Identify The Financial Statements That Must Be Prepared By A

Identify The Financial Statements That Must Be Prepared by a Private College

Identify the financial statements that must be prepared by a private college or university and those that must be prepared by a public college or university. A public college or university could follow the FASB standards or GASB standards. If the public college or university is following FASB standards they would prepare the following financial statements:

• Statement of Financial Position which shows net asset categories that are permanently restricted, temporarily restricted, and unrestricted.
• Statement of Activities which include changes to net assets and identifies if net assets are released from restricted.
• Statement of Cash Flow which shows 3 categories of cash flow.

If the public college or university is following GASB standards they would prepare the following financial statements:

• Statement of Net Position which shows net position classifications, net investment in capital assets both restricted and unrestricted.
• Statement of Revenues, Expenses and Changes in Net Position which is categorized by operating and non-operating activities.
• Statement of Cash Flows which shows 4 categories of cash flow and is prepared using the direct method.

Paper For Above instruction

The preparation of financial statements by colleges and universities varies depending on whether they operate as private or public institutions, and if they follow the standards set by the Financial Accounting Standards Board (FASB) or the Governmental Accounting Standards Board (GASB). Understanding these differences is essential for accurately interpreting their financial health and complying with relevant accounting frameworks.

Private colleges and universities are required to prepare a set of financial statements guided by FASB standards. The primary financial statements include the Statement of Financial Position, Statement of Activities, and Statement of Cash Flows. The Statement of Financial Position, often analogous to a balance sheet, details net asset classifications such as permanently restricted, temporarily restricted, and unrestricted assets, providing clarity on the source and restrictions on various assets. The Statement of Activities records the changes in net assets over a period, indicating the flow of resources that are either restricted or unrestricted and whether assets are released from restrictions. The Statement of Cash Flows reports cash inflows and outflows categorized into operations, investing, and financing activities, offering insights into the liquidity and cash management of the institution.

Public colleges and universities, on the other hand, follow either FASB or GASB standards. When adhering to FASB standards, these institutions prepare similar statements to private entities but are labeled differently. The Statement of Net Position serves the same purpose as the Statement of Financial Position, focusing on net asset classifications and the net investment in capital assets, including both restricted and unrestricted components. The Statement of Revenues, Expenses, and Changes in Net Position is similar to the Statement of Activities, detailing sources of revenue and expenses categorized by operating and non-operating activities, which is particularly relevant for public entities receiving substantial government funding. The Statement of Cash Flows remains similar, presenting cash flows in three categories: operating, investing, and financing, using the direct method for reporting cash flows.

If public colleges opt to follow GASB standards, the key financial statements include the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Net Position, and the Statement of Cash Flows. The Statement of Net Position categorizes assets, liabilities, and net position into classes such as net investment in capital assets, restricted, and unrestricted, offering a detailed picture of the institution's financial position at a specific point in time. The Statement of Revenues, Expenses, and Changes in Net Position reflects the operating results, including operational and non-operational revenues and expenses, facilitating an understanding of the institution’s operational efficiency and reliance on external funding sources. The Statement of Cash Flows reports the cash activities categorized into four sections: operating, non-capital financing, capital and related financing, and investing, providing a comprehensive overview of the cash flow process in accordance with GASB standards.

In conclusion, while there are similarities between the statements prepared by private and public institutions, the distinctions primarily arise from the applicable accounting standards (FASB or GASB) and the categories of net assets or net position reported. Properly understanding and preparing these financial statements is vital for stakeholders, including students, government agencies, and donors, to make informed decisions regarding the institution’s financial stability and operational efficiency.

References

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• Governmental Accounting Standards Board (GASB). (2018). GAAP Hierarchy. GASB.
• Financial Accounting Standards Board (FASB). (2020). Accounting Standards Codification (ASC). FASB.
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• Smith, R. (2017). Comparing GASB and FASB standards in public higher education. Public Finance Review.
• Educational Institution Financial Accounting Standards. (2021). National Association of Colleges and Employers.
• Harrison, L. (2020). Financial statements and reporting in higher education. Journal of Academic Financial Management.
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