In year 1, Beech City issued $400,000 of bonds, the proceeds of which were restricted to the financing of a capital project. The bonds will be paid wholly from special assessments against benefited property owners. However, Beech is obligated to provide a secondary source of funds for repayment of the bonds in the event of default by the assessed property owners. In Beechs basic financial statements, this $400,000 special assessment debt should

	Not be reported.
	Be reported in the General Fund.
	Be reported in the government-wide statements only.
	Be reported in a custodial fund.

This Answer is Correct (Answer is: C, be reported in the government-wide statements only.)

This answer is correct. According to GASB Codification Section S40, if a government is obligated in some manner to assume the payment of related debt service in the event of default by property owners, all transactions related to capital improvements financed by special assessments should be reported. These transactions should be reported in the same manner, and on the same basis of accounting as any other capital improvement and financing transaction. Therefore, the debt related to Beechs capital project is treated as general obligation debt and should be reported as any other general obligation debt (i.e., in the government-wide statements only).

Question:

Please explain why the special assessment debt of $400,000 should be reported in the government-wide statements only because I really don't understand the question and answer regardless of the explanation from my review course? Please try to explain as easy and simple as possible so I can understand why this is the answer.