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A Government's MD&A States That Government-Wide Net Position Decreased as a Result

question 61

Essay

A government's MD&A states that government-wide net position decreased as a result of the issuance of a long-term liability during the current reporting period. Does this sound correct? How does the issuance of long-term debt typically affect net position in the year of issuance?


Definitions:

Operating Lease

A lease agreement allowing the use of an asset without ownership, typically with shorter terms than a finance lease, and the lessor retains the risk of obsolescence.

Interest Expense

The cost incurred by an entity for borrowed funds, which can include loans, bonds, or lines of credit.

Lease Term

The lease term is the fixed, non-cancellable period of time for which a lease is taken out, including any options to renew that are reasonably certain to be exercised.

Loan Covenants

Clauses in a loan agreement that require the borrower to fulfill certain conditions or restricts certain activities to protect the lender.

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