8-4
a. What is infrastructure?
Infrastructure assets are “long-lived capital assets that normally are stationary in
nature and normally can be preserved for a significantly greater number of years
than most capital assets. Examples of infrastructure assets include roads, bridges,
tunnels, drainage systems, water and sewer systems, dams, and lighting systems”
(GASB, Statement 34)
b. What are two methods that might be used to record infrastructure expense
from year to year? How is the accounting different under the two methods?
Two methods are depreciation approach and modified approach.
The differences are: using the modified approach, expenditures to extend the life of
infrastructure assets are charged to expense. Choosing to depreciate infrastructure
assets, expenditures to extend the life of infrastructure assets would be capitalized
in the government-wide statements.
c. What conditions must exist in order to use the modified approach to record
and report infrastructure?
Governments electing to use the modified approach must meet two conditions.
1. The government must have an asset management system that keeps an up-todate inventory of eligible infrastructure assets; performs condition assessments of
those eligible infrastructure assets at least every three years, using a consistent
measurement scale; and estimates each year the annual amount to maintain and
preserve those assets at the condition level established and disclosed by the
government.
2. The government must document that the eligible infrastructure assets are being
maintained at a level at or above the condition level established and disclosed by the
government.
d. What are the disclosure requirements if the modified approach is used?
The requirements are documented by a government in two RSI schedules reflecting
the assessed condition of eligible infrastructure assets and the estimated annual
amount to maintain and preserve eligible infrastructure assets compared with the
amount actually expended for each of the preceding five fiscal periods.
8-5
1. What is the measurement focus and basis of accounting for: governmental
fund statements; proprietary fund statements; fiduciary fund statements; and
government-wide statements?
Governmental funds are prepared using the modified accrual basis and current
financial resource measurement focus. Proprietary funds, fiduciary funds, and
government-wide statements are prepared current financial resource measurement
focus on accrual basis accounting.
2. Indicate differences between fund financial statements and government-wide
statements with regard to: component units; fiduciary funds; and location of
internal service funds.
Component units are displayed as a separate column in the Statement of Assets and
as separate rows in the Statement of Activities. The revenues and expenses are
entered directly into the component unit rows of the Statement of Activities.
Component units that are fiduciary in nature are not included in the governmentwide statements. Fiduciary fund are not included in the government-wide
statements. Internal service funds are not included in the governmental fund
statements as they are considered to be proprietary funds.
3. Indicate what should be included in the Statement of Net Assets categories:
Invested in Capital Assets, Net of Related Debt; Restricted; and Unrestricted.
The purchase of Capital Assets is subtracted in calculating the balance of invested in
Capital Assets, such as accumulated depreciation, bonds payable and long-term
advance, Net of related Debt. Restricted Net Assets include the balances of the
restricted Fund Balances appearing in the governmental funds balance sheet plus the
Non-spendable fund Balance, representing the non-expendable principal of the
permanent fund. Unrestricted net assets is a “ Plug” figure calculated as the
difference between total net assets and the balances of the two previously
determined net asset components.
9-2
A. Governments engaged in governmental-type activities. Includes those that are
engaged in governmental- and business-type activities, more than one
governmental activity, and only one governmental activity.
Special-purpose governments that are engaged in both governmental and business
type activities or in more than one governmental activity are required full reporting.
They are including MD&A, government-wide and find-basis financial statements,
notes to the financial statements, and Required Supplementary information (RSI).
B. Governments engaged in business-type activities only.
The activities are usually reported in enterprise funds. It would include water and
sewer utilities, airports, transit systems, and other authorities. It required including
MD&A, Enterprise Fund Financial Statements (Statement of Net Assets or Balance
Sheet, Statement of Revenues, Expenses, and changes in Net Assets and Statement
of Cash Flows), Notes to the financial Statements, RSI, and other than ND&A, if
applicable.
C. Governments engaged in fiduciary-type activities only.
This is defined benefit plans; such as retirement plans, contribution plans deferred
compensation, and health care plans. They prepare separate financial statements as
special- purpose local governments that engaged only in fiduciary-type activities.
They are required to prepare MD&A, Statement of Fiduciary Net Assets, Statement
of Changes in Fiduciary Net Assets, Notes to the Financial Statements, RSI, and other
than ND&A, if applicable.