In your opinion, should these items be reported on the balance sheets of governmental funds?

Posted: September 16th, 2022

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Which of the following do you think a city should report as an “extraordinary” or a “special” item assuming that they are material in amount:
The settlement of an age discrimination lawsuit
The sale, at a sizable gain, of city‐owned land to a private developer
The unreimbursed cost of providing housing and other assistance to hurricane victims who have relocated from other areas
A major donation, which the city had actively solicited from a local corporation to support a city science center
According to the GASB, “Financial statements for governmental funds should be presented using the current financial resources measurement focus and the modified accrual basis of accounting.” Financial resources are conventionally defined as “cash, investments, and receivables, and other assets that can be expected to be transformed into cash in the normal course of operations.” Included among the assets of governmental funds are supplies inventories and prepaid items, such as insurance and rent. Yet neither of these appear to meet the definition of financial resources. In your opinion, should these items be reported on the balance sheets of governmental funds? In light of the conventional definition of financial resources, how can including them be justified?
You are the auditor of a state. The state made a $10 million grant to a city. The grant reimburses the city for allowable costs incurred in hosting a meeting of international leaders. The meeting was held two weeks prior to the end of the state’s fiscal year, but as of the end of the fiscal year the city had not yet submitted documentation of any costs incurred. The state comptroller asserts that no amount of the grant should be reported as an expenditure of the current year in that the state has no reliable information as to the actual amount of allowable costs incurred and that are thereby eligible for reimbursement. Do you agree with the comptroller?
A city on the coast of Florida has incurred losses (including impairment of assets, clean‐up costs, additional public safety costs, etc.) of $50 million owing to a recent hurricane. This was the third time in as many years in which the city was hit by major storms. Should the losses be classified as “extraordinary”?

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