Accounts and Reports

GAAP POLICY AND PROCEDURE MANUAL

Restricted Net Assets

34. Net assets should be reported as restricted when constraints placed on net asset use are either:
a. Externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments.
b. Imposed by law through constitutional provisions or enabling legislation.
Enabling legislation, as the term is used in this Statement, authorizes the government to assess, levy, charge, or otherwise mandate payment of resources (from external resource providers) and includes a legally enforceable requirement that those resources be used only for the specific purposes stipulated in the legislation.

35. When permanent endowments or permanent fund principal amounts are included, "restricted net assets" should be displayed in two additional components - expendable and nonexpendable. Nonexpendable net assets are those that are required to be retained in perpetuity.

Unrestricted Net Assets

36. Unrestricted net assets consist of net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt."

37. In the governmental environment, net assets often are designated to indicate that management does not consider them to be available for general operations. In contrast to restricted net assets, these types of constraints on resources are internal and management can remove or modify them. As described in paragraph 34, however, enabling legislation established by the reporting government should not be construed as an internal constraint. Designations of net assets should not be reported on the face of the statement of net assets.

• Because different measurement focuses and basis of accounting are used in the statement of net assets than in the governmental fund statements, and because the definition of "reserved" includes more than resources that are restricted, amounts reported as reserved fund balances in governmental funds will generally be different from amounts reported as restricted net assets in the statement of net assets.
• The 99 AFR includes the following components of fund balance: 
  • Line 36 - Unliquidated encumbrances (accounts 5002 and 5003)
  • Line 37 - Unencumbered balance of appropriations reappropriated
  • Line 38 - Designated balances
  • Line 39 - Balances of public employees' retirement fund 
• Reclass GL3007 Fund Balance to the correct Reservation or Restriction (GL 9301, 9302, 9303, 9304, 9306, or 9307).

• Nature of restrictions.
• Policy regarding whether restricted or unrestricted are used when both are available for the same purpose.

• The division of net assets by type of restriction should be calculated after the final adjusted amounts are done (this should include adding in the amounts from the agencies that produce their own CAFR (lottery, KPERS, etc.).
• The amount shown on the Statement of Net assets as "invested in capital assets, net of related debt" should be calculated using the adjusted balances for fixed assets and debt.
• There may be some restricted net assets for debt at the universities.
• The fund balance on the Balance Sheet - Governmental Funds will be separated by Reserved for Inventory, Reserved for Encumbrances, and Unreserved balances. The amount of fund balance reserved for inventory as well as reserved for encumbrances should be able to be calculated using the adjusted balances. The encumbrances should be adjusted for the ones used as payables.