GASB Statement 9 may cause agencies to classify certain activities differently between the operating statement and the cash flow statement. Such differences are recognized in the reconciliation section of the cash flow statement.
For example, GASB Statement 9 requires most loans programs be reported in the investing section of the cash flow statement. However, a governmental entity may feel that providing the loan program is one of the primary functions of the agency. Therefore, on their operating statement (which is not subject to GASB Statement 9), the agency classifies the activities as operating.
Therefore, the operating income reported in the cash flow reconciliation section contains activity related to these loan programs. However, GASB Statement 9 prevents these transactions from being classified as operating activities on the cash flow statement. Because of this, cash flows from operations cannot be reconciled to operating income without adjusting the effects of these transactions from operating income.
The classification difference should be used when there is a cash transaction in the operating section of either the operating or cash flow statement that is not reflected on the other statement.