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CHAPTER 4
GAAP ADJUSTMENTS AND RECLASSIFICATION ENTRIES
OVERVIEW
Once the derivation process from the legal basis of accounting to the line items of the BusinessType Activities Model has been completed, the next step in the process is to convert the account
balances from legal (modified accrual) to GAAP (full accrual) basis. This step is accomplished
by a series of adjustments, only a few of which require information that is provided by the Office
of the Chancellor (described in Chapter 5). These adjustments include, among others, accruals
for compensated absences and faculty salaries, accounting for capital leases, adjustments to fund
balance clearing, accounts payable accruals, unearned revenues, depreciating and/or amortizing
capital assets, tuition discounting and accrual for pollution remediation obligations.
The types of GAAP adjustments that can be prepared are solely based upon information
available at the campus are detailed in the sections of this chapter. The GAAP adjustments
discussed in this Chapter are not all inclusive. Campuses should analyze its balances to
determine if there are any other campus specific adjustments.
TYPES OF GAAP ADJUSTMENTS
There are two major types of GAAP adjustments:
1. Permanent adjustments: Required to reflect for GAAP reporting purposes accounting
activity that is always recorded differently, not at all, or only under the legal basis of
accounting. Such adjustments may result in a change to net position. The following are
different types of “permanent” adjustments:
a. Reclassifications: Required for accounting activity that is recorded under the legal basis
of accounting as well as under GAAP basis, for the same dollar amounts, in the same
fiscal year, but in different financial statement categories. Such adjustments occasionally
result in a change in net position between legal and GAAP basis. (Recurring
reclassifications may be automated by using the CDIP “GAAP_OVERRIDE” Account
Attribute feature.)
b. GAAP Only: Required to reflect for GAAP reporting purposes accounting activity that is
never recorded under the legal basis of accounting. Such adjustments may result in a
change to net position between legal and GAAP basis. An example of this adjustment is
depreciation and amortization of capital assets.
c. Eliminations (Legal Only): Required for accounting activity that is recorded under the
legal basis of accounting, but is not reported under GAAP. Such adjustments occasionally
result in a change in net position between legal and GAAP basis. (Recurring eliminations
may be automated by using the CDIP “GAAP_OVERRIDE” Account or Fund Attribute
feature.)
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2. Timing adjustments: Required for accounting activity that is recorded under the legal basis
of accounting as well as under GAAP basis, but at different times. Such adjustments typically
result in the creation of an accrued asset and/or liability and probably a change in net position
between legal and GAAP basis. Their effect must be reversed next year in the process of
deriving legal activity to GAAP basis activity.
BEGINNING GAAP TRIAL BALANCE
Before any GAAP adjustments and reclassification entries are to be made, validate the current
fiscal year’s beginning GAAP Trial Balance for the Statement of Net Position (SNP), and verify
that it agrees to the ending “Post Closing” GAAP Trial Balance for the SNP from the preceding
fiscal year.
Previous fiscal year’s ending GAAP balances in PeopleSoft must be the same as this fiscal year’s
beginning GAAP balances for each net position category by CSU fund in PeopleSoft. In
addition, the GAAP beginning balances in PeopleSoft should equal to the beginning balances in
the reporting package in the Year-End System (YES).
If the beginning GAAP Trial Balance does not agree to the preceding year’s final “Post Closing”
Trial Balance, this situation indicates a problem with the Year-End Closing process for the
preceding year GAAP Ledger. The problem could be the result of the following circumstances:
 Not all prior year GAAP adjustments were posted before the Year-End Closing process was
run.
 The Year-End Close Rules have not been set up correctly.
 The “Account Types” “Roll-Forward” checkbox has been incorrectly configured.
 There is an application problem (“bug”).
After correcting the circumstances, the Year-End Close Request should be reprocessed and the
beginning Trial Balance re-validated.
If the beginning GAAP Trial Balance in PeopleSoft disagrees with the beginning SNP balances
in the reporting package, then campus needs to determine why. If the difference is due to a
campus stand-alone entry booked after the final reporting package submission in the prior fiscal
year, then the entry must be reflected in the current year’s reporting package as a prior period
adjustment (note 15.1 and 15.2 in YES). Moreover, if the difference is due to an accounting
change from the new GASB pronouncements, then the entry must be reflected in the separated
Excel file (note 15.3, exhibit 21 in the GAAP manual).
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MAPPING OF TOPICS IN CHAPTER 4 (OLD VS. NEW)
Effective FY14/15, the contents in Chapter 4 have been arranged by financial statement line
item. In the previous years’ GAAP Manual, they were arranged by topic. Due to this change, a
mapping of the topics to the new sub-chapters within Chapter 4 has been created for users’
reference.
Mapping of GAAP
Manual Chapter 4.xlsx
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REVISION CONTROL
Document Title:
CHAPTER 4 – GAAP ADJUSTMENTS AND RECLASSIFICATION ENTRIES
REVISION AND APPROVAL HISTORY
Section(s)
Revised
Beginning
Trial
Balance
Table of
Contents
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Revision
Date
Summary of Revisions
Previously in Chapter 4.1
April 2015
Provides the mapping of the new chapter 4 arrangement based on prior
April 2015
year GAAP Manual.
GAAP Manual | GAAP Adjustments and Reclassification Entries | June 30, 2015