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Financial Accounting for Local and State School Systems, 2003 Edition

Account Classification Description
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Table of Contents
Uses of Information
Governmental  Accounting
Financial Accounting
Cost Accounting and Reporting for Educational Programs
Activity Fund Guidelines
Summary of Account Code Changes and other Appendices
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Frank Johnson
(202) 502-7362

Chapter 5: Financial Reporting

All uses of data are based on accurate, timely, and relevant information. Financial reporting is the communication of information regarding a governmental unit's accounting activities. Financial reporting encompasses a broad range of reporting activities including, but not limited to, presentation of the government's annual financial statements, grant applications and related reports, financial information submitted to state and federal regulatory and granting agencies, budget to actual comparison reports, management reporting, and other financial reports for internal and external use. The variety of these financial reports is evidence of the wide demand for financial information from both internal and external users. As a result, the financial reporting systems and activities of governments must be capable of producing financial information in a variety of formats and levels of detail.

Although the financial reporting activities of governmental entities, including schools, must fulfill a range of user needs, this chapter outlines the financial reporting requirements under Generally Accepted Accounting Principles (GAAP). Therefore, this chapter deals primarily with the preparation and presentation of the governmental annual financial statements and related GASB reporting standards. As discussed in the previous chapter, GASB Statement 34 has significantly modified the basic reporting requirements for governmental entities. The new reporting model requires the following financial statements and related information:

  • Management's Discussion & Analysis (MD&A) as Required Supplementary Information (RSI)
  • Basic Financial Statements:
    • Governmentwide Financial Statements
    • Fund Financial Statements
    • Notes to Financial Statements
  • Required Supplementary Information Other Than MD&A

The basic financial statements and the required supplementary information constitute the minimum requirements for external financial statements. GASB Statement 34 requires new types of financial reporting in response to the various needs of financial statement users. The financial statement components and targeted users are shown in table 2.

Table 2. Financial Statement Components and User Groups
Financial Statement Components Primary User Group
Required Supplementary Information (including MD&A) Citizenry, Legislators and Oversight Bodies, Financial Community
Governmentwide Financial Statements Citizenry and Legislators
Fund Financial Statements Oversight Bodies, Legislators and Financial Community

The following sub-section outlines the major financial statement elements and identifies the major requirements for presenting a government's annual financial statements.

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