Download Cash, Cash Equivalents, and Investments

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CHAPTER 4.1.1
GAAP ADJUSTMENTS AND RECLASSIFICATION ENTRIES
ASSETS: CASH, CASH EQUIVALENTS AND INVESTMENTS
1
GAAP POLICIES AND PROCEDURE
Accounting Policies
Cash and cash equivalents consisted of demand deposit held at the State Treasury, commercial
banks and petty cash.
The University considers highly liquid investments with an original maturity date of three
months or less to be cash and cash equivalents. The University considers amounts included in
the CSU Consolidated Investment Pool to be investments.
Investments are reflected at fair value using quoted market prices. Realized and unrealized gains
and losses are included in the accompanying Statement of Revenues, Expenses, and Changes
in Net Position as a component of investment income, net.
Investments that are used for current operations are classified as short-term investments.
Investments that are restricted for withdrawal or use for other than operations, designated or
restricted for the acquisition or construction of noncurrent assets, designated or restricted for
the liquidation of the noncurrent portion of long-term debt , and restricted as to the liquidity.
Investment Policy
State law and regulations require surplus monies of the University must be invested. The
primary objective of the University’s investment policy is to safeguard the principal. The
secondary objective is to meet the liquidity of the University. The third objective is to return an
acceptable yield. The University’s investment policy authorizes funds held in local trust
accounts under Education Code Sections 89721 and 89724 to be invested in any of the securities
authorized by Government Code Section 16430 and Education Code Section 89724, subject to
certain limitations. In general, the University’s investment policy permits investments in
obligations of the Federal and California state governments, certificates of deposit, high quality
domestic corporate and fixed income securities, and certain other investment instruments.
2
RELEVANT ACCOUNTING LITERATURE
Per GASB Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpandable Trust
Funds and Governmental Entities That Use Proprietary Fund Accounting
4.01.1-1
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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3
OBJECTIVE OF GAAP ADJUSTMENTS
The objectives of the GAAP adjustments that may be necessary at June 30 related to cash, cash
equivalents and investments are as follows:
 To record General Fund Appropriations and Systemwide Allocation Transfers (SWATs).
 To reclassify Short-Term Investment to Other Long-Term Investments if they are restricted
for withdrawal or use for other than current operations, designated or restricted for the
acquisition or construction of noncurrent assets, designated or restricted for the liquidation
of the noncurrent portion of long-term debt, and restricted as to the liquidity of the
investments.
 To reclassify establish the cash and cash equivalent balance from Short-Term Investments.
 To record CSU Consolidated Investment Pool Investment Income and Unrealized
Gain/Loss (Systemwide Investment Funds Trust (SWIFT) and State Money Investment
Fund (SMIF) in SCO fund 0948 (4th Quarter).
 To record Investment Held by CO adjustments in SCO fund 0576 and 0578 (passed down
by CO).
 To record underwater endowment (if necessary).
4
GAAP ACCOUNTING TREATMENT AND JOURNAL ENTRIES
4.1 RELATED GAAP ACCOUNT(S)
711101 – Cash and cash equivalents
711102 – Short-term investments
711205 – Endowment investment
711206 – Other long-term investments
4.2 HISTORY: REVENUE MANAGEMENT PROGRAM (RMP)
The California State University (CSU) implemented the Revenue Management Program
(RMP) on July 1, 2006. The RMP allowed the CSU to invest and record its collected
student fees in local trust accounts, rather than remitting it to the State to increase its
budget spending authority. The program has reduced the CSU’s dependency on the State
of California for fiscal tasks, increased working efficiencies and reduced delays to the
year-end closing process. All RMP implementation documents finalized in FY 2007-08
are available on the Office of the Chancellor’s (CO) RMP website at
https://csyou.calstate.edu/Divisions-Orgs/bus-fin/FinancialServices/mapo/rmp/Pages/default.aspx.
4.01.1-2
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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In FY 2012-13, the applicable RMP documents have been incorporated into the Legal
Manual and updated as needed. Going forward, the Legal Manual will house these
documents and will be continuously updated as needed.
The documents on the RMP website will remain on the website, however, they will not
be updated and should only be used as a historical reference.
4.3 GENERAL FUND APPROPRIATIONS AND SYSTEMWIDE ALLOCATION TRANSFERS
Since the implementation of RMP, general fund (GF) appropriations are used for payroll
related expenses. As the campus’ annual payroll expenses exceed the general fund budget
appropriations, there should be no state appropriations receivable-current balance
remaining at the end of the year.
Campuses will continue to have state appropriations receivable-noncurrent for capital
outlay appropriations.
As mentioned above, a campus’ annual payroll expenses exceed the GF appropriation. In
order to resolve this issue and to comply with RMP (to use the available GF appropriation
for payroll), the CO must distribute its unallocated GF appropriation to the campus via a
supplemental allocation order (AO) to fund the campus’ payroll. In exchange for the
supplemental AO, the campus must give up its cash/investments held in the Systemwide
Investment Fund Trust (SWIFT) pool. This is called the Systemwide Allocation Process
(SWAP). When a campus receives a supplemental AO, it records a debit to GF Payroll
Allocations/Expenditure-690003 and a credit to Cash-Short Term Investments (SWIFT)101100 on its legal basis records, while the CO debits Cash-Short Term Investments
(SWIFT)-101100 and credits GF Payroll Allocations/Expenditure-690003.
For GAAP financial statement purposes, the GF Payroll Allocations/Expenditure-690003
will map to State Appropriations, Noncapital-723001, which will offset the supplemental
AO recorded as a GAAP adjustment to state appropriations, noncapital. This entry
prevents the over/understatement of state appropriations, noncapital as the campus gave
up its cash/investments (held in the SWIFT pool) in exchange for additional GF
appropriation.
Now that GF appropriation must be fully used for payroll related expenses, special
programs (e.g. Student Outreach, Summer Arts, and the like) previously funded by GF
appropriations (prior to the implementation of RMP) are now being funded by the CO
through the CO’s cash/investments held in the SWIFT pool that were previously received
from issuance of supplemental AOs (as discussed above). To fund these special programs,
the System Budget Office issues a SWAT notice and a Cash Posting Order (CPO) to
transfer the CO’s cash/investments held in the SWIFT pool to the campus’
cash/investments held in the SWIFT pool. The campus records a credit to interagency
SWAT transfer in-506100 and a debit to Cash-Short Term Investments (SWIFT)-101100,
while the CO records a debit to inter-agency SWAT transfer out-680100 and a credit to
4.01.1-3
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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Cash-Short Term Investments (SWIFT)-101100 on its legal basis records. For GAAP
financial statement purposes, both transfer object codes map to state appropriations,
noncapital.
The legal and GAAP entries that take place during fiscal year by CSU fund are illustrated
below:
1. Received base budget
State appropriations are allocated to the campuses via allocation orders (AO) and
are recorded by campuses in CSU fund 001 as budget entries only. The
appropriations are not recognized in legal basis accounting for purpose of reporting
financial results to the SCO.
2. Estimated payroll to SCO
Derived GAAP Entry (Period 1-12)
Account
723001*
713899
713899
723001*
Journal
Description
Account Name
State appropriations,
noncapital
Fund Balance Clearing
Fund Balance Clearing
State appropriations,
noncapital
Program
Class
(CSU
Fund)
881-Unrestricted
50
001
$1,000,000
881-Unrestricted
90
001
($1,000,000)
881-Unrestricted
90
485
$1,000,000
881-Unrestricted
50
485
($1,000,000)
Fund
(Net Position)
Amount
To record ADNOAT for estimated payroll.
*690003-GF Payroll allocations/expenditures derives to 723001, State appropriations, noncapital.
3. Actual payroll
Derived GAAP Entry (Period 1-12)
Account
722001
Account Name
Salaries
722002
Benefits
881-Unrestricted
various
485
$200,000
Fund Balance Clearing
881-Unrestricted
90
485
($1,000,000)
713899
Journal
Description
4.01.1-4
Program
various
Class
(CSU
Fund)
485
Fund
(Net Position)
881-Unrestricted
Amount
$800,000
To record the actual payroll.
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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4. General fund appropriation SWAP
In the last quarter of the fiscal year, the CO will issue AOs and cash posting orders
(CPOs) to SWAP fee money (SWIFT) among campuses so that the campuses’ GF
payroll is more than their base budget will get more GF appropriation. Campuses
will record the supplemental AO to the budget ledger in CSU fund 001 and SWAP
CPO in CSU fund 485.
Derived GAAP Entry (Period 1-12)
Program
various
Class
(CSU
Fund)
485
Account
722001
Account Name
Salaries
Fund
(Net Position)
881-Unrestricted
722002
Benefits
881-Unrestricted
various
485
$200,000
Fund Balance Clearing
881-Unrestricted
90
485
($1,000,000)
Program
Class
(CSU
Fund)
Amount
881-Unrestricted
50
485
$400,000
881-Unrestricted
90
485
($400,000)
Program
Class
(CSU
Fund)
881-Unrestricted
50
001
$400,000
881-Unrestricted
90
001
($400,000)
881-Unrestricted
90
485
$400,000
881-Unrestricted
50
485
($400,000)
713899
Journal
Description
Account
723001
711102
Journal
Description
Amount
$800,000
To record the actual payroll.
Account Name
State appropriations,
noncapital
Short-term investments
Fund
(Net Position)
To record SWAP CPO.
5. Estimated payroll to SCO
Derived GAAP Entry (Period 1-12)
Account
723001
713899
713899
723001
Journal
Description
4.01.1-5
Account Name
State appropriations,
noncapital
Fund Balance Clearing
Fund Balance Clearing
State appropriations,
noncapital
Fund
(Net Position)
Amount
To record ADNOAT for estimated payroll.
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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6. Actual payroll
Derived GAAP Entry (Period 1-12)
Program
various
Class
(CSU
Fund)
485
Account
722001
Account Name
Salaries
Fund
(Net Position)
881-Unrestricted
722002
Benefits
881-Unrestricted
various
485
$100,000
Fund Balance Clearing
881-Unrestricted
90
485
($400,000)
713899
Journal
Description
Amount
$300,000
To record the actual payroll.
7. GAAP Adjustments
For GAAP reporting, adjustments are necessary at June 30 to recognize current year
general fund appropriation and appropriation receivable.
7a. Manual GAAP Entry (Period 998)
Account
711103
723001
Journal
Description
Fund
(Net Position)
881-Unrestricted
Program
90
Class
(CSU
Fund)
001
881-Unrestricted
50
001
Account Name
Fund Balance Clearing
Fund
(Net Position)
881-Unrestricted
Program
90
Class
(CSU
Fund)
001
Accounts receivable, net
881-Unrestricted
90
001
Account Name
Accounts receivable, net
State appropriations,
noncapital
Amount
$1,400,000
($1,400,000)
To record current year general fund appropriation.
7b. Manual GAAP Entry (Period 998)
Account
713899
711103
Journal
Description
Amount
$1,400,000
($1,400,000)
To reclassify Fund Balance Clearing to accounts receivable.
The above manual GAAP entries are similarly discussed in Chapter 4, Receivables
and Fund Balance Clearing.
4.01.1-6
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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The T-accounts below summarize the transactions and show the surviving transactions
(highlighted in gray) in CSU fund 001 and 485 at June 30 after GAAP adjustments.
CSU 001
723001-State appropriations,
noncapital
2.
5.
Dr.
1,000,000
400,000
CSU 001
713899-Fund Balance Clearing
Cr.
1,400,000
Dr.
7a.
7b.
CSU 485
723001-State appropriations,
noncapital
Dr.
4.
Cr.
1,000,000
400,000
CSU 485
713899-Fund Balance Clearing
Cr.
1,000,000
2.
Dr.
2. 1,000,000
400,000
5.
5.
400,000
Dr.
7a. 1,400,000
Cr.
1,400,000
7b.
Cr.
CSU 485
711102-Short-term investments
Dr.
1,000,000
3.
400,000
6.
Cr.
400,000
4.
400,000
400,000
CSU 485
722001-Salaries
Dr.
800,000
300,000
1,100,000
2.
5.
1,400,000
1,000,000
3.
6.
CSU 001
711103-Accounts receivable, net
Cr.
3.
6.
CSU 485
722002-Benefits
Dr.
Cr.
300,000
100,000
400,000
In summary, the state appropriations, noncapital GAAP balance is comprised of the GF
base budget plus the swap entries and any special programs funding via SWATs and is
comparable to pre-RMP state appropriations, noncapital. Unlike the GF base budget AO
and the supplemental AO, the SWAT notice does not require an entry in the GAAP ledger.
4.4 RECLASSIFICATION OF OTHER LONG-TERM INVESTMENTS FROM SHORT-TERM
INVESTMENTS
Investments is to be reclassified from current to other long-term if they meet the following
criteria:
 Restricted for withdrawal or use for other than current operations (i.e. endowments or
Perkins loans).
 Designated or restricted for the acquisition or construction of noncurrent assets (i.e.
SCO 0576 funds).
 Designated or restricted for the liquidation of the noncurrent portion of long-term debt.
4.01.1-7
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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
Restricted as to liquidity of the investments (i.e. investments in the common fund).
Example below is a GAAP adjustment at June 30 to reclassify short-term investments
to long-term investments due to funds that have been set aside by the Board of Trustees
for a capital construction project.
Account
711206
711102
Journal
Description
Class
(CSU
Fund)
Fund
(Net Position)
Account Name
Program
Amount
Other long-term
881-Unrestricted
90
532
$X,XXX,XXX
investments
Short-term investments
881-Unrestricted
90
532
($X,XXX,XXX)
To reclassify funds designated for housing construction project from short-term
investments to long-term investment.
Short-term investments and other long-term investments with restrictions should be
classified under “Restricted” net position.
Example below is a GAAP adjustment at June 30 to reclassify Perkins loans from
short-term investments to long-term investments. Based on nature of the CSU fund,
the reclassification is necessary as Perkins loans is not used for current operations.
Account
711206
711102
Journal
Description
Account Name
Other long-term
investments
Short-term investments
Fund
(Net Position)
892-Agency FundsGrants Refundable
892-Agency FundsGrants Refundable
Program
Class
(CSU
Fund)
90
403
$XXX,XXX
90
403
($XXX,XXX)
Amount
To reclassify short-term investments to long-term investment for Perkins loans.
4.5 RECLASSIFICATION OF NET CASH BALANCE FROM SHORT-TERM INVESTMENTS
With the implementation of RMP, campuses are required to record all operating and
investment activities within FIRMS object code 101100-Cash/Short-Term Investments
(SWIFT), which is mapped to short-term investments on a GAAP basis.
On legal basis:
 The net cash balance does not require a year-end adjustment, and
 The balance reflects accurately that the campus is fully invested.
However, this approach is not in accordance with GAAP. A GAAP reclassification entry
is required to reclassify the net cash balance from short-term investments to cash (or
accounts payable if negative balance, as discussed below) in order to properly reflect the
cash and investments balances at 6/30/CY. The resulting effect of this reclassification
entry is that the CSU Consolidated investments balance will agree to the SWIFT balance
at 6/30/CY (ending SWIFT Bank balance plus 4th quarter accrual and unrealized gain /
4.01.1-8
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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loss) provided in the Rollforward Summary by CO under the passdown schedules in this
website: http://www.calstate.edu/sfsr/gaap.
The reclassification entry needs to be reversed in the following year. In order to determine
the amount to reclassify from short-term investments, a calculation must be performed to
derive the net cash balance at year-end. The net cash balance per books equals the balance
per bank in the Bank of CSU - WFB account plus deposits in transit (DIT – deposits
recorded by the campus but not yet posted by the bank) and cash on hand (amounts
recorded by the campus but not yet deposited), less outstanding checks (bank
reconciliation).
After performing the bank reconciliation and determining the net cash balance per books,
an individual CSU fund may have either a positive or negative net cash balance. In order
to determine the necessary reclassification entry, the campus must look at the calculated
net cash balance in total, not by individual CSU fund, as follows:
 If the calculated total net cash balance is positive, a reclassification entry is required
to reclassify the net cash balance from short-term investments to cash for each CSU
fund, regardless of whether an individual CSU fund has a positive or negative balance.
 If the calculated total net cash balance is negative, a reclassification entry is required
to reclassify the net cash balance from short-term investments to accounts payable for
each CSU fund, regardless of whether an individual CSU fund has a positive or
negative balance.
Below is an illustration of cash and investment account balances at year-end
I. Bank Balance at 6/30/CY
Dep/Disb Checking
WFB
Deposit
Daily sweep to Concentration
Bank of CSU
WFB
SWIFT
1,500
(1,500)
To investments to max earnings (a)
Checks presented
Investment to concentration to cover checks
presented
Concentration to Checking to cover
checks presented
Bank of CSU
1,500
(700)
700
700
(700)
$
$
100
Balance per bank at 6/30/CY
(a) There is a $100 float that is not available to transfer immediately to investments.
4.01.1-9
1,400
(1,400)
(700)
$
700
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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II. Book balance at 6/30/CY
(b)
(b)
Investment
Activity in
101100
Operating
Activity in 101100
Deposit
To investments to max earnings
1,500
(1,400)
Checks issued - Ck1 (cleared)
(400)
Checks issued - Ck2 (cleared)
(300)
Checks issued - Ck3 (outstanding)
Investments to Checking to cover checks
presented
(600)
Cash recorded in GL and deposited on
6/30, but not posted by WFB on 6/30 DIT
Cash recorded in GL but not deposited at
6/30
Balance per books at 6/30/CY - before
June accrual
$100 in Bank
of CSU WFB
acct not yet
invested
Outstanding
check
700
220
1,400
(700)
Cash on hand
and DIT
80
$
$
(200)
700
50
June earnings distribution (GAAP entry)
Balance per books at 6/30/CY - after June
$
$
accrual
(200)
750 (c)
(b) Operating and Investing activities within object code 101100 are intentionally separated for illustration
purpose.
(c) Should agree to balance in the annual SWIFT Rollfoward Summary provided by CO at 6/30/CY.
To determine the necessary GAAP adjustment:
Calculate the net cash balance at 6/30/CY
The balance per bank in the Bank of CSU WFB account
+
Deposit in transit (deposits recorded by the campus but not yet posted by the bank)
+
Cash on hand (amounts recorded by the campus but not yet deposited)
-
Outstanding checks
=
Net cash balance at 6/30/CY
In this illustration, the net cash balance is the negative $200 (sum of green highlighted
numbers) that needs to be reclassified from short-term investments to accounts payable,
leaving the true investment balance of $750 in short-term investments".
CSU delivered “CSU_UNRECON_CHK_CSH_BAL” query identifies outstanding
checks by net position and CSU funds. The CSU funds returned are based on accounts
4.01.1-10
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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payable distribution. In a case of claimable fund, the invoice is first paid out of the
revolving fund 499, and then the claim is sent to the State for reimbursement. The claimed
CSU fund will appear on the query result, not the paid CSU fund.
Example
6048.321
Debit
Credit
Expense (1)
FBC
0948.499
Debit
A/R
Credit
Cash (2)
(1) Query will return CSU fund 321 based on the AP distribution.
(2) However, cash is paid out of SWIFT revolving fund 499.
Campus should perform the same calculation to determine whether the net cash in the
claimable fund is positive or negative to reclassify to cash or accounts payable using the
revolving CSU fund 499, as that is the fund that is owed and reimbursed by the State.
Hence, state appropriated funds e.g. 0574, 6028, 6041, 6048, etc. should not have cash or
investment balances. Campuses need to make sure there is no reclassification to these state
funds. Any CSU funds in the query that are outside state fund 0948 should be replaced
with CSU fund 499 instead when reclassifying net cash balance from short term
investment to AP or cash to maintain SWIFT within state fund 0948.
At year-end, the following GAAP reclassification entry is required:
If the calculated total net cash balance at 6/30/CY is positive, then:
Account
711101
711102
Journal
Description
Account Name
Cash and cash equivalents
Fund
(Net Position)
8XX
Program
90
Class
(CSU Fund)
XXX
Amount
$XX,XXX
Short-term investments
8XX
90
XXX
($XX,XXX)
To reclassify cash from short-term investments to cash and cash equivalents in order to
properly state the cash and investments balances at year-end.
If the calculated total net cash balance at 6/30/CY is negative, this represents a negative
book balance (i.e. amount owed to the bank) and the following entry is required:
Account
711102
712101
Journal
Description
4.01.1-11
Account Name
Short-term investments
Fund
(Net Position)
8XX
Program
90
Class
(CSU Fund)
XXX
Amount
$XX,XXX
Accounts Payable
8XX
90
XXX
($XX,XXX)
To reclassify the negative cash balance per books from short-term investments to accounts
payable in order to properly state the cash and investments balances at year-end.
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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4.6 CSU CONSOLIDATED INVESTMENT POOL INVESTMENT INCOME (SWIFT AND SMIF IN
SCO FUND 0948) AND 4TH QUARTER INCOME ACCRUAL
Investment income in SWIFT and SMIF for SCO fund 0948 is issued to the campuses on
a quarterly basis. The distribution schedule as follows:
Q1
Q2
Q3
Q4
July
October
January
April
August
November
February
May
September
December
March
June
For GAAP reporting purposes, campuses must accrue the 4th quarter investment income
each year subject for reversal in the beginning of the next fiscal year. Information for the
CSU Consolidated Investment Pool 4th quarter accrual GAAP adjustment entry will be
provided under the passdown schedules in this website: http://www.calstate.edu/sfsr/gaap.
Refer to Chapter 5, GAAP Adjustments and Reclassification Requiring Information from
CO.
EXAMPLE
GAAP Basis Adjusting Entry (SWIFT)
Account
711102
723003
Journal
Description
Account Name
Short-term investments
Investment Income (loss), net
Fund
(Net Position)
8XX
Program
90
Class
(CSU Fund)
XXX
8XX
50
XXX
Fund
(Net Position)
8XX
Program
90
Class
(CSU Fund)
XXX
8XX
50
XXX
Amount
$XX,XXX
($XX,XXX)
To record 4th quarter SWIFT investment income.
GAAP Basis Adjusting Entry (SMIF)
Account
711103
723003
Journal
Description
Account Name
Accounts Receivable
Investment Income (loss), net
Amount
$XX,XXX
($XX,XXX)
To record 4th quarter SMIF interest accrual.
NOTE: SWIFT 4th quarter accrual should be recorded as short-term investments instead
of account receivables since it is usually received by the CO already at year-end. It is
different from the SMIF interest accrual which is still kept by the State at year-end, and
therefore, is recorded as account receivables instead.
Since the GAAP adjustment recorded in one fiscal year is a timing adjustment, its effect
must be reversed in the following fiscal year to offset the legal basis entries that will be
made upon receipt of the investment income.
4.01.1-12
GAAP Manual | GAAP Adjustments and Reclassification Entries – Assets: Cash, Cash
Equivalents and Investments | June 30, 2016
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Manual GAAP Entry (SWIFT) (Period 998)
Account
723003
711102
Journal
Description
Account Name
Investment Income (loss), net
Fund
(Net Position)
8XX
Program
50
Class
(CSU Fund)
XXX
Amount
$XX,XXX
8XX
90
XXX
($XX,XXX)
Short-term investments
To reverse SWIFT investment income accrued for the three months ended June 30, 20PY.
Manual GAAP Entry (SMIF) (Period 998)
Account
723003
Account Name
Investment Income (loss), net
Fund
(Net Position)
8XX
Program
50
Class
(CSU Fund)
XXX
711103
Journal
Description
Accounts Receivable, current
8XX
90
XXX
Amount
$XX,XXX
($XX,XXX)
To reverse SMIF investment income accrued for the three months ended June 30, 20PY.
4.7 SWIFT UNREALIZED GAIN/LOSS
Unrealized gain/loss in SWIFT are recorded by the CO centrally in legal basis reporting.
For GAAP reporting purposes, the unrealized gain/loss in SWIFT needs to be allocated to
campuses. Campuses must accrue the unrealized gain/loss each year and reverse the prior
year’s accrual. Information for the SWIFT unrealized gain/loss GAAP adjustment entry
will be provided under the passdown schedules in this website:
http://www.calstate.edu/sfsr/gaap. Refer to Chapter 5, GAAP Adjustments and
Reclassification Requiring Information from CO.
Below is an example of the GAAP adjustment entry:
Account
711102
723003
Journal
Description
Account Name
Short-term investments
Investment Income (loss), net
Fund
(Net Position)
8XX
Program
90
Class
(CSU Fund)
XXX
8XX
50
XXX
Amount
$XX,XXX
($XX,XXX)
To record SWIFT unrealized gain/loss.
4.8 INVESTMENT HELD BY CO IN STATE FUND 0576 AND 0578
State fund 0576, CSU Dorm Construction Fund is used to record the proceeds from bond
and BAN issuances; state fund 0578, the Dormitory Interest and Redemption Fund is used
by the CO only to record and pay the principal and interest on Systemwide Revenue Bond
(SRB) to the State controller’s Office. GAAP adjustments related to Investment Held by
CO are through CO pass down schedules.
Please refer to Chapter 4, Long Term Debt Obligation and Chapter 5, GAAP Adjustments
and Reclassification Requiring Information from CO for detailed information.
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4.9 UNDERWATER ENDOWMENTS
Underwater endowment occurs when the value of donor-restricted endowment funds
decline below the corpus, consideration of various accounting issues is required. The
decrease in value must be determined and accounted for on a fund by fund basis and not
based on the endowment funds in total. As the majority of CSU’s endowment funds are
held by discretely presented component units (mostly auxiliary organizations), required
accounting and disclosures for endowments of both Financial Accounting Standards
Board (FASB) and Governmental Accounting Standards Board (GASB) reporting entities
are discussed in more detail in Chapter 8 of this manual.
4.10 GASB STATEMENT NO. 72 IMPLEMENTATION
On February 2015, GASB released Statement No. 72 Fair Value Measurement and
Application, which require all investments to be measured at fair value (with limited
exceptions). GASB’s revised definition of fair value is as follows:
The fair value definition focuses on the price that would be received to sell an asset or
paid to transfer a liability – an exit price. Entities do not necessarily sell assets at the price
paid to acquire them – an entry price. Fair value is considered from the perspective of
market participants and is not an entity-specific measurement.
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Exceptions to the fair value measurement for investments and their corresponding
valuation are as follows:
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DISCLOSURE REQUIREMENTS
This standard also expands fair value disclosures to provide comprehensive information
for financial statement users about the impact of fair value measurements on a
government’s financial position. See below:
FAIR VALUE HIERARCHY
Valuation inputs are assumptions that market participants use in pricing an asset or
liability. GASB Statement No. 72 establishes a hierarchy of inputs used to measure fair
value that prioritizes the inputs into three categories – Level 1, Level 2, and Level 3 inputs
– considering the reliability of the inputs and is leveraged from FASB 157 Fair Value
Measurement. The level is determined based on the lowest level of input significant to the
measurement in its entirety.
Level 1 inputs – are quoted (unadjusted) prices in active markets for identical assets or
liabilities that the government can access at the measurement date. Observable markets
include exchange, dealer, brokered, and principal-to-principal markets.
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Level 2 inputs – are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. These inputs are derived
from or corroborated by observable market data through correlation or by other means.
Level 2 inputs include:
 Quoted prices for similar assets or liabilities in active markets
 Quoted prices for identical or similar assets or liabilities in an inactive markets
 Inputs other than quoted prices that are observable for the asset or liability
Level 3 inputs – are unobservable inputs for the asset or liability and should only be used
when relevant Level 1 and Level 2 inputs are unavailable. Governments may use their
own data to develop unobservable inputs if there is no information available without
undue cost and effort.
VALUATION TECHNIQUES AND APPROACHES
There are many ways to determine the fair value of an asset or liability, and the standard
allows for many possible valuation techniques using one or more of three approaches:
market, cost, or income approach. The fair value hierarchy does not prioritize valuation
techniques; the government shall use valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value
maximizing the use of relevant observable inputs and minimizing the use of unobservable
inputs.
Market approach – The market approach uses prices and other relevant information
generated by market transactions involving identical or similar assets, liabilities, or a
group of assets and liabilities (e.g., quoted market prices).
Cost approach – The cost approach reflects the amount currently required to replace the
present service capacity of an asset, adjusted for obsolescence.
Income approach – The income approach converts future amounts (e.g., cash flows or
revenues and expenses) to a single current amount such as discounted present value,
reflecting current market expectations about those future amounts. Valuation techniques
consistent with the income approach include present value, option pricing models such as
the Black-Scholes-Merton formula and the multiperiod excess earnings method.
GASB did not prescribe a set format for the disclosures as the governments may present
the information in either narrative or tabular format.
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5
REFERENCE TOOLS
5.1 TABLES OF OBJECT CODE AND CSU FUND DEFINITIONS
http://www.calstate.edu/sfsr/standards_and_rules/2015/Tables_of_Object_Code_and_C
SU_Fund_Definitions_Updated_2015-1130.xls
5.2
THE OFFICE OF THE CHANCELLOR’S (CO) RMP WEBSITE
https://csyou.calstate.edu/Divisions-Orgs/bus-fin/FinancialServices/mapo/rmp/Pages/default.aspx
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REVISION CONTROL
Document Title:
CHAPTER 4.01.1 – GAAP ADJUSTMENTS AND RECLASSIFICATION ENTRIES
– ASSETS: CASH, CASH EQUIVALENTS AND INVESTMENTS
REVISION AND APPROVAL HISTORY
Section(s)
Revised
Summary of Revisions
Revision
Date
4.10
Added a discussion about GASB Statement 72 and the additional
May 2016
disclosure requirements for investments.
3
Removed bullet point “To eliminate transactions related to Internal
May 2015
Campus Service Providers”.
4
Removed discussion related to “Internal Campus Service Providers”
as the same information is covered in Section Cost Recovery of
May 2015
Chapter 4, Operating Expenses and does not affect cash, cash
equivalents and investments.
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