1-2. Identify and describe the five environmental differences between governments and for-profit business enterprises as identified in the Governmental Accounting Standards Board's Why Governmental Accounting and Financial Reporting Is—and Should Be—Different. The five environmental differences include mission/purpose, source of revenue, potential longevity, relationship with stakeholders, and role of budget. The mission/purpose is defined by the goals of the organization. The purpose of a commercial business is to make money. A non-profit organization’s purpose is to provide a service, without compensation from the people being served.
The source of revenue comes from net income, which comes from a sale of goods or services in
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1-4. What is the definition of a government as agreed upon by the FASB and GASB? The definition of a government, as agreed to by the FASB and the GASB is as follows: “Public corporations and bodies corporate and politic are governmental organizations. Other organizations are governmental organizations if they have one or more of the following characteristics: Popular election of officers or appointment (or approval) of a controlling a majority of the members of the organization’s governing body by officials of one or more state or local governments; The potential for unilateral dissolution by a government with the net assets reverting to a government, or the power to enact and enforce a tax levy. Furthermore, organizations are presumed to be governmental if they have the ability to issue directly (rather than through a state or municipal authority) debt that pays interest exempt from federal taxation. However, organizations possessing only that ability (to issue tax-exempt debt) and none of the other governmental characteristics may rebut the presumption that they are governmental if their determination is supported by compelling, relevant evidence.” (
1-5. Describe the “hierarchy of GAAP” for state and local governments, the federal government, and nongovernmental not-for-profit organizations. Based on the website, www.fasab.gov. The hierarchy of GAAP is that the standards of the FASAB will