Chapter 6 - Accounting for general long-term liabilities and debt service. After studying Chapter 6, you should be able to: Explain what types of liabilities are classified as general long-term liabilities, make journal entries in the governmental activities general journal to record the issuance and repayment of general long-term debt, prepare note disclosures for general long-term debt, | Chapter 6 Accounting for General Long-term Liabilities and Debt Service Learning Objectives After studying Chapter 6, you should be able to: Explain what types of liabilities are classified as general long-term liabilities Make journal entries in the governmental activities general journal to record the issuance and repayment of general long-term debt Prepare note disclosures for general long-term debt 1 Learning Objectives (Cont’d) After studying Chapter 6, you should be able to: Describe the reasons for statutory debt limits and explain the terms debt margin and overlapping debt Explain the purpose and types of debt service funds Describe budgeting for debt service funds and make appropriate journal entries to account for activities of debt service funds 1 Answer: Debt and other long-term liabilities that arise from the activities of governmental funds that are not accounted for as liabilities of a proprietary or fiduciary fund If debt reported in a proprietary or . | Chapter 6 Accounting for General Long-term Liabilities and Debt Service Learning Objectives After studying Chapter 6, you should be able to: Explain what types of liabilities are classified as general long-term liabilities Make journal entries in the governmental activities general journal to record the issuance and repayment of general long-term debt Prepare note disclosures for general long-term debt 1 Learning Objectives (Cont’d) After studying Chapter 6, you should be able to: Describe the reasons for statutory debt limits and explain the terms debt margin and overlapping debt Explain the purpose and types of debt service funds Describe budgeting for debt service funds and make appropriate journal entries to account for activities of debt service funds 1 Answer: Debt and other long-term liabilities that arise from the activities of governmental funds that are not accounted for as liabilities of a proprietary or fiduciary fund If debt reported in a proprietary or fiduciary fund also has general obligation (“full faith and credit”) backing the contingent liability should be disclosed in the notes to the financial statements What Are General Long-term Liabilities? 3 Tax-supported bonds Long-term warrants Long-term notes Capital lease obligations Unfunded compensated absences (vacation and sick leave) Unfunded pension obligations Long-term portion of judgments and claims Pollution remediation obligations Examples of General Long-term Liabilities 3 Pollution Remediation Obligation Addressed by GASB Codification Sec. P40 Relates to liabilities arising from the clean-up of hazardous waste or hazardous substances resulting from existing pollution Recognize if the liability is reasonably estimable and an obligating event (as defined by GASB) has occurred The liability is measured using expected cash flows Accounting for General Long-term Liabilities All general long-term liabilities are reported in the Governmental Activities column of the .
