Return to CHAPTER 80
| 80.20 Generally Accepted Accounting Principles |
80.20.10July 1, 2001 | This state adopts Generally Accepted Accounting Principles [GAAP] |
Generally accepted accounting principles [GAAP] are uniform minimum standards of and guidelines to financial accounting and reporting. GAAP establishes appropriate measurement and classification criteria for financial reporting. Adherence to GAAP provides a reasonable degree of comparability among the financial reports of state and local governmental units. In accordance with RCW 43.88.037], the Office of Financial Management adopts GAAP as applicable to state governments. |
80.20.20July 1, 2015 | What constitutes GAAP? |
The hierarchy of GAAP governs what constitutes GAAP for state governments, including government-owned colleges and universities and health care providers. It details the priority sequence of pronouncements that the state should look to for accounting and reporting guidance. The Governmental Accounting Standards Board [GASB] established the following hierarchy of authoritative GAAP for state and local governments: | |
If the accounting treatment for a transaction or other event is not specified by a pronouncement in Category A, a governmental entity should consider whether the accounting treatment is specified by a source in Category B. If the accounting treatment for a transaction or other event is not specified in either Category A or B, a government generally should first consider accounting principles for similar transactions covered in the above categories and then may consider other nonauthoritative accounting literature that does not conflict or contradict authoritative GAAP. Nonauthoritative accounting literature include:
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80.20.30July 1, 2001 | Governmental GAAP requires fund accounting |
Among the basic principles of governmental GAAP is fund accounting. Because of the diverse nature of governmental operations and the numerous legal and fiscal constraints under which those operations must be conducted, it is impossible to record all governmental financial transactions and balances in a single accounting entity. Therefore, unlike a private business which is accounted for as a single entity, a governmental unit is accounted for through separate funds, each of which is a fiscal and accounting entity with a self-balancing set of accounts. |
80.20.35July 1, 2020 | Fund categories used in governmental accounting |
Funds are categorized by type to indicate both the sources of the fund's financial resources and the nature of activities financed. There are three broad categories of funds used in governmental accounting. | |
80.20.35.a | Governmental funds are used to account for most typical governmental functions. The acquisition, use, and balances of the state's expendable financial resources and the related current liabilities [except those accounted for in proprietary funds], are accounted for through governmental funds. There are five types of governmental funds:
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80.20.35.b | Proprietary funds are used to account for a government's ongoing organizations and activities that are similar to businesses found in the private sector. These funds are considered self-supporting in that the services rendered by them are generally financed through user charges or on a cost reimbursement basis. There are two types of proprietary funds:
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80.20.35.c | Fiduciary funds are used to account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, and/or other governmental units. There are four types of fiduciary funds:
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80.20.40July 1, 2001 | Financial reporting requirements |
80.20.40.a | Interim reports. In order to facilitate management control, legislative oversight or other purposes, appropriate interim financial statements and reports of financial position, operating results and other pertinent information should be prepared. |
80.20.40.b | Annual Comprehensive Financial Report. An annual comprehensive financial report [ACFR] should be prepared covering all activities of the primary government and providing an overview of its discretely presented component units. It should contain the following sections:
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80.20.45July 1, 2012 | What is the financial reporting entity? |
The financial reporting entity of the state consists of:
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80.20.50July 1, 2020 | Measurement focus and basis of accounting |
80.20.50.a | Measurement focus is concerned with what financial transactions and events will be recognized in the accounting records and reported in the financial statements. Measurement focus is concerned with the inflow and outflow of resources - what is being measured. While there are a number of measurement focuses, the following two are fundamental to current governmental accounting principles: |
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80.20.50.b | Basis of accounting refers to when transactions and events will be recognized in the accounting records and presented in the financial statements. Governmental accounting transactions and events are recognized on either the accrual basis or the modified accrual basis. |
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80.20.50.c | Under GAAP, the measurement focus and basis of accounting applied varies with fund type category. |
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80.20.60July 1, 2015 | Accounting for capital assets and long-term obligations |
80.20.60.a | Capital assets of the state are accounted for at cost or, if the cost is not practicably determinable, at estimated cost. The cost of a capital asset includes its purchase price or construction cost, as well as the ancillary charges necessary to place the asset in its intended location and condition for use. Donated capital assets are recorded at their estimated acquisition value at the time received. Refer to Chapter 30 for the state's policy for capitalizing assets and for estimating the useful lives of those assets. |
80.20.60.a.[1] | Capital assets used in proprietary and fiduciary funds, where the flow of economic resources is measured, are accounted for in the appropriate fund. Depreciation of capital assets accounted for in a proprietary or fiduciary fund is recorded in the accounting records of that fund. Proprietary funds report capital assets both in the government-wide and fund financial statements. Capital assets of fiduciary funds are reported only in the Statement of Fiduciary Net Position. |
80.20.60.a.[2] | General capital assets are capital assets used in the operations of governmental funds where the primary accounting purpose is to reflect the sources and uses of current financial resources. Since general capital assets do not represent financial resources available for expenditure, they are not reported as assets in governmental funds. Rather, they are capitalized and depreciated in the General Capital Assets Subsidiary Account, and reported in governmental activities column in the government-wide Statement of Net Position. |
80.20.60.a.[3] | Capital assets should be depreciated over their estimated useful lives unless they are either inexhaustible or are infrastructure assets using the modified approach. Depreciation expense should be reported in:
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80.20.60.b | Long-term obligations. Due to the fund accounting requirements of a government's operations, some long-term obligations are accounted for in certain funds [fund long-term obligations] and others are accounted for in the General Long-Term Obligations Subsidiary Account. |
80.20.60.b.[1] | Long-term obligations associated with and expected to be paid from proprietary and fiduciary funds are accounted for in the appropriate fund. These obligations may be secured by a specific fund asset or revenue or may be backed by the full faith and credit of the state. Proprietary funds should report long-term obligations both in the government-wide and fund financial statements. Long-term obligations of fiduciary funds are reported only in the Statement of Fiduciary Net Position. |
80.20.60.b.[2] | All long-term obligations that are not accounted for in a proprietary or fiduciary fund are considered general obligations of the state. Since general long-term obligations represent debt that will be met by expending resources other than those considered current and available as of current balance sheet year-end, they should not be reported in governmental funds. Rather, they are reported in the governmental activities column in the government-wide Statement of Net Position. |
80.20.70July 1, 2001 | GAAP budgetary requirements |
Budgeting is recognized in GAAP as being a critical element of governmental planning, control and evaluation processes. GAAP budgetary requirements include:
Governmental funds of the state are budgeted materially in accordance with GAAP. The required budgetary comparisons are presented as required supplementary information. |
80.20.80July 1, 2001 | Management's Discussion and Analysis |
The state's financial statements are preceded by the Management's Discussion and Analysis [MD&A]. The MD&A, which is classified as required supplementary information, is a narrative introduction, overview, and analysis of the state's financial statements. It focuses on the primary government and is objective, easily readable, and based on currently known facts and conditions. The MD&A introduces the basic financial statements describing the statements and their relationship to one another. With emphasis on the current year, it presents condensed comparative data and an analysis of the overall financial position of the state as well as an analysis of significant balances and operations of individual funds. The MD&A presents budget variances, significant capital asset [including infrastructure] and debt activity, and other potentially significant matters. |
80.20.82June 1, 2013 | Government-wide financial statements |
The state presents two basic government-wide financial statements: the Statement of Net Position and the Statement of Activities. These statements are prepared using the economic resources measurement focus and the accrual basis of accounting. The government-wide financial statements present information about the overall state. All governmental and business-type activities are included, but fiduciary activities are excluded. Nonfiduciary component units are included. | |
80.20.82.a | Statement of Net Position. The purpose of the Statement of Net Position is to display the financial position of the primary government and its component units. Governmental and business-type activities of the primary government are displayed in separate columns with a total column presenting a consolidated total [balances between governmental and business-type activities are eliminated]. The statement reports all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. Net position is displayed in three components: 1] net investment in capital assets; 2] restricted; and 3] unrestricted. The net investment in capital assets component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction or improvement of those assets or related debt should be included in this component of net position. The restricted component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Generally, a liability relates to restricted assets if the asset results from a resource flow that also results in the recognition of a liability or if the liability will be liquidated with the restricted assets reported. Assets are reported as restricted when constraints are placed on asset use either externally, by creditors, grantors, contributors, or imposed by law through constitutional provision or enabling legislation. The unrestricted component of net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. |
80.20.82.b | Statement of Activities. The purpose of a statewide Statement of Activities is to identify the extent to which each major state program is supported by general state revenues or is self-financed through fees and intergovernmental aid. For governmental activities, a major program is defined as a function. For business type activities, a major program is an identifiable activity. |
80.20.85June 1, 2013 | Fund financial statements |
80.20.85.a | The fund financial statements focus on major individual funds of the state with non major funds aggregated into a single column regardless of fund type. In conjunction with the fund statements, the state presents a summary reconciliation between the fund financial statements and the government-wide financial statements. At the fund statement level, governmental funds use the current financial resources measurement focus and the modified accrual basis of accounting. Proprietary funds use the economic resources measurement focus and the accrual basis of accounting. Fiduciary funds are reported consistent with proprietary funds except for the recognition of certain liabilities of defined benefit pension plans. |
80.20.85.b | The state's fund financial statements include: Governmental Funds
Proprietary Funds
Fiduciary Funds
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