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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 14 – Adjustments to Beginning Net position, Fund Balances or Fund Net Position
Change in Accounting Estimate

Accounting estimates are defined as amounts subject to measurement uncertainty that are recognized or disclosed in the basic financial statements. There are two parts to calculating an accounting estimate:

  • Input – A change in an accounting estimate occurs when inputs change. These inputs may include a change in circumstances, new information or more experience.

    Example: A capital asset is depreciated over 35 years using straight-line method. After receiving new information that wasn’t originally available. The useful life is changed to 25 years.

  • Methodology – A change in the method used to depreciate capital assets and a change in valuation techniques to determine fair value are considered changes in methodology. This change must be justified on the basis that the new method or technique is preferable to the methodology used before the change.

    Example: The same capital asset’s depreciation is changed from straight-line method to double-declining balance method.

Reporting

Per GASB 100, agencies must report changes in accounting estimates prospectively by recognizing the change in the reporting period in which the change occurs. This important distinction is consistent with current GASB 62 guidance.

Disclosure

Agencies must disclose the following in the notes to the financial statements for each significant change in accounting estimate:

  • The nature of the change in accounting estimate, including the financial statement line items affected.
  • A Note disclosure (only if the change is significant).