In this video, I discuss notes to financial statements as they appear in the annual comprehensive financial report (ACFR).
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An Annual Comprehensive Financial Report (ACFR) is a set of financial statements for a state, municipal, or other governmental entity that complies with the accounting requirements established by the Governmental Accounting Standards Board (GASB). It's more detailed than a typical financial report and is intended to give a complete overview of the government's financial status. Here's a breakdown of its key components:
Introductory Section: This part provides an overview of the report. It typically includes a letter of transmittal, which is a written narrative explaining the contents of the ACFR, its significance, and any notable events or changes during the reporting period. This section might also include a list of principal officials, an organizational chart, and an overview of the government entity's structure and services.
Financial Section:
Management's Discussion and Analysis (MD&A): This narrative provides an overview of the financial activities based on the government entity's financial statements. It offers insights into the financial health, challenges, and future prospects of the entity.
Basic Financial Statements: This includes government-wide financial statements and fund financial statements. The government-wide statements provide a broad view of the entity's finances, whereas the fund statements provide detailed information about specific activities or objectives.
Notes to Financial Statements: These are essential for providing additional context and details about the information presented in the financial statements.
Required Supplementary Information (RSI): This section supplements the basic financial statements and notes, often including information about the government entity's pension plans and other post-employment benefits.
Statistical Section: This section includes additional data to provide context and a longer-term view of the government entity’s financial activities. It often contains statistical tables and charts covering financial trends, revenue sources, debt capacity, demographic and economic information, and operating information.
The ACFR is an important tool for assessing the financial health of a government entity. It provides a comprehensive view of where money comes from, how it's spent, and the overall financial position, including assets, liabilities, revenues, and expenditures. This report is used by policymakers, investors, and the public to understand the financial practices and health of the government entity.
The GASB sets the standards for the content and format of the ACFR to ensure consistency, transparency, and comparability among different governmental entities. These reports are typically audited by independent auditors to ensure accuracy and compliance with accounting standards.
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