[Anonymous]

This question in the subject line is in regard to governmental reporting, on cash flow stmt for proprietary funds of course.

I understand that acquiring money to buy capital asset is financing activity, as well as the related money-pay-back, but how come the acquisition of capital asset itself is also considered financing activity here? For a regular company, such transactions would be included in investing activities. I’m not understanding if there is any rationale behind it at all?…

Can anyone shed some light on this matter? I’m very confused…

Thank you sooooooo much!

[Anonymous]

Bumping up 🙂

[kettik]

When funds purchase capital assets with their own unrestricted money it is in fact classified as investing (because they invest in assets).

But when someone gives them money with a restriction to buy assets it's considered financing because it's kind of like grantors are giving them the assets (only the get to go and pick ones they need). So grantors finance funds through that.

That's how I understand it. I don't know if it's any help.

[Anonymous]

Thanks again for clearing up my confusion, Kettik!!! I was dwelling on the nature of the transaction, forgetting the overall context and nature of government accounting. They're not there to make business profit and have most of their resources contributed/transferred. So yes, it now makes sense that they're considered financing activities, as you said, they're grantor financed. =) Thanks!!!

[Author]

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