What does modified accrual mean on the CPA exam?
Modified accrual. The basis for governmental fund statements: revenue when measurable and available, expenditure when the liability is incurred. It reports current financial resources only.
Defined against GASB 34.
Which CPA exam sections use modified accrual?
Modified accrual appears in 6 CPA exam sections: AUD, BAR, FAR, ISC, REG, TCP.
Other terms defined against GASB 34
- capital assets: In GOVERNMENTAL reporting, long-lived assets such as land, buildings and infrastructure.
- enterprise fund: A proprietary fund used where a government charges outside users for goods or services, run on the full accrual basis like a business.
- full accrual: Recognizing revenue when earned and expense when incurred, and reporting every asset and liability including long-term ones.
- governmental activities: The part of a government's operations financed mainly by taxes rather than by fees, reported on the government-wide statements on the full accrual basis.
- governmental funds: The funds that account for tax-supported activity, reported on the modified accrual basis with a current financial resources focus.
- internal service fund: A proprietary fund that supplies goods or services to other parts of the same government on a cost-reimbursement basis, such as a motor pool.
- management's discussion and analysis: A narrative overview management provides ahead of the financial statements.
- required supplementary information: Schedules a government must present outside the basic statements, such as budgetary comparisons and pension trend data.
Related terms
- basis of accounting: The rule for WHEN something is recorded: cash when money moves, accrual when it is earned or incurred, modified accrual somewhere between.
- operating segment: A component of a public entity that may recognize revenues and incur expenses, whose operating results the chief operating decision maker reviews to allocate resources and assess performance, and for which discrete financial information is available.
- asset retirement obligation: A legal obligation associated with the retirement of a tangible long-lived asset, recognized at fair value in the period incurred, with an equal asset retirement cost capitalized into the asset.
- valuation allowance: The contra account reducing a deferred tax asset to the portion more likely than not to be realized, meaning a likelihood above 50%.
- reporting entity: The unit whose statements are being presented, including everything it controls.
- operating lease: A lease that does not transfer control.