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Comprehensive Annual Financial Report Fiscal And Economic Condition Analysis Term Paper

¶ … Annual Financial Report Fiscal and Economic Condition Analysis The Piqua City School District in Ohio

Accounting in the public and private sectors is often subjected to differences, some of these differences being also observable at the level of budgeting. One important difference is constituted by the fact that economic agents -- that is private, for profit entities -- will construct the budgetary presentation in the form of annual financial reports. These financial reports are generally composed from financial statements and their qualitative presentation.

Governmental agencies on the other hand are requested to construct comprehensive annual financial reports (CAFR), which are more complex than annual financial reports. These reports contain added elements to the minimum elements requested from economic agents. In this order of ideas, while the financial statements are more detailed, the difference is also observed in the fact that the CAFRs are composed of three main parts -- the financial statements, the qualitative presentation of the financial statements as well as the quantitative interpretation through statistical information (Gauthier, 2005).

Aside from these main differences however, the annual financial reports and the comprehensive annual financial reports also reveal a series of similarities. Among the most important ones are the scope of the reports or the expectations from the reports. In this order of ideas, both categories of institutions -- public and private -- are under the constant observation of the public, and the reports strive to inform the public of the actions undertaken by the company. A difference is however observed in the construction of the public.

While in the case of governmental institutions, the public is constituted by the population, in the case of private organizations, the public is represented primarily by the share owners, but also by other categories of stakeholders, such as customers, staff members or business partners. The expectation of all these public categories is that both the annual financial report as well as the comprehensive annual financial reports reflect the reality of the operations undergone by the agencies. In this sense, the main requirement is that of transparency.

Finally, a last difference is constituted by the budgeting techniques. At the level of the private sector, the financial statements are constructed...

This is mostly possible as the economic agents are independent and generate their own funds, they can then redistribute towards investments. In the case of the governmental agencies however, these are reliant upon the state and often face resource shortages. This specifically implies that the emphasis on performance and efficiency in CAFRs is decreased. Nevertheless, this has been increasing throughout the past years (Wilson, Kattelus and Reck, 2007).
At a simplistic level, the non-discretionary policy is understood as a set of policies developed and implemented with the scope of creating stability within the economy. In the words of Robert Guell (2008), "nondiscretionary fiscal policy is that set of policies that are built into the system to stabilize the economy what growth is either too fast or too slow."

In terms of the effects the nondiscretionary policy generates, these have been widely discussed by the specialized literature, as well as praised and condemned by practitioners. Francesco Farina and Roberto Tamborini (2007) for instance state that nondiscretionary policies have a direct impact on interest rates and on inflation, which in turn generate national impacts upon the entire economy.

Robert Guell is more focused on the benefits of nondiscretionary policies and argues that these can generate more national output, which can in turn not only generate wealth and stability among economic agents, but also overall wealth and economic stability for the entire nation. In case however adjustments are made, the benefits would be lost for the simple reason that a discretionary policy -- one which is developed and implemented at a specific time, to address a specific issue -- does not have the ability to create economic stability. The author attributes the reasons as to why discretionary policy does not work to three specific elements -- "lags in recognizing, administering and operating fiscal policy" (Guell, 2008).

An important note which has to be made refers to the current application of nondiscretionary policy. It is as such argued that the application of stabilizers has become less susceptible to generalization ever since the internationalized financial crisis broke out in 2007. In this order of ideas, the governmental spending is directed towards the private sector through bailout programs which strive to revive the economy. This situation however…

Sources used in this document:
References:

Farina, F., Tamborini, R., 2007, Macroeconomic policy in the European Monetary Union: from the old to the new stability and growth pact, Routledge

Gauthier, S.J., 2005, Governmental accounting, auditing and financial reporting, Government Finance Officers Association

Guell, R., 2008, Issues in economics today, 4th edition, The McGraw Hill Companies

Wilson, E.R., Reck, J.L., Kattellus, S.C., 2007, Accounting for governmental and nonprofit entities, 14th edition, The McGraw-Hill Companies
2011, CAFR-2000 sample reports, CAFR 2000, http://www.cafr2000.com/samples.php last accessed on January 14, 2011
2010, Central bank policy and the currency markets, Vantage FX, https://vantagefx.wordpress.com/tag/non-discretionary-fiscal-policy / last accessed on January 14, 2011
2010, Financial ratios, New MBA, http://www.netmba.com/finance/financial/ratios / last accessed on January 14, 2011
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