A city finance director presents the annual comprehensive financial report to the council. One member asks why the pension schedules appear after the notes rather than in the notes themselves. The answer lies in GASB's layered disclosure architecture. RSI occupies a defined zone between the audited statements and purely supplementary data, and the exam expects you to know exactly what belongs there and why.
AICPA Representative Tasks (verbatim). "Recall the objectives and components of required supplementary information other than management's discussion and analysis in the annual comprehensive financial report for state and local governments."
GASB Statement No. 34 established the current financial reporting model for state and local governments, creating a three-tier disclosure architecture. The basic financial statements and notes form the audited core. RSI surrounds that core: MD&A precedes the statements, while all other RSI follows the notes. This placement is not arbitrary; it reflects the nature of each disclosure type.
MD&A provides management's analytical overview and forward-looking discussion. The remaining RSI categories provide supporting schedules that GASB determined are essential for fair presentation but that either involve significant estimates, projections...
Common mistakes
- Confusing MD&A with other RSI. MD&A is RSI, but it appears before the basic financial statements. All other RSI appears after the notes. The exam may describe content and ask where it belongs. Pension schedules and budgetary comparisons follow the notes; management's narrative overview precedes the statements.
- Assuming RSI is optional. RSI is required by GAAP. A government that omits required RSI has departed from GAAP. The auditor must address the omission even though RSI is not audited.
- Applying full audit procedures to RSI. RSI receives limited procedures, inquiries and analytical procedures. The auditor does not test RSI with the same rigor as financial statement assertions. An answer choice describing "substantive testing of RSI" is a trap.
Bottom line
- RSI is required by GAAP but unaudited; auditors apply limited procedures (inquiries, analytical procedures), not substantive testing.
- Budgetary comparison schedules present original budget, final budget, and actual results for the general fund and each major special revenue fund with a legally adopted budget.
- Pension RSI includes the schedule of changes in net pension liability, schedule of contributions, and related notes, building to 10 years prospectively.
- OPEB RSI mirrors pension RSI structure: schedule of changes in net OPEB liability and schedule of contributions, with healthcare cost trend assumptions disclosed in notes to RSI.
Exam shortcut
When a question asks where pension or OPEB schedules appear, default to RSI after the notes, not in the notes themselves. The schedules showing changes in liability and contributions are RSI; the disclosure of methods and assumptions for measuring the liability in the statements is in the notes to financial statements.
The full lesson (about 2,881 words, 19 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- III.A8
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