1. Legal Entries vs. GAAP Entries Sedong John, Director, Financial Services / SFSR Chancellor’s Office April 24, 2015

2. Learning Objectives Understand Measurement Focus and Basis of Accounting as the underlying concepts for legal and GAAP reporting. Achieve consistency among CSU campuses in deciding what entries to record in the Legal ledger vs. GAAP ledger. April 2015Year-End GAAP Training2

3. Key Concepts: Measurement Focus Measurement Focus identifies what transactions and events should be recorded. Flow of current financial resources measurement focus does not include long-term capital assets and liabilities on the balance sheet. Flow of economic resources measurement focus includes long-term assets and liabilities as well as current assets and liabilities on the balance sheet. April 2015Year-End GAAP Training3

4. Key Concepts: Basis of Accounting Basis of Accounting determines the timing of recognizing the transactions. Under Modified Accrual basis of accounting, revenues are recognized when they become measurable and available, and expenses are recognized in the accounting period in which the liability is incurred, measurable, and expected to be paid within twelve months of the fiscal period ended. April 2015Year-End GAAP Training4

5. Key Concepts: Basis of Accounting (cont.) Under Accrual basis of accounting, revenues are recognized when they are earned, regardless of when cash is received, and expenses are recognized when a liability is incurred, regardless of when paid. April 2015Year-End GAAP Training5

6. Question 1 What basis of accounting is used in conjunction with current financial resources measurement focus? April 2015Year-End GAAP Training6

7. Governmental Funds vs. Nongovernmental Funds Governmental funds are reported using current financial resources measurement focus and modified accrual basis of accounting (GASB 34, par 79) Nongovernmental (Proprietary and Fiduciary) funds are reported using economic resources measurement focus and accrual basis of accounting (GASB 34, par 92, 107) April 2015Year-End GAAP Training7

8. CSU Accounting Governmental funds (GF, GO Bond Funds, etc.) are reported using current financial resources measurement focus and modified accrual basis of accounting. April 2015Year-End GAAP Training8

9. CSU Accounting (cont.) Nongovernmental funds (0948, etc.) are not fully using economic resources measurement focus and accrual basis of accounting in the Legal ledger due to the following limiting factors: Unavailability of information before legal closing Lack of some state GL accounts CSU’s policy (e.g., recording all fixed assets in CSU fund 501, etc.) Budgetary reporting needs April 2015Year-End GAAP Training9

10. Staff and Faculty Accrual Payroll expenses for the fiscal year should be recorded in Legal books before yearend closing to the extent information is available. Faculty payroll for July and August and staff payroll not included in the June pay file will be recorded in GAAP. April 2015Year-End GAAP Training10

11. Compensated Absences Compensated absences are recorded in GAAP because CalPERS data used for calculation of compensated absences is available in late July after yearend closing. April 2015Year-End GAAP Training11

12. Prepaid Expenses Due to budgetary reporting consideration, some campuses want to report entire expenditures as expenses in legal books rather than identify the portion for prepaid expenses. No one method is adopted at this point because changes may affect campus operations. This may be revisited with more time in the future. April 2015Year-End GAAP Training12

13. Fund Balance Clearing Fund Balance Clearing (FBC) may not be reclassified in the Legal ledger since it affects legal basis reports and has different meaning, depending on the SCO fund. Campus FBC balances are linked to the CO’s balances in enterprise/fiduciary funds. FBC should be reclassified only in GAAP as described in the GAAP Manual. April 2015Year-End GAAP Training13

14. Fixed Assets Fixed assets should be recorded in the Legal ledger throughout the year. Adjustments discovered after legal closing should be recorded in GAAP. April 2015Year-End GAAP Training14

15. Notes Receivable/Leases Receivable Notes receivable and leases receivable with auxiliaries should be recorded in GAAP because no state GL accounts are available for either one. April 2015Year-End GAAP Training15

16. Accrued Expenses/Revenues Accrued expenses/revenues should be recorded in the Legal ledger in accordance with applicable modified accrual basis or accrual basis of accounting, unless exceptions are allowed by CSU policy or other appropriate reasons. Accrued expenses/revenues discovered after legal closing or otherwise not recorded in the Legal ledger will be recorded in GAAP. April 2015Year-End GAAP Training16

17. SRB Pass-down Entries from the CO SRB pass-down entries will continue to be recorded in the GAAP ledger as they are not available before Legal closing and some entries are not applicable to Legal. April 2015Year-End GAAP Training17

18. Summer Session Revenue and Expenses Summer session revenue should be recognized for the earned portion in the Legal ledger. Summer session accrued expenses related to the accrued revenue should also be recognized in the Legal ledger, using approximation if actual data is not available, for Extended Education report. April 2015Year-End GAAP Training18

19. Faculty Release Time Expenses related to faculty release time for research projects should be reported in the correct NACUBO functional categories (FIRMS program codes) in the Legal ledger rather than reclassified in GAAP. Consistency in functional categories between Legal basis data and GAAP data is becoming more important as these data are often compared in various reports and analyses. April 2015Year-End GAAP Training19

20. Top Finishers in Legal Basis Submission San Bernardino Humboldt Monterey Bay April 2015Year-End GAAP Training20

21. Top Finishers in GAAP Submission San Diego Chico Northridge April 2015Year-End GAAP Training21

22. www.calstate.edu April 2015Year-End GAAP Training22