Wiley GAAP for Governments 2013: Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments

CHAPTER 5

CAPITAL PROJECTS FUNDS

Introduction

Basis of Accounting

Measurement Focus

When Are Capital Projects Funds Used?

Revenues and Other Financing Sources

Proceeds from Debt Issuance

Basic journal entries to record the issuance of debt

Bond Anticipation Notes

Demand Bonds

Special Assessment Debt

Government obligation for special assessment debt

Arbitrage Rebate Accounting

Summary

INTRODUCTION

Governments often use the capital projects fund type to account for and report major capital acquisition and construction activities. GASBS 54, Fund Balance Reporting and Governmental Fund Definitions, provides that capital projects funds should be used to “. . . account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition of construction of capital facilities and other capital assets.” GASBS 54 further provides that capital projects funds should exclude those types of capital related outflows financed by proprietary funds or for assets that will be held in trust for individuals, private organizations, or other governments.

This is actually a broader definition of the use of capital projects funds than previously existed under GAAP, which provided that capital projects funds be used to account for the acquisitions or construction of major capital facilities. Despite the previous GAAP definition, many governments in practice used capital projects funds to account for the acquisitions of all capital assets, ...