Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 1 – Summary of Significant Accounting Policies
Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Fund Balances/Net Position

The Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Fund Balances/Net Position section of Note 1 describes accounting treatment for major account balances or transactions. Examples often include:

• Cash and cash equivalents
• Investments (including a discussion of the relevant accounting policies)
• Inventories and prepaid items

  Note: Agencies are required to use the consumption method to report inventories and prepaid items in governmental funds. The consumption method requires reporting inventories and prepaid items as assets and deferring the recognition of expenditures until the period in which inventories and prepaid items are used or consumed.

• Current Receivables

  Note: Balances of receivables reported as accounts receivable – other revenues (GL 0238) or current other receivables (GL 0270) on the balance sheet/statement of net position may be aggregations of different components (such as balances due from vendors or customers). Provide details of significant components or different liquidity characteristics obscured by aggregation. Make the disclosure in Note 24 and include a reference to that disclosure in this note.

• Non-current Receivables

  Note: Disclose significant receivable balances not expected to be collected within one year of fiscal year-end as non-current receivables. For balances in other non-current receivables (GL 0467), provide details of the significant components obscured by aggregation. Make the disclosure in Note 24 and include a reference to that disclosure in this note.

• Restricted Assets — Use of restricted assets (cash, investments, receivables) by proprietary fund types are described here. Include the reasons for the restrictions.
• Capital Assets — When reporting capital assets, the general policy for capitalizing assets and for estimating the useful lives of depreciable assets are disclosed here. Present reported infrastructure assets as a separate line item. Do not include land with infrastructure assets — instead, report it as a separate line item. Include Intangible Right-to-Use (IRTU) assets for leases and subscription-based information technology arrangements (SBITAs). Make the disclosure in Note 2 and include a reference to that disclosure in this note.
• Long-Term Liabilities

  Note: Do not treat rebatable arbitrage as a reduction of revenues in governmental funds — instead, treat rebatable arbitrage in the same way as any other claim or judgment. That is, there is no recognition in the governmental fund financial statements until rebatable amounts are actually due and payable to the federal government. If amounts are not reported in governmental funds, basis conversion entries are required for rebatable arbitrage.

• Current Payables

  Note: Balances of payables reported as current other liabilities (GL 1150) on the balance sheet/statement of net position may be aggregations of different components (such as balances due to vendors or customers). For balances in GL 1150, provide details of significant components obscured by aggregation. Make the disclosure in Note 24 and include a reference to that disclosure in this note.

• Non-current Payables

  Note: Disclose significant payable balances not expected to be paid within one year of fiscal year-end as non-current payables. For balances in non-current other liabilities (GL 1450), provide details of significant components obscured by aggregation. Make the disclosure in Note 24 and include a reference to that disclosure in this note.

• Employees’ Compensable Leave Balances
  1. Annual leave
  2. Overtime and compensatory leave for FLSA
  3. Employee sick leave
• Lease Obligations — Make the disclosure in Note 8 and include a reference to that disclosure in this note.
• SBITA Obligations — Make the disclosure in Note 8 and include a reference to that disclosure in this note.
• Conduit Debt Obligations — Certain revenue bonds issued by the agency for the express purpose of providing capital financing for a third party that is not part of the agency. Although conduit debt obligations bear the name of the agency, the agency has no obligation for such debt beyond the resources provided by a bond with the third party on whose behalf the bond was issued.
  Note: Disclose

  1. A general description of the conduit debt transactions
  2. Types of commitments and the aggregate outstanding principal amount of all conduit obligations that share the same type of commitments at the end of the reporting period
     –AND–
  3. A clear indication that the issuer has no obligation for the debt beyond the resources provided by the related bonds.
  Make the disclosure in Note 6 and include a reference to that disclosure in this note.
• Deferred outflows of resources — The government’s net asset consumption that is applicable to a future fiscal year.
• Deferred inflows of resources — The government’s net asset acquisition that is applicable to a future fiscal year. Make the disclosure in Note 28 and include a reference to that disclosure in this note.
• Interfund Activity and Transactions
  1. Interfund activity refers to financial interaction between funds (including blended component units) and is related to internal events.
  2. Interfund transactions refer to interactions with legally separate entities (discretely presented component units, other governments, other legally separate entities and individuals) and are restricted to external events.
  3. Reciprocal interfund (internal) activity is similar to exchange and exchange-like transactions and includes:
     • Loans (including activity previously termed advances) – Report loans as interfund receivables and payables on the balance sheet.
     • Interfund services provided and used (interfund sales and purchases, previously called quasi-external transactions) – Report interfund sales and purchases as interfund services provided (revenues) and interfund services used (expenditures or expenses) on the operating statement.
  4. Nonreciprocal interfund (internal) activity is similar to non-exchange transactions or other events and includes:
     • Interfund transfers represent the flow of assets (cash or goods) without equivalent flow of assets in return or a requirement for repayment. Transfers are redefined to include activities previously known as operating transfers and residual equity transfers. In governmental funds, transfers are reported as other financing sources or uses. In proprietary funds, transfers are reported after non-operating revenues and expenses in the statement of revenues, expenses and changes in net position.
     • Interfund reimbursements are repayments from funds responsible for expenditures or expenses to funds that made the actual payment. Reimbursements are not displayed in the financial statements.
     Make the disclosure in Note 12 and include a reference to that disclosure in this note.
• Risk Financing — Liabilities are reported when it is probable a loss occurred, and the amount of the loss can be reasonably estimated. These liabilities include an amount for claims that were incurred but not reported. See Note 17 for information on claims and judgments.
• Fund Balance/Net Position — “Fund balance” is the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources on the governmental fund statements. “Net position” is the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources on the government-wide, proprietary and fiduciary fund statements.
• Fund Balance Components — The fund balance amounts for governmental funds were reclassified in accordance with GASB 54. Amounts previously reported as reserved and unreserved are now reported as nonspendable, restricted, committed, assigned or unassigned. For more information on GASB 54 fund balance classifications, see the Fund Balance/Net Position section of Governmental Funds under General Accounting.
  • Nonspendable fund balance includes amounts not available to be spent because they are either not in a spendable form or they are legally or contractually required to be maintained intact.
  • Restricted fund balance includes those resources that have constraints placed on their use through external parties such as creditors, grantors, contributors, laws or regulations of other governments or by law through constitutional provisions or enabling legislation.
  • Committed fund balance can be used only for specific purposes pursuant to constraints imposed through legislation passed into law by a formal action of the Texas Legislature, the state’s highest level of decision-making authority.
  • Assigned fund balance includes amounts constrained by the state’s intent to be used for specific purposes, but the constraints do not meet the requirements to be reported as restricted or committed. Intent is expressed by either the Texas Legislature or a body (for example, a budget or finance committee) or official to which the governing body has delegated the authority to assign amounts to be used for specific purposes.
  • Unassigned fund balance is the residual classification for the general fund. This classification represents fund balance that was not assigned to other funds and was not restricted, committed or assigned to specific purposes within the general fund. The general fund is the only fund that can report a positive unassigned fund balance.