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Preparing for GAAP Reporting

The following is a sequence of steps which a district should consider as they prepare for the GAAP startup year. A number of these steps reflect decisions that should be addressed in a "Board Policy" Manual. This is a document which needs to be prepared early in the planning stage in cooperation with the district board of education, the superintendent, the treasurer, and possibly others.

GAAP and Pre-GAAP Periods

This guide will refer to "GAAP reporting", a district being on "GAAP", or the "Pre-GAAP" period. The definitions of these terms follows:

Term Meaning

GAAP

Generally Accepted Accounting Principles

GAAP Reporting

Producing an annual general purpose financial statement which contains a balance sheet or producing a complete annual financial report (CAFR)

Being on GAAP

This means that the district has started the period of GAAP reporting and the GAAP flag on the EISMNT/DATSCN record has been set to "Yes".

Pre-GAAP Period

The period of time when the GAAP flag on the EISMNT/DATSCN record is set to "No"

Board Policy Issues

  • Capitalization Limits---Capitalization limits determine what items will appear on the GAAP schedules. Both dollar and useful life thresholds can be set. The Board needs to decide values for these. Any item with a dollar cost or useful life less than the threshold will not be capitalized.
  • Controlled Items---These are items which are inventoried and reported on the system as fixed assets but which do not meet the capitalization criteria. However, the district may want to maintain information for insurance purposes and/or to help prevent loss or theft of such items.
  • Percent for Foundations---A certain percent of the original cost of buildings can be assigned to the foundation in order to exclude building foundations on the Insurance Values Report.
  • Transfer and Disposition of Assets---The Board needs to decide if the transfer of assets from one location to another is permitted, and if so, under what conditions, with whose approval, and what report forms to use. Similar decisions should be made for the disposing of a fixed asset.
  • Capital Leases---The Board should set policy to determine whether or not operating leases should be maintained on the system. Capital leases are maintained on the system if they meet the capitalization limits.
  • Taking an Inventory---The Board must decide whether or not to hire an appraisal company to do an initial inventory and/or appraisal, what specific information it wants to gather and in what form. Careful planning at this point is critical in order to get maximum benefit.
  • Tagging Items---The Board should decide whether or not to physically tag items, and if so, whether or not to have an appraisal company do it as they inventory.
  • Organizational Unit in Charge---The Board should decide which organizational unit will be responsible for which items.
  • Locally Defined Codes---The EIS software requires the use of a number of codes. Some of these are set by the Ohio Department of Education. However, others are to be defined locally by the school district.
  • Procedures---Once policies have been established, procedures must be defined in order to insure that each policy is implemented.

Checklist of Steps

Prior to Beginning of First Reporting Year

  1. Run the USAS program USASDAT and set the EIS pending file flag if you wish to have the software transfer p.o. data from the invoice file directly to the EIS pending file. If an appraisal company will be doing an inventory, an appropriate time to set the pending file flag in USASDAT would be as soon as the inventory is finished so as to catch all new items which were acquired after the inventory. Then hold these items on the pending file, and enter them on the EIS system after the appraisal tape is returned and loaded. If no appraisal is being done, set the pending file flag and begin entering items on the system as soon as possible.
  2. Contact the system manager to load an appraisal tape if you are starting up from scratch and/or to create the initial EIS files and set an initial value for the "Fiscal Year Closed" field on the configuration record in EISMNT/DATSCN.
  3. The district needs to determine what they are going to use for capitalization limits, and enter this data in the EISMNT/DATSCN program.
  4. All of the locally defined codes need to be in place in the EISMNT program.
  5. If the district is utilizing the life limit field in the capitalization criteria, they should verify that an asset's life expectancy has been entered correctly on screen 2 of the item record. Use EISSCN/ITMSCN to make modifications.
  6. The district should verify that the original cost has been entered for each item which is to be included on the GAAP reports, and update it if necessary using the EISSCN/ITMSCN program.

    Items which will be excluded from the GAAP reports are those items which do not meet the capitalization limits, items with a status of "disposed of", "inactive", or "old tag item", and items coded as operating leases. In addition, items may be included/excluded from the GAAP reports based on the entity ID field.

  7. The current fund, function, and asset class should be entered on the item record (screen 1) for each item which is to be included on the GAAP reports. Use the EISSCN/ITMSCN program for updates. It may be possible to enter the asset class by using the EISCHG program, but the fund and function will probably have to be entered on an item by item basis.
  8. If the district has any leased assets, they should make sure that these assets are correctly coded with an acquisition method of "leased" and whether it is an operating or capital lease (lease type field). Use screen 3 in the EISSCN/ITMSCN program. Operating leases are excluded from the GAAP schedules.
  9. Depreciation information must be entered and updated for proprietary fund assets. Use screen 2 in the EISSCN/ITMSCN program. Life-to-date depreciation should be updated using the EISDEPR program if changes are made to depreciation fields and it is necessary to recalculate the depreciation for the item from the beginning. The program EISCLS (fiscal year closing) will compute the actual depreciation at the end of the fiscal year.
  10. The district should add any new items which have been acquired prior to going on GAAP by using the Add option in the EISSCN/ITMSCN program.
  11. The district should post disposition transactions to dispose of any items which have been disposed of prior to going on GAAP. Use the Add option in the EISSCN/DSPTRN program.

    If these steps aren't done prior to beginning the first fiscal year on GAAP, the GAAP schedules may still be generated, but the GAAP change schedule will not be accurate. These fields should ideally be updated prior to beginning on GAAP reporting so that the beginning balance information may be stored properly.

  12. At this point, the district should follow the "Fiscal Year Closing Procedure" to close out the fiscal year. The last step of this procedure is to contact the system manager if the district is beginning on GAAP reporting this year.

During the First Reporting Year

The remainder of these steps may be done after the district has begun the fiscal year. These are things the district may want to update before the end of the first GAAP reporting year when the schedules will be run.

  1. The district may desire to enter historical acquisition transactions for at least their larger assets. This is so that the GAAP Schedule by Source will be more accurate (the source is determined by the acquisition method and fund portion of the account code entered on the acquisition transaction(s)). Items without acquisition transactions will be reported on a line "Prior to System Startup" on the GAAP Schedule by Source.

    Note that not all information need be entered on these historical acquisition transactions. All that is mandatory for the GAAP Schedule by Source to be generated is the tag number, acq. date, acq. type = A (Acquired), fund portion of the account code, and amount. The system will allow you to leave the remainder of the account code blank as well as the vendor and p.o. information.

  2. The acquisition method should be verified and updated if necessary. Donated or leased assets may need the acquisition method updated so that they may be correctly reflected on the GAAP Schedule by Source. Use screen 2 in the EISSCN/ITMSCN program.
  3. If the district has any entities they need to exclude from reporting or need to report separately, they should fill in the entity id field for those items associated with that entity. Use screen 1 in the EISSCN/ITMSCN program. This field can be used when it is time to generate the GAAP schedules in order to generate the reports for specific entities or exclude specific entities from the GAAP reports.

Fields Necessary for GAAP Reporting

The fields listed in the following table need to be completed on the item records before the GAAP flag on the configuration record in EISMNT/DATSCN has been set to "Y". That is, the district is still in the pre-GAAP period.

Field Notes

Fund

Classification of asset by fund.

Fund Type

Stored on the local code file for each fund code defined. This defines the fund as Governmental, Proprietary, or Fiduciary.

Function/Activity

Classification of asset by function/activity.

Asset Class

Classification of asset by class (type).

Status

Only items coded as Active, New Items, Excess Asset Not in Use, or Excess Asset Held for Sale will be considered as active for the GAAP reports. Items with a status of Disposed Of, Inactive, or Old Tag Item will not be included (although disposed of items are included as a decrease on the GAAP change schedules).

Original Cost

Historical cost of the item is reported on the GAAP reports.

Acquisition Method

Indicates if the item is purchased, donated, or leased. This is necessary for the GAAP schedule by source.

Lease Type

Capital or operating. Necessary for an item whose method is leased to determine whether it should be included on the GAAP reports (operating leases are excluded from GAAP reports).

Depreciation Information

Depreciation is required for assets of proprietary funds. It is not necessary for General Fixed Assets.

Acquisition Transaction Information

Acquisition transactions are necessary once on GAAP for the change schedule. Important fields for this schedule are the date, type, amount, fund, function, and class at time of acquisition, and the adjustment flag.

Historical acquisition information is utilized for the GAAP schedule by source. It is recommended that historical acquisition transactions be entered for at least the larger assets of the district. However, the schedule by source will provide a line "Prior to System Startup" for items with insufficient acquisition information on file. Note, all that is really necessary when entering historical acquisition transactions is the date (approximate), type, amount, and fund portion of the account code.

Disposition Transaction Information

Disposition transactions are necessary once on GAAP reporting. Important fields for these transactions are the date, adjustment flag, and the fund, function, class, and original cost at the time of disposition.

Transfer Transaction Information

Transfer transactions are necessary once on GAAP reporting. Transfer transactions are used to change an item's fund, function, or asset class. All of the fields are necessary for the reports.

Fiscal Year Closing

The following sequence of steps should be completed at the end of each fiscal year whether the district is on GAAP or not. This procedure can be done at any time after June 30; it has no relation to when the district closes the fiscal year for Uniform School Accounting System (USAS).

You should continue to add items received prior to July 1 to the system before using this procedure. If items were ordered prior to June 30, but are not received until after that date, they may properly be posted in the next fiscal year. You can continue to add items to the pending file even though they may not be posted until later.

If the depreciation data has been changed so that it is necessary to completely recalculate the life-to-date (LTD) depreciation from the beginning for a number of items, you may need to run the program EISDEPR. However, if you have been tracking depreciation for some time, then this program should not be used. Contact your system manager before using the EISDEPR program.

  • Run any year-end reports desired. The following are suggested GAAP reports:
    • EIS101,102---GAAP schedules.
    • EIS103(only if on GAAP)---GAAP Change Schedule.
    • EIS104(only if on GAAP)---Depreciation Change Schedule.
      The following are suggested NON-GAAP reports:
    • EIS303--Inventory Master Listing (don't recommend printing this report.. very large)
    • EIS304---Brief Asset Listing Report, to make available for the auditors. Run three times, sorting first by fund, sorting next by function, and lastly by class. Use just the "active" Status Codes: A,N,EH,EN. Also select both
      capitalized and non-capitalized items.
    • EIS305---Book Value Report, to obtain depreciation information. Use the date 06/xxxx for the report (where xxxx is the fiscal year being closed). Use just the "active" Status Codes: A,N,EH,EN. Select capitalized items only.
    • EIS401---Insurance Value Report, to be run if the district maintains current replacement cost and/or insurable value of the inventory item records.
    • EIS801---EIS Audit Report, to obtain an official audit report for the auditors.
  • If on GAAP, run EISEMS. Creates an EISEMS.SEQ file to be submitted via EMIS for reporting period H
  • Make a copy of the EIS files and other appropriate files. 
  • Run the fiscal year closing program EISCLS. Creates an EISCLS.TXT and EISDEP.TXT. Once closed, you may start entering inventory for new fiscal year.

    If not on GAAP, ITC needs to assist in helping district start up on GAAP by running EISGAAP.

    Once EISGAAP is complete, they may start entering inventory for the new year.

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