Chapter 4.1.3 · Web viewThe first step in developing state appropriations revenue is to identify...

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CHAPTER 4.1.3

GAAP ADJUSTMENTS AND RECLASSIFICATION ENTRIES

ASSETS: RECEIVABLES

1 GAAP POLICIES AND PROCEDURES

Below are the various types of receivables recognized by the campus and the Office of the Chancellor (CO):

Accounts receivable Accounts receivable of the University generally consists of State appropriations (including those related to State Public Work Board (SPWB) Lease Revenue Bond Program), discretely presented component units (mostly recognized auxiliary organizations), student accounts, government grants and contracts, intra-agency (i.e. other CSU campuses and the CO), and others. Inter-agency receivables and payables are eliminated at Systemwide level.Please see Legal Manual Chapter 28, Accounts Receivable for more details related to the account. Lease receivableLease receivable of the University arise mainly from capital lease agreements with certain discretely presented component units to lease existing and newly constructed facilities to the discretely presented component unit.

Notes receivableNotes receivable of the University arise mainly from note agreements with certain discretely presented component units to finance existing and newly constructed facilities for the discretely presented component units. This type of notes receivable is carried in the books of the CO as the agreement is entered into by the CSU Trustees and the discretely presented component units.

Pledges receivablePledges receivable of the University represent promises from donors to make a gift or philanthropic grant in the future. At the CSU, most of the pledges are managed by discretely presented component units.Please see GAAP Manual Chapter 8.5.2, Pledge Reporting Guidelines for more detailed information.

4.01.3-1 GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Receivables | June 30, 2018

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Student loans receivableStudent loans receivable generally do not meet the definition of a current asset, as the related payments to be received within 12 months of the Statement of Net Position (SNP) date are not available for liquidation of current liabilities. Therefore, the entire student loans receivable balance should be classified as a noncurrent asset in the SNP, unless the funds collected on the receivable are expected to be available for current operations within 12 months.

Policy on Allowance for doubtful accountsThe University maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable based on type of receivables and expectations of repayment. In establishing the required allowance, management considers one or more of the following: type of receivable, state guidelines, historical losses adjusted to take into account current market conditions, the amount of receivable in dispute, the current receivable aging, and current payment patterns. The University reviews its allowance for doubtful accounts annually. Past-due balances over 90 days and over a specified amount are reviewed individually for collectability. Allowance for doubtful accounts are recorded in legal basis records. Please refer to Legal Manual Chapter 28, Accounts Receivable for detailed discussions of contra receivable accounts.

Policy on classification of current and noncurrent assetsThe University considers its assets to be current if it can reasonably be expected, as part of its normal business operations, to be converted to cash and be available for liquidation of current liabilities within 12 months of the SNP date (June 30). All other assets should be considered noncurrent.

2 RELEVANT ACCOUNTING LITERATURE

GASB Statement No. 33, Accounting and Financial Reporting For Nonexchange TransactionsGASB Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future RevenueGASB 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (which covers lease accounting and classification between current and noncurrent assets.)


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3 OBJECTIVES OF GAAP ADJUSTMENTS

The objectives of the GAAP adjustments necessary at June 30 related to receivables are: Accounts Receivable To record current year net appropriations and appropriations receivable for those funds

appropriated by the State. To record the reduction in state appropriations receivable for funds received during the

current year. To properly classify accounts receivable between current and noncurrent.

Student Loans Receivable To properly classify student loan receivable to Grants refundable account for recognizing

the reserve allowance.

Lease Receivables To set up lease receivable (for campus originated capital leases that are non-Systemwide

Revenue Bonds (SRB) related). To apply collection of lease payments against lease receivables. To properly classify lease receivable between current and noncurrent.

Notes Receivables To set up notes receivable (for campus originated note agreements that are non-SRB

related). To apply collection of note payments against notes receivables. To properly classify notes receivable between current and noncurrent.

Pledge Receivable To record pledge receivable at June 30 when the pledge commitments meet all eligibility

requirements (this line item is not available in the legal-basis records).

Allowance for Doubtful Accounts To adjust the allowance for doubtful accounts (if necessary).


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4 GAAP ACCOUNTING TREATMENT AND JOURNAL ENTRIES

4.1 RELATED GAAP ACCOUNT(S)711103 – Accounts receivable, net (current)711202 – Accounts receivable, net (noncurrent)711105 – Leases receivable, current portion711209 – Leases receivable, net of current portion711110 – Notes Receivable, current portion711210 – Notes receivable, net of current portion711106 – Pledges receivable, net (current)711204 – Pledges receivable, net (noncurrent)711203 – Student loans receivable, net

4.2 ACCOUNTS RECEIVABLE

OverviewThe accounts receivable are mainly recorded in the legal-basis books as mentioned above and it derives properly to GAAP account 711103 Accounts Receivable, Net, except for state appropriation receivables, which is recorded only in the GAAP ledger. As such, the discussion below is focused on state appropriation receivables. The State appropriates funds to the University on an annual basis. The appropriations are, in turn, allocated among the campuses by the Systemwide Budget Office. Appropriations are recognized as revenues/receivables in general when authorization is received and are reported as either noncapital appropriations when used to support general operations or capital appropriations when used for capital projects. In legal basis accounting, state appropriations are allocated to the campuses via allocation orders and are recorded by campuses as budget entries only. Budget entries are “memo entries” in legal basis accounting records, and they do not affect a campus’ legal basis assets, liabilities, revenues, expenses, or encumbrances. Therefore, in these funds (governmental funds), revenue for appropriations is not recognized on the SAM07 Pre-closing Trial Balance.Appropriated SCO Funds

0001 General Fund0660* Public Building Construction Fund0668* Public Building Construction Fund Subaccount6028 2002 Higher Education Capital Outlay Bond Fund (HECOBF)6041 2004 Higher Education Capital Outlay Bond Fund (HECOBF)6048 2006 Higher Education Capital Outlay Bond Fund (HECOBF)


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*Funding provided by the State for the construction projects under the Public Work Board (PWB) program is recorded as state appropriation revenue, capital by the campuses in GAAP. A corresponding contra state appropriation revenue, capital is recognized by the CO in order to self-eliminate upon systemwide consolidation. This is not a true state appropriation, the account is simply used as mechanism to facilitate the consolidation. Campuses no longer receive allocation orders from the CO related to the Lottery Fund, and as a result it is no longer reported as state appropriations revenue/receivable in GAAP. GAAP Accounting TreatmentCurrent Year State Appropriation For GAAP financial reporting purposes, current year state appropriations represent a receivable of the University from the State. A receivable and revenue must be recorded for GAAP purposes at June 30.The first step in developing state appropriations revenue is to identify all allocation orders, de-allocation orders, and allocation orders pending, which make up the total current year appropriations to the campus. It will be necessary to distinguish the Capital Outlay allocations from those for the General Fund (0001), because the GAAP adjustments for these two groups of funds are recorded in different net position categories.Current year state appropriations to the campus in State fund 0660 and 0668 usually are for the construction projects funded by the SPWB. Campuses usually recognize this as state appropriation revenue, capital in GAAP in the current year. In fact, the state will usually turn around and set up a capital lease arrangement with the CO in subsequent years. Additionally, the CO issues Systemwide Allocation Transfers (SWAT) to the campus to fund special programs. The SWATs are mapped to and must be recorded as state appropriations revenue, noncapital in GAAP. The CO will issue “General Fund Appropriation Support Summary” by campus for each campus to reconcile its state appropriations revenue, noncapital. This summary is included in the “State Appropriations Revenue, Noncapital Summary” that is distributed at year-end by the CO (as discussed in GAAP Manual Chapter 5). Campus will continue to use the “Capital Outlay Allocations Summary” issued by the CO to reconcile its state appropriations revenue-capital (also discussed in GAAP Manual Chapter 5).


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The journal entry to record a receivable and revenue from the State for current year appropriations would be as follows:State appropriation, noncapital for General Fund (0001)

Account Account NameFund

(Net Position)Progra

m

Class(CSU Fund) Amount

711103 Accounts receivable, net (current year net amount) 881-Unrestricted 90 001 $X,XXX

723001 State appropriations, noncapital (current year net amount) 881-Unrestricted 50 001 ($X,XXX)

Journal Description To record CY state appropriation for General Fund (0001).

State appropriation, capital for HECOBF fund


(Net Position) Program


711202 Accounts receivable-noncurrent (current year net amount)

834-Restricted: Expendable-Capital Projects 90 320 $X,XXX

724001 State appropriations, capital (current year net amount)

834-Restricted: Expendable-Capital Projects 50 320 ($X,XXX)

Journal Description

To record CY state appropriation for HECOBF fund.

Collection of State Appropriation FundsThe collection of the state appropriation funds are recorded in the legal-basis books as a credit to Fund Balance Clearing (FBC) account as these are actual transactions that have cleared the State Controller’s Office (SCO) during the fiscal year. In GAAP, the current year activity (Periods 1 -12) in the FBC account will be reclassified as a reduction of the Accounts Receivable for Appropriations due from the State. See related discussion in GAAP Manual Chapter 4 Fund Balance Clearing. In appropriated funds (governmental funds), the accounts receivable for state appropriations equals:

Beginning state appropriations receivable (BBA on Tab Run at June 30, 20PY)

+ Current year net appropriations revenue (SRECNP)

- Current year FBC activity (Periods 1-12)

+/- Any other adjustments (e.g. reverted BBA)

= State appropriations receivable at June 30, 20CY


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Other Funds that receive Allocation OrdersIn addition to the governmental funds listed above, there are other SCO funds for which campuses receive allocation orders from the State via the CO. These funds are normally used for construction of assets from the proceeds of revenue bonds or from net revenues of auxiliary enterprise operations. An example of such a fund is SCO Fund 0576 (CSU Funds 221 through 229). While it may appear from review of SCO accounting information that the campus has received an appropriation for such a fund and therefore must record appropriation revenue and a State Appropriation receivable, this is not the proper accounting treatment. See GAAP Manual Chapter 4 Long-Term Debt Obligations.

Recognizing interagency receivables in CSU Fund 230Campuses may carry liabilities (either to outside vendor or due to other funds) as of 6/30/CY in CSU fund 230, DFC-Academic Deferred Maintenance and Capital Renewal. These liabilities are essentially accounts receivable from the CO since it handles the investment accounts. Because these liabilities will result to an abnormal balance in CSU fund 230 net position, campuses should recognize accounts receivable from CO through a manual GAAP entry (set to reverse in the following fiscal year). CO will record the corresponding AP to the campus which will be part of SW elimination entry. Note: This balance should be included in AR/AP Interagency Matrix and also Note 4 input sheet in YES (TM1) reporting package as Accounts receivable from Chancellor’s Office.

Manual GAAP Entry (Period 998)




711103 Accounts receivable, net 834-Restricted: Expendable-Capital Projects 90 230 $X,XXX

724005Other nonoperating revenues (expenses) – interagency transfers

834-Restricted: Expendable-Capital Projects 15 230 ($X,XXX)

Journal Description To record Accounts receivable to offset liabilities in CSU Fund 230

Please refer to Chapter 4.6.1 Eliminations in this manual for more details about the inter-agency eliminations.


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4.3 LEASES RECEIVABLE

OverviewPrior to January 1, 2008, to facilitate the debt financing for a discretely presented component unit construction project, the campus enters into a ground and facilities lease agreement with the discretely presented component unit prior to the SRB issuance. The term and payment schedule under the ground and facilities lease agreements mirrors the term and debt service schedule of the related SRB debt issued by the campus. Effective January 1, 2008, the campus no longer issues a ground and facility lease agreement with the discretely presented component units, but rather the CO enters into a note agreement with the participating discretely presented component unit for financing debt under the revenue bond or revenue bond anticipation notes program.

GAAP Accounting Treatment The GAAP accounting treatment is discussed in the memorandum AD06-06, see copy in Section 5.0 Reference Tools. Per the memorandum, the ground and facilities lease agreement meets the capital lease criteria per GAAP. As the lessor in the arrangement, the campus shall recognize Lease Receivables, Noncurrent in GAAP. This account is not recognized in the legal-basis books, as such manual GAAP adjusting entries are required. Below are the GAAP entries, both derived and manual, to record the collection of lease payments from discretely presented component unit.

Derived GAAP Entry (Period 1-12)



m


711101 Cash and cash equivalents 881-Unrestricted 90 537 $X,XXX

723006 (a) Other nonoperating Revenue (Expense) 881-Unrestricted 15 537 ($X,XXX

)Journal Description

Accounting records derived from legal for recording periodical lease payments from discretely presented component unit.

(a) Object code 580098-Auxiliary Program Lease Principal Payment is used in legal for recording the principal payment on debt issued prior to January 2008.



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723006 Other nonoperating Revenue (Expense) 881-Unrestricted 15 537 $X,XXX

711105 Leases receivable, current portion 881-Unrestricted 90 537 ($X,XXX


To properly reclassify the principal payment derived from legal basis as reduction of lease receivable.



m


711105 Leases receivable, current portion 881-Unrestricted 90 537 $X,XXX

711209 Leases receivable, net of current portion 881-Unrestricted 90 537 ($X,XXX

)

Journal Description

To re-establish the current portion of leases receivable balance.

Please refer to Chapter 10, Auxiliary Organizations of the legal manual for more details about the legal accounting entry.

4.4 NOTES RECEIVABLE

Effective January 1, 2008, there is no ground and lease agreement signed between the campus and the discretely presented component units for financing the latter’s construction, refunding of old debt and purchase of capital assets. The note agreement is actually signed between the discretely presented component units and the CSU Trustees directly (carried in the books of the CO). The campus may be involved through the following scenarios: a. Acts as a pass-through to collect payments of debt service from discretely presented

component units and to transfer it to the CO (see GAAP Treatment Scenario 1 below).

b. Acts as a capital project manager on behalf of the discretely presented component unit (see GAAP Treatment Scenario 2 below).

c. No involvement as proceeds and payments of debt service are directly between CO and discretely presented component units. No campus entries.

GAAP TreatmentScenario 1 – Campus is acting as an agent only


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No manual GAAP adjusting entry by campus is required for the periodic principal payments from the discretely presented component unit as payments have already been recorded and derived as other liability in the campus’ legal accounting records. Object code 250002 "Uncleared Collections" is derived to GAAP account 712109 “Other liabilities – current”. The CO should create a manual GAAP entry to apply the payments against Notes Receivable.

Derived GAAP Entry (Period 1-12)




711102 Short-term investment 881-Unrestricted 90 537 $X,XXX

712109(b) Other liability-current 881-Unrestricted 90 537 ($X,XXX)Journal Description

Accounting records derived from legal-basis books for recording periodical debt service payments collected from discretely presented component unit.




712109(b) Other liability-current 881-Unrestricted 90 537 $X,XXX

711102 Short-term investment 881-Unrestricted 90 537 ($X,XXX)Journal Description

Accounting records derived from legal-basis books for transferring discretely presented component unit's debt service payment to the CO.

(b)Object code 250002-Uncleared collection is used in legal for recording auxiliary debt service payment after the SB 855.

Please refer to the legal manual, Chapter 10, Auxiliary Organizations for more details about the legal accounting entry.

Scenario 2 – Campus is acting as a project manager Discretely presented component unit construction projects after the Senate Bill 855.Derived GAAP Entry (Period 1-12)




722004 Supplies and other services 881-Unrestricted Various 537 $X,XXX

713899 Fund Balance Clearing 881-Unrestricted 90 537 ($X,XXX)Journal Description Accounting records derived from legal for recording vendor payments.



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711206 Other long-term investment 881-Unrestricted 90 537 $X,XXX

712208 Other liabilities-noncurrent 881-Unrestricted 90 537 ($X,XXX)Journal Description

To properly record the authority to spend the SRB proceeds and establish liability to the discretely presented component unit.




713899 Fund Balance Clearing 881-Unrestricted 90 537 $X,XXX

711206 Other long-term investment 881-Unrestricted 90 537 ($X,XXX)Journal Description

To properly reclassify construction expenses charged to fund balance clearing recorded in legal basis to investments.




712208 Other liabilities-noncurrent 881-Unrestricted 90 537 $X,XXX

722004 Supplies and other services 881-Unrestricted Various 537 ($X,XXX)Journal Description

To properly reclassify the construction expenses recorded in legal basis to reduce other liabilities.

The CO will provide passdown entries for campuses and their discretely presented component units that utilized SRB financing. The above examples are simplified in the GAAP manual. Actual transactions in the passdown entries are more complicated and require more thoughtful communications between the campus, the discretely presented component units and the CO. If the campus is a party to such a transaction, the campus should contact the discretely presented component units as soon as possible to verify that both parties are properly recording the transaction. Additionally, the campus and the discretely presented component units must also consult with the CO, the independent auditors of the discretely presented component unit, and the independent auditors of the campus in order to determine 1) the proper accounting treatment for the transaction and 2) consistency in accounting treatment within the CSU as a whole. Note that in certain situations, the total construction costs of the asset may ultimately be more or less than the SRB issuance amount. In these situations, the campus and the related discretely presented component units would need to come to agreement on how to handle the resulting “excess” or “shortfall” and consider this aspect in determining the proper accounting treatment


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In addition to construction, the discretely presented component units is able to participate in the refunding of its senior bonds through the SRB, also discussed in AD 06-06.

4.5 PLEDGES RECEIVABLE

GASB Statement No. 33 requires that the pledge receivable should be recognized as assets on the University’s SNP if it meets all applicable eligibility requirements.

ExampleIn the current year, a donor makes a promise to give the CSU $240,000 each year for five years starting 06/30/CY. This promise to give is unconditional and can be recorded when received. Derived GAAP Entry (Period 1-12)



m


711101 Cash and cash equivalents 881-Unrestricted 90 491 $240,000

711103(c) Accounts receivable, net (current) 881-Unrestricted 90 491 $240,000

724002 Grants and gifts, capital 881-Unrestricted 50 491 ($480,000)Journal Description

Accounting records derived from legal for recording pledge payments from donors.

(c)Object code 103007-Accounts Receivable-Other is used in legal as pledges receivable is not available in legal.





711106 Pledges receivable, net (Current) 881-Unrestricted 90 491 $240,000

711204 Pledges receivable, net (Noncurrent) 881-Unrestricted 90 491 $720,000

711103 Accounts receivable, net (Current) 881-Unrestricted 90 491 ($240,000)

724002* Grants and gifts, capital 881-Unrestricted 50 491 ($720,000)

Journal Description

To reclassify accounts receivable, net (current) to pledges receivable (current) and to record year-end gross pledges.

*If the pledges are for noncapital purposes, 723002-Gifts, noncapital should be used.


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Please refer to Chapter 8.5.2, Pledge Reporting Guidelines of GAAP Manual, for detailed discussion of pledge reporting.

4.6 STUDENT LOANS RECEIVABLE GAAP TreatmentFederally Guaranteed Student LoansUnder the William Ford Direct Loan Program and the Federal Family Education Loan Program (FFELP), the CSU acts as an agent in disbursing money provided by the lenders and the Federal government to the students. Accordingly, the direct loan program and FFELP should be reported as agency transactions; no revenue or expense should be recognized and the SNP should contain only assets or liabilities for these programs. Other Loan ProgramsThe Federal Perkins and Nursing Loan Programs also shall be reported as agency transactions. Prior to fiscal year 2001/02, these programs were reported as loan programs with revenues, expenses and net position. However, any cash, investments and receivable balances that are carried in these programs at the end of the fiscal year are considered to represent a refundable grant liability to the Federal government, as they must be repaid to the government if they are not continually loaned out to students.At a minimum, an allowance for the portion of student loans receivable deemed uncollectible in the Perkins or Nursing Loan Programs is required for GAAP purposes. There appears to be some inconsistency in the method each campus uses to obtain this estimate, but the idea is that a reserve allowance is recorded. One common method used to estimate the allowance amount at fiscal year-end is to obtain the annual Fiscal Operations Report and Application to Participate (FISAP) report under Part III-Federal Perkins Loan Program which contains the loan balances in default 240 or more days (lines 5.2, 5.3 and 5.4 in the A-133 Input Sheet of TM1 reporting package).

GAAP entry to recognize the reserve allowance is as follows (if not booked in legal ledger):



m


712203 Grants refundable 892-Agency funds: Grants Refundable 90 406

$X,XXX


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711203* Student loans receivable, net

892-Agency funds: Grants Refundable 90 406 ($X,XXX


To properly record the reserve allowance for the current fiscal year.

On an ongoing basis, only the incremental change in the allowance from the prior year to the current year is recorded. The campus may also reverse the gross amount of the GAAP adjustment from the prior year and record the full amount of the current year uncollectible allowance as a current year GAAP adjustment if that is more practical.


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5 REFERENCE TOOLS

5.1 AD06-06 SYSTEMWIDE REVENUE BOND PROGRAM – AUXILIARY ORGANIZATION DEBT REFINANCING AND CONSTRUCTION FINANCING

5.2 TABLES OF OBJECT CODE AND CSU FUND DEFINITIONS

Appendix 19, Table of Object Code Definition/Table of CSU Fund Definitions and Authorities

5.3 PASSDOWN SCHEDULES

Systemwide Passdown Schedules


https://csyou.calstate.edu/groups/fsaudit/Passdown%20Schedules/Forms/AllItems.aspx

http://www.calstate.edu/financialservices/resources/year-end/standards-rules/standards-rules.shtml

http://www.calstate.edu/financialservices/resources/year-end/standards-rules/standards-rules.shtml

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REVISION CONTROL

Document Title: CHAPTER 4.1.3 – GAAP ADJUSTMENTS AND RECLASSIFICATION ENTRIES – ASSETS: RECEIVABLES

REVISION AND APPROVAL HISTORY

Section(s) Revised Summary of Revisions Revision Date

4.2 Added discussion on the accounting treatment for interagency receivables in CSU Fund 230. April 2017

4.4 Scenario 2

Corrected GAAP Account in last GAAP Manual Entry from 711208 to 712208 April 2016

5.3 Changed the link for the Passdown Schedule from SFSR website to PBC SharePoint Site April 2016

4.2.1 Removed state fund 0574 from the fund list as it is closed as of 06/30/2015 April 2015


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