|Oracle Public Sector Financials User Guide|
Part Number E13449-04
Governmental Accounting Standards Board (GASB) Statement Number 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments, establishes new reporting requirements for state and local governments while maintaining much of what is already required for annual reports. GASB Number 35 extends these requirements to public colleges and universities. One of the most significant new requirements is to prepare government- or university-wide financial statements using the accrual basis of accounting, in addition to the modified accrual-based fund statements already required. The challenge presented by GASB 34/35 is to produce these accrual and modified accrual statements simultaneously from the same financial records.
Nowhere is this challenge more acute than in the area of asset accounting. Capital acquisitions, accounted for and reported as expenditures in the fund statements, must be accounted for and reported under GASB 34/35 as assets and depreciated in the government- or university-wide statements.
The objective of GASB 34/35 is to enhance the understanding and usefulness of the general purpose external financial reports of state and local governments, and public colleges and universities. GASB 34/35 asset accounting enables users to simultaneously report capital acquisitions as expenditures in fund statements and depreciating assets in the new government- or university-wide statements required by GASB while continuing to charge these acquisitions to expense accounts in Oracle Purchasing and Oracle Payables.
Standard consolidation and allocation functionality in Oracle General Ledger can be used to copy account balances from the modified accrual ledger to a new, full accrual ledger, reclassifying certain expense account balances to asset accounts to reflect the change in accounting basis. Standard copying functionality in Oracle Assets can be used to set up a second asset book that automatically calculates depreciation for the full accrual ledger.
Note: The relationship between the depreciation asset book and the expenditure asset book is analogous to the relationship between the tax asset book and the corporate book for commercial organizations.
GASB 34/35 asset accounting setup requires the following:
Modified accrual ledger as the primary ledger of record that reflects the expenditure-oriented, fund-based accounting used by state and local governments or by public colleges and universities
Secondary ledger for accrual reporting
Expenditure asset book associated with the primary accrual ledger
Depreciation asset book that is tied to the expenditure asset book and associated with the secondary accrual ledger
The GASB 34/35 process consists of the following parts:
Capital acquisitions are recorded in Payables as expenditures.
Expenditures are posted to the primary accrual ledger.
Expenditures are brought into the expenditure asset book using Mass Additions which runs a process to allow depreciation to be generated for these additions even though they were not charged to asset accounts.
Mass Copy copies assets from the expenditure asset book to the depreciation asset book where depreciation is generated.
Depreciation and accumulated depreciation are posted to the secondary accrual ledger.
Balances, including asset expenditure balances, are copied from the modified accrual ledger to the accrual ledger using standard consolidation mapping and transfer functionality.
Entries in the accrual ledger are recorded to adjust certain balances, including asset balances, from the modified accrual to the accrual basis of accounting.
Note: Balances are transferred from the modified accrual ledger to the accrual ledger. Posting in the accrual ledger must be limited to depreciation, other entries from Assets such as adjustments, transfers, and retirements, and to adjusting journals that are necessary to reflect the different basis of accounting. All transactions from subledgers other than Assets should be posted to the modified accrual ledger.
GASB 34/35 statements can be prepared using General Ledger’s Financial Statement Generator provided that the user has an appropriately structured chart of accounts.
The following assumptions and dependencies apply to the GASB 34/35 asset accounting feature:
Payables, Assets, and General Ledger applications are used.
If modified accrual basis of accounting is already in use, beginning balances of certain balance sheet accounts on an accrual basis are ascertainable.
All capital acquisitions are originally recorded to expense accounts.
This solution assumes a new installation of Assets.
Note: If Assets is already used, consulting assistance may be required to implement the solution.
For information on setting up GASB 34/35 asset accounting, see Oracle Public Sector Financials Setup Overview and GASB 34/35 Asset Accounting Setup.
For information on using the GASB 34/35 asset accounting feature, see GASB 34/35 Asset Accounting Procedure.
For information on using the Financial Statement Generator, see Overview of the Financial Statement Generator, Oracle General Ledger User Guide and Using Financial Statement Generator, Oracle General Ledger User Guide.
The diagram below shows an overview of the integration between Payables, Assets, and General Ledger under the GASB 34/35 asset accounting process as described in the GASB 34/35 Asset Accounting Process table.
GASB 34/35 Asset Accounting Process Flowchart
The table below describes the GASB 34/35 asset accounting process.
|1.||In Payables, users enter invoices, using expense accounts reserved for capital acquisitions.|
|2.||A GASB 34/35 request set, scheduled to start at regular intervals, automatically runs the following processes:Payables Approval|
Create Accounting Process
Update Assets Tracking Flag process for all invoice distributions in range of expense accounts reserved for capital acquisitions, ensuring that all such acquisitions are eligible for Mass Additions to Assets.
Transfer Journal Entries to GL
Mass Additions Create program from Payables to the expenditure asset book
Update Asset Type program to change Expensed assets to Capitalized or CIP.
Note: Capitalized assets are depreciated immediately. CIP assets depreciate when placed in service some time in the future.
|3.||In the expenditure asset book, users prepare assets in the Mass Additions Summary window, assigning category codes, depreciation expense accounts, and locations.|
|4.||Users post Mass Additions in the expenditure asset book.|
|5.||Users close the period in the expenditure asset book by running depreciation.
Note: Even though nothing is done with the depreciation generated in the expenditure asset book, depreciation must be run to close a period in Assets, and a period must be closed in an asset book before assets can be copied from that book.
|6.||Users run Periodic Mass Copy to copy assets from the expenditure asset book to the depreciation asset book.|
|7.||Users generate depreciation in the depreciation asset book.|
|8.||Users run the Create Accounting program in Assets to send depreciation expense and accumulated depreciation amounts to accrual ledger where they are posted.|
|9.||In General Ledger, users run the Transfer Consolidation Data process to transfer account balances and transactions from the modified accrual ledger to the accrual ledger. The resulting journal entry is posted in the accrual ledger.|
|10.||In the accrual ledger, users run Mass Allocations to reclassify asset expenditures to fixed asset accounts.|
|11.||In the accrual ledger, users record journal entries to reclassify proceeds from asset disposals, a revenue account in the modified accrual ledger, to its accrual basis components.|
|12.||In the accrual ledger, users record funding of fixed assets by running Mass Allocations to reclassify that portion of net assets representing investment in fixed assets, net of related debt.|
The example below shows how the differences between modified accrual and accrual accounting affect the respective balance sheets.
This example depicts the accounting treatment of the same series of business transactions using the modified accrual and accrual bases of accounting. The basis for the modified accrual accounting shows a Fund Balance of $157,500 and the basis for the accrual accounting shows Net Assets of $239,500.
Capital expenditures, which are expensed in modified accrual accounting, are recorded as assets and depreciated in accrual accounting. Asset disposals are also accounted for differently. The reconciliation of the Fund Balance to Net Assets takes the Fund Balance of $157,000, adds the Fixed Assets value of $90,000, and deducts the Accumulated Depreciation of $8,000. This equals the Net Assets value of $239,500.
Modified Accrual Versus Accrual Asset Accounting Example
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