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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

General Accounting

Specialized Accounting
Service Concession Arrangements

Introduction

GASB 60 establishes accounting, reporting and disclosure guidance for both governmental transferors and governmental operators in Service Concession Arrangements (SCAs). These arrangements are a type of public-private or public-public partnership.

The provisions apply to economic resources measurement focus financial statements (proprietary and government-wide) and do not apply to governmental fund financial statements.

Definition

Based on GASB 60, an SCA is an arrangement between a transferor (a government) and an operator (governmental or nongovernmental entity) where the transferor conveys to the operator the right to provide public services through the use of a facility (either existing or newly constructed infrastructure) or other asset, in exchange for fees from third parties. To be an SCA, ALL of the following criteria must be met:

  1. The transferor conveys to an operator the right and related obligation to provide public services:
    • Through the use and operation of infrastructure or another public asset (a "facility")
    • In exchange for significant consideration (such as an up-front payment, installment payments, a new facility or improvements to an existing facility)
  2. The operator collects and is compensated by fees it collects from third parties.
  3. The transferor determines or has the ability to modify or approve:
    • What services the operator must provide
    • To whom the operator must provide services
      –AND–
    • The prices or rates that the operator can charge for the services
  4. The transferor is entitled to significant residual interest in the service utility of the facility at the end of the partnership arrangement.

Scope

Applicability

Assets commonly used in SCAs are those that generate fees for services (such as roads and bridges, water and sewer, parking garages, parking meters, dormitories, bookstores, foundations, golf courses, public radio, sports complexes and many others).

Exceptions

Public-private or public-public arrangements not included in the scope of GASB 60 are:

  • A facility that is designed and built by a third party for the government rather than for the general public.
  • Vendor arrangements between a government and a vendor to provide “ancillary” services using a public asset (such as a vendor selling food or souvenirs in a public stadium).
  • Service management arrangements (SMA’s) in which a government contracts with a separate entity for services it would otherwise have performed and places management responsibilities for the services with the separate entity. These arrangements are accounted for similarly to accounting for vendor or service contracts.
  • The government pays the operator directly rather the operator being paid by user fees for operating a facility that is constructed by the operator and owned by the transferor.
  • A government permanently transfers a capital asset or service to an operator — usually through a sale. This is considered a privatization, not an SCA.
  • Construction in progress of the operator on new or improved facilities of an SCA is not required to be reported by the transferor.

GASB 60 – Applicable Accounting and Financial Reporting Decision Process

Answer the following questions to help determine whether a public-private or public-public partnership arrangement is within the scope of GASB 60 and, if not, what existing accounting and financial reporting guidance is applicable. Use the questions below along with SCA reporting requirements.

  1. Does the arrangement involve a transferor conveying to an operator the right and obligation to provide a service in exchange for significant consideration?
  2. Is infrastructure (or another public asset existing or to be constructed or acquired) used in providing the services?
  3. Is the operator compensated by users or service recipients?
  4. Does the transferor determine or have the ability to modify or approve:
    • The services the operator can provide?
    • To whom the operator can provide the services?
      –AND–
    • The rates that can be charged?
  5. Does the transferor retain a significant residual interest in the asset?

GASB 60 – Applicable Accounting and Financial Reporting Decision Process flowchart as explained above, is also depicted in the graphic below.

Visual representation of GASB60 - Applicable Accounting and Financial Reporting Decision Pocess Flowchart as explained above.

Transferor Accounting

Initial Transactions

The transferor continues to report the existing facility as a capital asset at its current carrying value. The transferor reports purchases of capital assets at its historical cost. The transferor reports new facilities constructed or acquired by the operator or improvements made by the operator to existing facilities as follows:

  1. A capital asset at acquisition value when placed into operation. (GASB 72 supersedes GASB 60, paragraph 9, replacing “fair” value with “acquisition” value for capital assets.)
  2. A liability for the present value of significant contractual obligations imposed on the transferor, recognized in accordance with the provisions of the Recognition of Liabilities.
  3. Corresponding deferred inflows of resources for the difference between 1) and 2).
  4. Up-front or installment payments from the operator — the transferor recognizes:
    • An asset (cash) for the up-front payment and/or a receivable for the present value of installment payments.
    • A liability for any significant contractual obligations.
    • A corresponding other financing sources on the governmental fund financial statements and deferred inflows of resources on the government-wide financial statements for the difference between 1) and 2).

      Note: Per GASB 65, paragraph 30, up-front payments do not meet the definition of deferred inflows of resources for governmental funds. Since there is no specific guidance for reporting up-front payments for governmental funds, the best fit under current reporting standards is “other financing sources” (per GASB guidance referenced by TxDot).

Subsequent Transactions

Transferor subsequent transactions are:

  • The capital asset is subject to existing requirements for depreciation, impairment and disclosures.

    Exception — Do not depreciate the capital asset if the arrangement requires the operator to return the facility to the transferor in its original or an enhanced condition.

  • The deferred inflows of resources are reduced and revenue is recognized in a systematic and rational manner over the term of the arrangement (beginning when the facility is placed into operation).
  • If a liability is recorded (to reflect the contractual obligation in accordance with the provisions in the “Recognition of Liabilities” section below) the liability is reduced as the transferor’s obligations are satisfied.
  • Improvements made to the facility by the operator during the term of the SCA are capitalized as they are made and are subject to existing requirements for depreciation, impairment and disclosure.
  • Up-front or installment payments:
    • The liability is reduced as the transferor’s obligations are satisfied.
    • Revenue is recognized as:
      • Other financing sources on the governmental fund financial statements.
      • Deferred inflows of resources and reduced on the government-wide financial statements — recognized in a systematic and rational manner over the term of the arrangement.

Revenue Sharing Arrangements

SCA arrangements where the transferor shares revenues with the operator are revenue sharing arrangements. These arrangements can contain contingencies that are dependent on an event occurring before revenue is paid to the transferor. These contingent payments are recognized as revenue by the transferor when the event the payment is contingent upon occurs, as stipulated in the agreement.

When these arrangements stipulate that revenue amounts are to be paid to the transferor regardless of revenues earned, the transferor reports the present value of those revenue amounts as if they were installment payments at the inception of the arrangement. An example of this is an annual installment payment in a fixed amount.

Recognition of Liabilities

Record liabilities associated with the SCA at the present value if a contractual obligation is significant and meets either of the following criteria:

  • The contractual obligation directly relates to the facility. This obligation could relate to ownership of the facility or could arise from the transferor’s responsibility to ensure that the facility remains fit for the particular purpose of the arrangement. Examples are obligations made for capital improvements, insurance on the facility or maintenance of the facility.
    –OR–
  • The contractual obligation commits the transferor to maintain a minimum or specific level of service related to the operation of the facility. Examples are obligations made to provide a specific level of security services for the facility, or a minimum level of maintenance to areas surrounding the facility.

After the initial liability is recognized, the liability is reduced as the transferor’s obligations are satisfied. As obligations are satisfied:

  • The deferred inflows of resources are reported

    –AND–

  • Related revenue is recognized in a systematic and rational manner over the remaining term of the arrangement.

Depreciation Requirements

After initial measurement, the capital asset is subject to existing requirements for depreciation, impairment and disclosures.

Improvements made to the facility by the operator during the term of the SCA are capitalized as they are made and are also subject to the requirements for depreciation, impairment and disclosures.

However, the capital asset is not depreciated if the arrangement requires the operator to return the facility to the transferor in its original or an enhanced condition.

USAS Entries – Transferor

Initial Transactions – Record Capital Assets and Related Liabilities

The transferor continues to record the existing facility at its carrying amount and use existing capital asset guidance. The transferor records the newly constructed or acquired facilities (or improvements made by the operator to an existing facility) at its acquisition value when it is placed in operation.

Business-Type Activities

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record acquisition value of capital assets
(1) 5 U 0832CY XXX 644 CY XXXXX   $ XX.XX   XXXX XXXX*
To record present value of contractual obligations as liabilities
(2) 5 U 0832CY XXX 645 CY XXXXX   $ XX.XX   XXXX 1410
To record deferred inflows of resources for difference between (1) and (2)
(3) 5 U 0832CY XXX 645 CY XXXXX   $ XX.XX   XXXX 1472

Accounting effect of above entries

Debit Credit
(1) To record acquisition value of capital assets    
  XXXX* General Ledger Account for Asset Being Added $ XX.XX      
  9999 System Clearing   $ XX.XX
(2) To record present value of contractual obligations as liabilities    
  9999 System Clearing $ XX.XX      
  1410 SCA Contract Obligation   $ XX.XX
(3) To record deferred inflows of resources for difference between (1) and (2)    
  9999 System Clearing $ XX.XX      
  1472 Deferred Inflows of Resources   $ XX.XX

*For more information on general ledger accounts for capital assets business-type activities, see Recording Capital Asset Acquisitions. For more information on capital asset object codes, see Capital Asset Object Codes.

Governmental Activities – Fund Type 11

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record acquisition value of capital assets
(1) 5 U 0832CY XXX 534 CY XXXXX   $ XX.XX   XXXX 06XX*
To record deferred inflows of resources
(2) 5 U 0832CY XXX 535 CY XXXXX   $ XX.XX   XXXX 1972

Accounting effect of above entries

Debit Credit
(1) To record acquisition value of capital assets    
  06XX* General Ledger Account for Asset Being Added $ XX.XX      
  9992 BC System Clearing   $ XX.XX
(2) To record deferred inflows of resources    
  9992 BC System Clearing $ XX.XX      
  1972 BC Deferred Inflows of Resources   $ XX.XX

*For more information on general ledger accounts for capital assets – government-wide activities, see Recording Capital Asset Acquisitions. For more information on capital asset object codes, see Capital Asset Object Codes.

Governmental Activities – Fund Type 12

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record deferred inflows of resources.
(1) 5 U 0832CY XXX 534 CY XXXXX   $ XX.XX   XXXX 1972
To record present value of contractual obligations as liabilities.
(2) 5 U 0832CY XXX 535 CY XXXXX   $ XX.XX   XXXX 1910

Accounting effect of above entries

Debit Credit
(1) To record deferred inflows of resources    
  1972 BC Deferred Inflows of Resources $ XX.XX      
  9992 BC System Clearing   $ XX.XX
(2) To record present value of contractual obligations as liabilities    
  9992 BC System Clearing $ XX.XX      
  1910 BC NC SCA Contract Obligation   $ XX.XX

Subsequent Entries – Amortization of Initial Deferred Inflows Related to Capital Asset

Once the facility is placed into operation, the deferred inflows of resources are reduced and revenue is recognized in a systematic and rational manner over the term of the arrangement.

Business-Type Activities

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record deferred inflows of resources
(1) 5 U 0832CY XXX 644 CY 99999   $ XX.XX   XXXX 1472
To record the amortization of deferred inflows of resources related to the capital asset over the SCA term
(2) 5 U 0832CY XXX 631 CY 99999 3XXX $ XX.XX   XXXX 9999

Accounting effect of above entries

Debit Credit
(1) To record deferred inflows of resources    
  1472 Deferred Inflows of Resources $ XX.XX      
  9999 System Clearing   $ XX.XX
(2) To record the amortization of deferred inflows of resources related to the capital asset over the SCA term    
  9999 System Clearing $ XX.XX      
  5100 GAAP Revenue Offset   $ XX.XX

Governmental Activities – Fund Type 11

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record the amortization of deferred inflows of resources related to the capital asset over the SCA term
(1) 5 U 0832CY XXX 511 CY XXXXX 3XXX $ XX.XX   XXXX 1972

Accounting effect of above entries

Debit Credit
(1) To record the amortization of deferred inflows of resources related to the capital asset over the SCA term    
  1972 BC Deferred Inflows of Resources $ XX.XX      
  5150 BC – Revenue Control   $ XX.XX

Amortization of Contractual Obligations

Liabilities recorded for contractual obligations related to the SCA are reduced as the obligations are satisfied. Report the deferred inflows of resources and recognize the related revenue in a systematic and rational manner over the remaining term of the arrangement.

Business-type Activities

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record costs incurred/paid for contractual obligations related to the facility
(1) 4 9 MMDDCY XXX 225/380 CY 99999 7XXX $ XX.XX   XXXX  
To record reduction of the liability for contractual obligation related to the facility
(2) 5 U 0832CY XXX 644 CY 99999   $ XX.XX   XXXX 1410
To record deferred inflows of resources
(3) 5 U 0832CY XXX 645 CY 99999   $ XX.XX   XXXX 1472
To record amortization from the liability reduction over the remaining SCA term
(4) 5 U 0832CY XXX 631 CY 99999 3XXX $ XX.XX   XXXX 9999
To record deferred inflows of resources
(5) 5 U 0832CY XXX 644 CY 99999   $ XX.XX   XXXX 1472

Accounting effect of above entries

Debit Credit
(1) To record costs incurred/paid for contractual obligations related to the facility    
  5500 Expenditure Control – Cash $ XX.XX      
  0045 Cash in State Treasury   $ XX.XX
(2) To record reduction of the liability for contractual obligation related to the facility    
  1410 SCA Contract Obligation $ XX.XX      
  9999 System Clearing   $ XX.XX
(3) To record deferred inflows of resources    
  9999 System Clearing $ XX.XX      
  1472 Deferred Inflows of Resources   $ XX.XX
(4) To record amortization from the liability reduction over the remaining SCA term    
  9999 System Clearing $ XX.XX      
  5100 GAAP Revenue Offset   $ XX.XX
(5) To record deferred inflows of resources    
  1472 Deferred Inflows of Resources $ XX.XX      
  9999 System Clearing   $ XX.XX

Governmental Activities

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
Governmental fund: To record costs incurred/paid for contractual obligations related to the facility
(1) 4 9 MMDDCY XXX 225/380 CY 99999 7XXX $ XX.XX   XXXX  
Fund Type 12: To amortize deferred inflows of resources for contract obligations that has been satisfied
(2) 5 U 0832CY XXX 565 CY 99999 3XXX $ XX.XX R XXXX 1972
Fund Type 12: To reduce the liability
(3) 5 U 0832CY XXX 534 CY 99999   $ XX.XX   XXXX 1910
Fund Type 12: To record additional deferred inflows of resources from the liability reduction
(4) 5 U 0832CY XXX 535 CY 99999   $ XX.XX   XXXX 1972
Fund Type 12: To record amortization of deferred inflows of resources from the liability reduction and recognize revenue
(5) 5 U 0832CY XXX 565 CY 99999 3XXX $ XX.XX   XXXX 1972

Accounting effect of above entries

Debit Credit
(1) Governmental fund: To record costs incurred/paid for contractual obligations related to the facility    
  5500 Expenditure Control – Cash $ XX.XX      
  0045 Cash in State Treasury   $ XX.XX
(2) Fund Type 12: To amortize deferred inflows of resources for contract obligations that has been satisfied    
  5150 BC Revenue Control $ XX.XX      
  1972 BC Deferred Inflows of Resources   $ XX.XX
(3) Fund Type 12: To reduce the liability    
  1910 BC NC SCA Contract Obligation $ XX.XX      
  9992 BC System Clearing   $ XX.XX
(4) Fund Type 12: To record additional deferred inflows of resources from the liability reduction    
  9992 BC System Clearing $ XX.XX      
  1972 BC Deferred Inflows of Resources   $ XX.XX
(5) Fund Type 12: To record amortization of deferred inflows of resources from the liability reduction and recognize revenue    
  1972 BC Deferred Inflows of Resources $ XX.XX      
  5150 BC Revenue Control   $ XX.XX

Governmental Operator Accounting

A governmental operator reports an intangible asset at cost for the right to access the facility and collect third-party fees for operating the facility.

  • The cost for existing facilities is the amount of an up-front payment or the present value of installment payments.
  • The cost for improved or new facilities would be the cost of improving an existing facility or constructing or acquiring a new facility.

Amortize intangible asset over the term of the arrangement in a systematic and rational manner. These intangible assets are not subject to GASB 51 and are not reported within the capital asset classification.

Revenue Sharing Arrangements

A governmental operator that shares revenues with a transferor reports all revenue earned and expenses incurred associated with the operation of the facility — including the amount of revenues shared with the transferor.

If revenue sharing arrangements contain amounts to be paid to the transferor regardless of revenues earned, the governmental operator reports revenue at the present value of those amounts as if they were installment payments at the inception of the arrangement.

Illustrations

Illustration 1: Service Concession Arrangement Involving an Existing Asset

A state government (the transferor) conveys to a private entity (the operator) the use of an existing capital asset (a tollway) for an up-front payment of $1 billion and no significant contractual obligations under the contract. In turn, the operator receives the right to collect fees and the obligation to deliver services related to the capital asset for 20 years. The carrying amount of the capital asset is $2 billion. The state agency elects to use the straight-line method. The operator is not a component unit of the state agency’s financial reporting entity.

Transferor Initial Transactions

At the commencement of the arrangement, the transferor continues to report the existing tollway as a capital asset at its carrying value of $2 billion using existing capital asset reporting guidance. Recognize $1 billion of other financing sources for the up-front payment on the governmental fund financial statements and deferred inflows of resources on the government-wide financial statements.

Transferor Subsequent Transactions

The transferor records depreciation expense using existing capital asset reporting guidance, unless the private entity is required to return the asset in its original or better condition at the end of the service concession arrangement. If that is the case, no depreciation expense is recorded. In future years, continue to depreciate the tollway (if applicable) using existing capital asset guidance.

The transferor amortizes the initial deferred inflows of resources on the proprietary and government-wide financial statements in a systematic and rational manner over the SCA term. Using a straight-line method, amortization is ($1 billion/20) = $50 million each year of the arrangement.

Business-type Activities

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record deposit of up-front payment from the operator
(1) 5 U 0832CY XXX 644 CY 99999   $ 1,000,000,000   XXXX 0040
To record deferred inflows of resources for the up-front payment
(2) 5 U 0832CY XXX 645 CY 99999   $ 1,000,000,000   XXXX 1472
To record amortization for up-front payment received over the SCA term
(3) 5 U 0832CY XXX 644 CY 99999   $      50,000,000   XXXX 1472
To recognize revenue for up-front payment received over the SCA term
(4) 5 U 0832CY XXX 631 CY 99999 3XXX $      50,000,000   XXXX 9999

Accounting effect of above entries

Debit Credit
(1) To record deposit of up-front payment from the operator    
  0040 Cash In Bank $ 1,000,000,000      
  9999 System Clearing   $ 1,000,000,000
(2) To record deferred inflows of resources for the up-front payment    
  9999 System Clearing $ 1,000,000,000      
  1472 Deferred Inflows of Resources-Prop/Fid   $ 1,000,000,000
(3) To record amortization for up-front payment received over the SCA term    
  1472 Deferred Inflows of Resources-Prop/Fid $      50,000,000      
  9999 System Clearing   $      50,000,000
(4) To recognize revenue for up-front payment received over the SCA term    
  9999 System Clearing $      50,000,000      
  5100 GAAP Revenue Offset   $      50,000,000

Governmental Activities

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
Governmental fund: To record deposit of up-front payment from the operator
(1) 2 D MMDDCY XXX 195 CY 99999 3XXX $ 1,000,000,000   XXXX  
Year 1
Governmental fund: To reclassify revenue received for up-front payment
(2) 5 U 0832CY XXX 630 CY 99999 3XXX $ 1,000,000,000   XXXX 9999
Governmental fund: To record up-front payment to other financing sources
(3) 5 U 0832CY XXX 657 CY 99999 3XXX $ 1,000,000,000   XXXX 9999
Fund Type 21: To reclassify other financing sources related to up-front payment
(4) 5 U 0832CY XXX 516 CY 99999   $ 1,000,000,000   XXXX 9992
Fund Type 21: To recognize revenue for up-front payment received over the SCA term
(5) 5 U 0832CY XXX 511 CY 99999 3XXX $     50,000,000   XXXX 9992
Fund Type 21: To record deferred inflows of resources
(6) 5 U 0832CY XXX 535 CY 99999   $   950,000,000   XXXX 1972
Subsequent years
Fund Type 21: To record amortization of deferred inflows of resources for up-front payment received over the SCA term
(7) 5 U 0832CY XXX 534 CY 99999   $     50,000,000   XXXX 1972
Fund Type 21: To recognize revenue for up-front payment received over the SCA term
(8) 5 U 0832CY XXX 511 CY 99999 3XXX $     50,000,000   XXXX 9992

Accounting effect of above entries

Debit Credit
(1) Governmental fund: To record deposit of up-front payment from the operator    
  0045 Cash in State Treasury $ 1,000,000,000      
  5000 Revenue Control – Cash   $ 1,000,000,000
Year 1
(2) Governmental fund: To reclassify revenue received for up-front payment    
  5100 GAAP Revenue Offset $ 1,000,000,000      
  9999 System Clearing   $ 1,000,000,000
(3) Governmental fund: To record up-front payment to other financing sources    
  9999 System Clearing $ 1,000,000,000      
  6035 Other Financing Sources   $ 1,000,000,000
(4) Fund Type 21: To reclassify other financing sources related to up-front payment    
  6135 BC Other Financing Sources $ 1,000,000,000      
  9992 BC System Clearing   $ 1,000,000,000
(5) Fund Type 21: To recognize revenue for up-front payment received over the SCA term    
  9992 BC System Clearing $     50,000,000      
  5150 BC-Revenue Control   $     50,000,000
(6) Fund Type 21: To record deferred inflows of resources    
  9992 BC System Clearing $   950,000,000      
  1972 BC Deferred Inflows of Resources   $   950,000,000
Subsequent years
(7) Fund Type 21: To record amortization of deferred inflows of resources for up-front payment received over the SCA term    
  1972 BC Deferred Inflows of Resources $     50,000,000      
  9992 BC System Clearing   $     50,000,000
(8) Fund Type 21: To recognize revenue for up-front payment received over the SCA term    
  9992 BC System Clearing $     50,000,000      
  5150 BC-Revenue Control   $     50,000,000

Illustration 2: Service Concession Arrangement Involving a Newly Constructed Asset

A city government enters into an agreement with a state government to design, build and operate a parking garage for a 20-year term. In return, the state government (transferor) conveys the right to collect the fees generated by the parking garage to the city government for the arrangement period. The useful life of the parking garage is 35 years. The acquisition value of the parking garage is $1 billion when it is placed in operation.

The state government also has a significant contractual obligation (which qualifies as a liability of an SCA under Recognition of Liabilities) to insure the parking garage during the arrangement period. Annual payments for insurance are to be made at the beginning of each year for $53,000 based on 6 percent interest compounded annually. The contractual liability is calculated as $630,000.

Transferor Initial Transactions

Upon completion of construction/beginning of arrangement, the transferor records the:

  • Parking garage at its acquisition value of $1 billion when placed into operation
  • Present value of annual insurance payments of $630,000 under the contract
  • Difference between the acquisition value of the parking garage and the present value of the insurance contract of $999,370,000 as deferred inflows of resources

For government-wide reporting, the deferred inflows of resources must be separated between fund type 11 and fund type 12. The deferred inflows reported in fund type 11 is a credit of $1 billion and a debit of $630,000 in fund type 12. The purpose of these entries is to report revenues related to assets and liabilities in fund type 11 and zero out deferred inflows in fund type 11 and fund type 12 at the end of the SCA term.

Transferor Subsequent Transactions

The transferor records depreciation expense using existing capital asset reporting guidance, except if the private entity is required to return the asset in its original or better condition at the end of the service concession arrangement. When this is the case, the asset is not depreciated. In future years, the transferor continues to depreciate the parking garage (if applicable) using existing capital asset guidance.

The transferor amortizes the initial deferred inflows related to the parking garage in a systematic and rational manner over the SCA term. If the transferor elects a straight-line method of amortization, the transferor recognizes revenue and reduces the related initial deferred inflows.

The transferor record payments made for insurance obligations of $53,000 at the beginning of each year.

As payments are made, the transferor reduces the liability for the insurance obligation and records an additional deferred inflows related to the reduction of the liability.

The transferor amortizes the additional deferred inflows related to reduction of liability for insurance obligation in a systematic and rational manner over the remaining term of the SCA arrangement and recognizes revenue. In other words, at the beginning of the first year, the remaining term is 20 years — and in the subsequent year the remaining term is 19 years, and so on.

Business-type Activities

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record acquisition value of parking garage constructed by the operator
(1) 5 U 0832CY XXX 644 CY 99999   $ 1,000,000,000   XXXX XXXX
To record the present value of insurance obligations
(2) 5 U 0832CY XXX 645 CY 99999   $          630,000   XXXX 1410
To record deferred inflows of resources for the difference between (1) and (2)
(3) 5 U 0832CY XXX 645 CY 99999   $    999,370,000   XXXX 1472
To record amortization of initial deferred inflows of resources related to the parking garage each year of the SCA term
(4) 5 U 0832CY XXX 631 CY 99999 3XXX $     49,968,500   XXXX 1472
To record payments made for insurance obligations of $53,000 each year of the SCA term
(5) 4 9 0832CY XXX 225/380 CY 99999 7XXX $            53,000   XXXX  
As payments are made, reduce the liability by the principal reduction amount for the insurance obligation
(6) 5 U 0832CY XXX 644 CY 99999   *$           53,000   XXXX 1410
To record an additional deferred inflows of resources related to the reduction of the liability
(7) 5 U 0832CY XXX 645 CY 99999   *$           53,000   XXXX 1472
Amortize the additional deferred inflows of resources related to reduction of liability for insurance obligation in a systematic and rational manner over the remaining term of the SCA arrangement
(8) 5 U 0832CY XXX 631 CY 99999 30XX *$             2,650   XXXX 1472

Accounting effect of above entries

Debit Credit
(1) To record acquisition value of parking garage constructed by the operator    
  XXXX* General Ledger account for Capital Assets $ 1,000,000,000      
  9999 System Clearing   $ 1,000,000,000
(2) To record the present value of insurance obligations    
  9999 System Clearing $           630,000      
  1410 NC Contract Obligations – SCA   $           630,000
(3) To record deferred inflows of resources for the difference between (1) and (2)    
  9999 System Clearing $   999,370,000      
  1472 Deferred Inflows of Resources   $    999,370,000
(4) To record amortization of initial deferred inflows of resources related to the parking garage each year of the SCA term    
  1472 Deferred Inflows of Resources $      49,968,500      
  5100 GAAP Revenue Offset   $      49,968,500
(5) To record payments made for insurance obligations of $53,000 each year of the SCA term    
  5500 Expenditure Control – Cash $             53,000      
  0045 Cash in State Treasury   $              53,000
(6) As payments are made, reduce the liability by the principal reduction amount for the insurance obligation
 
  1410 SCA Contract Obligation $             53,000      
  9999 System Clearing   $             53,000
(7) To record an additional deferred inflows of resources related to the reduction of the liability    
  9999 System Clearing $             53,000      
  1472 Deferred Inflows of Resources   $             53,000
(8) Amortize the additional deferred inflows of resources related to reduction of liability for insurance obligation in a systematic and rational manner over the remaining term of the SCA arrangement.
 
  1472 Deferred Inflows of Resources $                2,650      
  5100 GAAP Revenue Offset   $                2,650

*For more information on general ledger accounts for capital assets business-type activities, see Recording Capital Asset Acquisitions. For more information on capital asset object codes, see Capital Asset Object Codes.

Governmental Activities – Fund Type 11

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record acquisition value of parking garage constructed by the operator and present value of insurance obligations
(1) 5 U 0832CY XXX 534 CY 99999   $ 1,000,000,000   XXXX 06XX
To record deferred inflows of resources
(2) 5 U 0832CY XXX 535 CY 99999   $ 1,000,000,000   XXXX 1972
To record amortization of initial deferred inflows of resources related to the parking garage each year of the SCA term
(3) 5 U 0832CY XXX 511 CY 99999 3XXX $       50,000,000   XXXX 1972
Governmental fund: To record payments made for insurance obligations each year
(4) 4 9 MMDDCY XXX 225/380 CY 99999 7XXX $             53,000   XXXX  

Accounting effect of above entries

Debit Credit
(1) To record acquisition value of parking garage constructed by the operator and present value of insurance obligations    
  06XX* BC General Ledger account for Capital Assets $ 1,000,000,000      
  9992 BC System Clearing   $ 1,000,000,000
(2) To record deferred inflows of resources    
  9992 BC System Clearing $ 1,000,000,000      
  1972 BC Deferred Inflows of Resources   $ 1,000,000,000
(3) To record amortization of initial deferred inflows of resources related to the parking garage each year of the SCA term    
  1972 BC Deferred Inflows of Resources $       50,000,000      
  5150 BC Revenue Control   $       50,000,000
(4) Governmental fund: To record payments made for insurance obligations each year    
  5500 Expenditure Control – Cash $              53,000      
  0045 Cash in State Treasury   $              53,000

*For more information on general ledger accounts for capital assets business-type activities, see Recording Capital Asset Acquisitions. For more information on capital asset object codes, see Capital Asset Object Codes.

Governmental Activities – Fund Type 12

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To record acquisition value of parking garage constructed by the operator and present value of insurance obligations
(1) 5 U 0832CY XXX 534 CY 99999   $ 630,000,000   XXXX 1972
To record deferred inflows of resources
(2) 5 U 0832CY XXX 535 CY 99999   $ 630,000,000   XXXX 1910
To record amortization of initial deferred inflows of resources related to the parking garage each year of the SCA term
(3) 5 U 0832CY XXX 565 CY 99999 3XXX $          31,500 R XXXX 1972
Governmental fund: To record payments made for insurance obligations each year
(4) 4 9 MMDDCY XXX 225/380 CY 99999 7XXX $         53,000   XXXX  
To reduce the liability by the principal reduction amount for the payment made to satisfy the insurance obligation
(5) 5 U 0832CY XXX 534 CY 99999   *$         53,000   XXXX 1910
To record an additional deferred inflows of resources related to the reduction of the liability
(6) 5 U 0832CY XXX 535 CY 99999   *$         53,000   XXXX 1972
Amortize the additional deferred inflows of resources related to reduction of liability for insurance obligation in a systematic and rational manner over the remaining term of the SCA arrangement and recognize revenue
(7) 5 U 0832CY XXX 565 CY 99999 3XXX *$           2,650   XXXX 1972

Accounting effect of above entries

Debit Credit
(1) To record acquisition value of parking garage constructed by the operator and present value of insurance obligations    
  1972 BC Deferred Inflows of Resources $ 630,000,000      
  9992 BC System Clearing   $ 630,000,000
(2) To record deferred inflows of resources    
  9992 BC System Clearing $ 630,000,000      
  1910 BC NC SCA Contract Obligation   $ 630,000,000
(3) To record amortization of initial deferred inflows of resources related to the parking garage each year of the SCA term    
  5150 BC Revenue Control $           31,500      
  1972 BC Deferred Inflows of Resources   $           31,500
(4) Governmental fund: To record payments made for insurance obligations each year    
  5500 Expenditure Control – Cash $           53,000      
  0045 Cash in State Treasury   $           53,000
(5) To reduce the liability by the principal reduction amount for the payment made to satisfy the insurance obligation
 
  1910 BC NC SCA Contract Obligation $          53,000      
  9992 BC System Clearing   $           53,000
(6) To record an additional deferred inflows of resources related to the reduction of the liability    
  9992 BC System Clearing $           53,000      
  1972 BC Deferred Inflows of Resources   $          53,000
(7) Amortize the additional deferred inflows of resources related to reduction of liability for insurance obligation in a systematic and rational manner over the remaining term of the SCA arrangement and recognize revenue
 
  1972 BC Deferred Inflows of Resources $              2,650      
  5150 BC Revenue Control   $              2,650
Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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