| Subject |
Inventories (Consumable Supplies Inventories) |
| Authoritative Literature |
GASB 34 Paragraphs 16, 79, 92, 107 |
| General Description |
- The statement of net assets and the statement of activities should
be prepared using the economic resources measurement focus and the
accrual basis of accounting. Paragraph 16.
- The financial statements for governmental funds should be presented
using the current financial resources measurement focus and the modified
accrual basis of accounting. Paragraph 79.
- Proprietary fund statements of net assets and revenues, expenses,
and changes in fund net assets should be presented using the economic
resources measurement focus and the accrual basis of accounting. Paragraph
92.
- Financial statements of fiduciary funds should be reported using
the economic resources measurement focus and the accrued basis of
accounting, except for the recognition of certain liabilities of defined
benefit pension plans and certain postemployment health care plans.
Paragraph 107.
|
| Current Reporting by STARS |
- STARS has a balance sheet general ledger account number 1015 set
up for inventory.
- No accounting entries are made in STARS to general ledger account
number 1015.
- See Policy and Procedures Manual (PPM) filing number 13,001 Annual
Physical Inventory.
|
Conversion Issues
(Data Needed, Journal Entries Required) |
- Journal entries will be made to record material inventory. consumable
supplies will be reported only if over $200,000.00 per agency.
- Determined options for reporting inventory on the purchases or
consumption method.
- Determined how changes in inventory will be reported.
|
| Footnote Disclosure Required |
Basis for stating inventory, including the method of determining cost.
The footnotes do not need to state the dollar threshold. |
| Methodology of Gathering Data (including name of State agency and detail
description of data) |
- The inventory amounts for the universities will be provided by the
universities.
- The inventory amounts for agencies that produce their own CAFR will
be taken from the CAFR or audited financials.
- The inventory for other agencies is summarized from the DA-87 (previously
DA-80) report. A summary of the consumable supplies inventories by
agency should be prepared annually. Based on the dollar amount of
the inventory, a dollar cutoff limit should be established to determine
the material inventory to be recorded. A cut-off of $200,000.00 per
agency was used for the 99 mock-up, which resulted in recording inventory
for 18 agencies and recorded at least 75% of the total inventory.
This cut-off is still utilized.
|
| Material State Agencies Affected |
Universities
Kansas Department of Transportation |
| Policies |
- Inventories are valued at cost using the first in/ first out (FIFO)
method.
Inventories in the governmental funds can be accounted for using
either the purchases or consumption method. It has been determined for
ease of implementation, that the purchases method will be used. The
purchases method provides that inventory be treated as an expenditure
when purchased. This is the method that is currently being used under
the STARS cash system. Adjustments will need to be made for GAAP to
capitalize significant amounts of inventory at year-end, however. Significant
amounts of inventory, as defined below, should be reported in the balance
sheet.
- Consumable supplies will be reported only if over $200,000.00 per
agency.
The governmental funds statements have a current financial resources
focus. As a result, modified accrual adjustments to capitalize inventory
at year-end affect beginning fund balance rather than expenditures.
The focus on current financial resources is better maintained by not
adjusting the expenditures for the amount of inventory reclassified
to the balance sheet. The government wide statements, however, require
the full accrual adjustment to expenditures to properly reflect the
amount of inventory consumed during the fiscal year.
The required adjusting journal entries are illustrated below:
Governmental Funds Statements - Modified Accrual
Dr. GLA 1015 Inventories
xxx
Cr. GLA 3007 Fund Balance - Beginning
xxx
Government-wide statements - Full Accrual
Dr. GLA 3007 Fund Balance - Beginning
xxx
Cr. GLA 5001 Expenditures
xxx
For additional discussion and guidance in this area please refer to pages 80 - 81 of the
2001 Blue Book. |
| Contacts |
Katrina Yoakum, Kansas University
Lloyd Pinon, Kansas Department of Transportation
Gary Bond, Division of Accounts and Reports
Brett Bauer, Division of Accounts and Reports |
