the primarygovernment. Likewise, component units anddepartments of the public institution, e.g.,foundations, academic medical centers,hospitals, etc., must adopt GASB Statement34—35 no later than the same year as the publicinstitution. The accrual basis provisions ofGASB Statement 33 must be implemented atthe same time as GASB Statements 34 and35. Phase 1 institutions—with total annualrevenues at 100 million or more—should apply the requirements of thisStatement for periods beginning afterJune 15,2001; Phase 2 institutions— with total annualrevenues at 10 million or more but less8W J For public institutions reporting asBTAs, what are the implementation dates forGASB Statements 34-35 as they pertain toinfrastructure?infrastructure must be reported at the date ofimplementation of GASB Statement 35. Otherpublic institutions should refer to the phase-inperiods specified in paragraph 10 of GASBStatement 35.If an institution elects to report as BTA,W j Will public institutions be required torestate prior-period financial statements in theyear of adoption?' * * Yes. Adjustments resulting from achange to comply with GASB Statement 35should be treated as adjustments of prior peri-13
GASB 35 I M P L E M E N T A T I O N G U I D E(MD&A). However, public institutions areencouraged to provide comparative analysis ofkey financial statement elements in MD&A forthat period (GASB Statement 35, paragraph11). For example, institutions can describecurrently known facts, decisions, or conditionsthat are expected to have a significant effect onfinancial position (net assets) or results ofoperations (revenues, expenses, and otherchanges in net assets). Other examples includedata on instructional expenses, examples ofstudent tuition and fee growth, and enrollment.ods, and financial statements presented for theperiods affected should be restated. Ifrestatement of the financial statements for priorperiods is not practical, the cumulative effect ofapplying GASB Statement 34 should bereported as a restatement of beginning netassets (GASB Statement 35, paragraph 12).In the first period that GASB Statement 35is applied, public institutions are not requiredto restate prior periods for purposes ofproviding the comparative data formanagement's discussion and analysis10[ What type of disclosure is appropriate forreporting periods prior to implementing therequirements of the BTA model?' * The significance of the new reportingmodel warrants consideration of a footnote similar to the following in financial statementsissued in years leading up to the year of implementation:New Accounting Pron
Local Governments, published in April 2000 by the Governmental Accounting Standards Board (GASB) on GASB Statements 34 and 35. Since GASB Statement 35 merely amends GASB Statement 34 to make it apply to public institutions, the GASB Statement 34 implementation guide also addresses Statement 35.
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friend, Bill Martin Jr. Eric Carle has been awarded numerous honors throughout the years; most recently the 2003 Laura Ingalls Wilder Award from the Association for Library Service to Children. For more information on Eric Carle visit www.eric-carle.com and the Eric Carle Museum of Picture Book Art at www.picturebookart.org.
Carle, Eric. The Art of Eric Carle. Philomel: 1992. Includes an autobiography, photographs, essays and critical appreciations of his work, and reproductions of many illustrations. Videos: Eric Carle: Picture Writer. Produced by Searchlight Films, Director: Rawn Fulton. 1993. Interview with Eric Carle; demonstration of paper painting and collage.
Other Eric Carle Favorites Based on The Very Hungry Caterpillar, Little Cloud, and The Mixed-Up Chameleon by Eric Carle Back to awe our audiences once again, Mermaid Theatre of Nova Scotia draws upon the magic of black light to capture the charm of three favorite Eric Carle stories. The triple-bill begins with The Very Hungry Caterpillar (published
