Interfund activity should be classified and reported as follows:

• Reciprocal interfund activity (the internal counterpart to exchange transactions that includes interfund loans and interfund services). For example, if an internal service fund sells goods or services to a general fund, that is an example of reciprocal interfund activity.

• Nonreciprocal interfund activity (the internal counterpart to nonexchange transactions includes transfers and reimbursements). An example, of a nonreciprocal interfund transfer is when the general fund transfers resources to debt service fund to repay principal or to pay interest, nothing is received in exchange and there is no commensurate consideration.

• Include on main balance sheet as discrete units.

• Present information in combined set of statements with lots of columns for component units.

• Present complete financial statements of component units in the notes to the financial statements.

1. Schedule of changes in capital assets and long-term liabilities. This note substitutes for the superseded account groups. The note provides the reconciliation of the asset and accumulated depreciation accounts plus details on depreciation expense. Thus, the need for account group information is eliminated. See Exhibit 10.

2. Disclosure of information about long-term liabilities. This note provides the reconciliation from beginning to ending balances for long-term liabilities and other liabilities, including amounts due within one year. See Exhibit 11.

• Details of donor-restricted endowments

• Segment information for enterprise funds (or governments that use enterprise accounting)

This reporting holds officials accountable for what was budgeted at the beginning of the year, a major step forward in governmental reporting. The new reporting requirements affects general funds and special revenue funds with legally adopted budgets. See Exhibit 12 for an example.

Mid-sized governments: June 15, 2002 for governments with between $10 million and $100 million in revenues.

Small governments: June 15, 2003 for governments with less than $10 million in revenues.

Transition
Adjustment to funds should be treated as prior period adjustments. Financial statements presented for prior periods should be restated, or if restatement is impractical, the cumulative effect on fund balance or net assets should be reported as a restatement of beginning balance. Except for deep-discount bonds, the requirements to report bond premiums and discounts can be applied prospectively.

Governments may establish the historical cost of infrastructure assets by reference to current replacement costs and an appropriate price index.

Example
Here is an example of infrastructure reporting:

Suppose that in 2005 the replacement cost of a road constructed in 1991 was $10 million. A road construction price-level index was .90 for 1991 and 120 for 2005. The road would be recorded at an initial cost of $7.5 million ($10 million times 90/120).

If the road had a useful life of 30 years, then at the end of 2005 (after 15 years, it would be 50 percent depreciated) it would have a book value of 50 percent of $7.5 million or $3.75 million.