The dual-perspective model (GASB 34)
Governments present two very different views of the same activity:
- Fund financial statements — governmental funds on modified accrual, showing short-term fiscal accountability
- Government-wide statements — everything on full accrual, showing long-term operational accountability
Government-wide statements consist of the Statement of Net Position and the Statement of Activities, separated into governmental activities, business-type activities, and component units. Fiduciary funds are excluded from government-wide statements because those resources don't belong to the government.
The required reconciliation
IMPORTANT: Because the two perspectives use different bases, GASB requires a reconciliation from total governmental fund balance to government-wide net position. Typical adjustments:
- Add capital assets (net of accumulated depreciation) — expensed in the funds, capitalized government-wide
- Subtract long-term liabilities (bonds payable, compensated absences, net pension liability) — not reported in the funds
- Add deferred inflows/outflows and internal service fund net position as applicable
- Adjust revenues deferred under the "available" criterion but earned under full accrual
Statement of Activities
Presented in a distinctive net (expense) revenue format: program expenses are reduced by program revenues (charges for services, operating grants, capital grants) to show the net cost of each function. General revenues — notably taxes — are then reported at the bottom, because they support the government as a whole rather than a single function.
Components of the ACFR
- Introductory section — letter of transmittal (unaudited)
- Financial section — auditor's report, MD&A (required supplementary information), basic financial statements (government-wide + fund + notes), other RSI including budgetary comparison
- Statistical section — 10-year trend data (unaudited)
EXAM TIP: MD&A comes before the basic financial statements and is required supplementary information — not part of the basic statements themselves. Budgetary comparison schedules are also RSI.