Free GAFRB Practice Test Questions and Answers (2026) | Cert Empire Practice Questions

The Federal Accounting Standards Advisory Board (FASAB) was established in 1990 by the U.S.

Department of the Treasury, the Office of Management and Budget (OMB), and the Government

Accountability Office (GAO). These three entities are collectively known as the “sponsors” of FASAB.

Each has a representative who serves as a voting member of the board.

FASAB is responsible for establishing GAAP for federal entities. The sponsor organizations appoint

board members and have authority over standard-setting governance, but do not individually veto

standards. Final standards are issued only after due process, including public comment and sponsor

approval.

Relevant Standards and Reference:

FASAB Memorandum of Understanding (MOU) Among Treasury, OMB, and GAO (as amended):

“These three agencies are the sponsors of FASAB and each appoints one voting member to the

Board.”

FASAB Governance Manual (2023 Edition), Section 2: Identifies Treasury, OMB, and GAO as sponsors

and voting members.

AGA’s “CGFM Study Guide 2,” Chapter 2: Highlights the role of sponsors in the standard-setting

process.

Therefore, Option D is correct.

The city issues $100,000 in general obligation bonds on April 1, 2024, and the first principal payment

of $10,000 is due on March 31, 2025. The interest rate is 5% annually on the unpaid principal

balance.

As of April 1, 2024, the full $100,000 is outstanding. For the full fiscal year (April 1, 2024 to March 31,

2025), interest accrues on the full amount until payment is made. The interest on $100,000 for one

year at 5% =

Interest Expense = $100,000 × 5% = $5,000

Note: Interest is typically calculated on the beginning-of-period balance, and since the payment is

made at the end of the year (March 31, 2025), the full $5,000 interest is recognized for that year.

Relevant Standards and Reference:

GASB Statement No. 34, Basic Financial Statements for State and Local Governments

GASB Codification Section 2200 (Government-Wide Financial Statements)

GFOA Guidance on Long-Term Debt Accounting

The $900,000 paid to the construction manager and $100,000 paid to the architect are capitalized as

part of the building's total cost, totaling $1,000,000.

Using straight-line depreciation over 50 years with the half-year convention:

Annual depreciation = $1,000,000 ÷ 50 = $20,000

Since the half-year convention is used in the year the asset is placed in service, only 50% of the full-

year depreciation is recorded.

Depreciation for the current year = $20,000 × 0.5 = $10,000

However, note: since both amounts ($900,000 + $100,000) were paid during construction and the

school was completed and placed into service this year, the full capitalized amount applies.

GASB and GAAP allow the half-year rule unless the asset was placed into service at the beginning of

the year. In this case, since placed during the year, the half-year rule applies.

Correct depreciation for the first year = $10,000

So, the correct answer is:

Answer : B. $10,000

Explanation:

Correction Note: While option C ($20,000) may seem valid for full-year depreciation, the use of the

"half-year depreciation method" dictates that only half of the full-year amount is expensed in the

first year.

Relevant Reference:

GASB Statement No. 34 – Capital Assets and Depreciation

GFOA Best Practices on Capital Asset Accounting and Reporting

Comprehensive Detailed

According to FASAB's Objectives of Federal Financial Reporting (Statements of Federal Financial

Accounting Concepts, particularly SFFAC No. 1), the four major objectives of federal financial

reporting are:

Budgetary Integrity

Operating Performance

Stewardship

Systems and Control

Mission readiness is not one of the core federal financial reporting objectives under FASAB standards,

although it may be a goal of some federal agencies operationally (e.g., DOD), it is not one of the

defined financial reporting objectives.

Answer : C. mission readiness

Explanation:

Relevant Reference:

FASAB SFFAC No. 1 – Objectives of Federal Financial Reporting

FASAB Handbook of Accounting Standards and Other Pronouncements