Acct4421 LSU Exam 2

Capital project funds - -used to account for financial resources that are legally restricted and contractually acquired for acquisition of capital assets Primary purpose of CPF - -ensure and demonstrate the expenditure of the dedicated financial resource is legal and contractual compliant Schedule of capital assets - -where capital assets themselves are accounted for Two types of capital projects - -General , Special Construction cycle - -pre-construction phase (project and financing authorization) construction phase debt serving phase Type I long term financing (tax supported debt) - -voter approval, memo entry for bond authorization, proceeds accounted for in OFS, Different between FV of bonds and cash received is Issue costs and premiums/discounts Special assessments - -tax levied when taxpayers in areas beyond their jurisdiction want to benefit from facilities budgetary accounts help - -control individual project expenditures Debt service funds - -accounts for and report financial resources that are restrictted/commiteed/assigned to expenditure for principal and interest payment on LT debt When are interest and principal considered current liabilities of DSF - -the period in which they must be paid Tax supported debt Types - -taxes levied by DSF taxes levied by GF and transferred to DSF Special taxes restricted to the payment of debt GASB requires DSFs be established when: - -1. legally acquired 2. financial resources are being accumulated for principal and interest payments maturing in future years Debt service fund revenue is recognized - -as earned phases of special assessments - -1. construction and financing ( property owners are assessed, issues LT debt, undertakes construction) 2. property owners pay and debt is serviced when special assessments don't recognizing debt - -Unless it is prohibited from assuming default or makes no statement of obligation Assessments in proprietary funds (utility infrastructure) - -full accrual basis and capitalization (if no responsibility= capital contribution) arbitrage - -issuance of debt at low tax exempt rates Return rate without tax - -stated rate/(1-tax rate) Arbitrage restriction - -state and local governments must observe arbitrage regulations arbitrage rebates - -all earnings are remitted to the fed 2 Approaches for estimating rebates - -1. deduct from interest revenues and payable to US gov. 2. debit service fund and credit capital projects bond refunding - -early retirement of old debt to make room for new economic cost - -the present value of all future payments based on the prevailing interest rate when re-fundings have a benefit - -1. yield curves 2. call prices in substance defeasance - -Provision for the government to lock the savings that would result from a decline in the interest rates (advance refunding) conditions to replace old debt with new - -1. place cash/assets sole to retire debt 2. possibility of making future debt payments is remote 3. escrow fund must be risk free ex. treasury bonds 4. Amortize loss (or gain) over future years (using the shorter of the original term or the term of the new debt.) defeasance economic loss vs gain - -can defeasance debt at an economic loss to report a gain Type II - -grants Type III - -Other forms of financings (special assesssments) Types of Type I debt - -serial and term bonds serial bonds - -mature at different times (self amortizing and no sinking fund needed) term bonds - -mature at year ends at one time (FMV, sinking fund) when special assessment is obligated it