A reporting entity uses the regulatory basis of accounting when the entity is subject to a governmental regulatory agency's jurisdiction. The regulatory basis of accounting is a comprehensive basis of accounting other than accounting principles generally accepted in the United States. Regulatory basis accounting rules and guidelines vary from one regulatory agency to another.

The regulatory basis of accounting is used in about four percent of the City, County and School District credits in CreditScope. The majority of the regulatory basis of accounting credits in CreditScope are put in practice in New Jersey Cities and Counties and in Indiana Cities, Counties and School Districts.

New Jersey Cities and Counties follow the "Requirements of Audit" as promulgated by the State of New Jersey, Department of Community Affairs, Division of Local Government Services. Generally, the financial statements are presented using the modified accrual basis of accounting with minor exceptions mandated by the "Requirements of Audit." One of the significant differences between this regulatory basis of accounting versus GAAP is the use of the following funds such as: Current Fund, Trust Fund, General Capital Fund and General Fixed Assets Account Group. Cities, Counties and School Districts that follow GAAP use the following funds: General Fund, Special Revenue Fund, Debt Service Fund, Capital Projects Fund and Permanent Fund.

The majority of the Indiana Cities, Counties and School Districts in CreditScope are reported on a regulatory basis of accounting as prescribed by the Indiana State Board Accounts in accordance with state statute (IC 5-11-1-6). Two significant differences between this regulatory basis of accounting and GAAP is that receipts are recognized when received in cash rather than when earned, and disbursements are recognized when paid rather than when a liability is incurred.

This article is the sixth and final installment in a series of articles entitled, "On What Basis Are You Accounting for That?" addressing the following specific topics:

Footnotes Category: