Norwalk, CT, March 26, 2010—The Governmental Accounting Standards Board (GASB) today issued an Exposure Draft (ED) of a proposed Statement, The Financial Reporting Entity, an amendment of GASB Statements No. 14 and No. 34. The proposed Statement is intended to improve guidance for including, presenting, and disclosing information about component units and equity interest transactions of a financial reporting entity.
The proposed Statement is intended to improve financial reporting of component units, which are legally separate organizations that state and local governments include in their financial reports. It would modify the existing criteria for inclusion of organizations that are “fiscally dependent” on a government by adding a requirement that the potential component unit and the primary government also have a financial benefit or burden relationship. In cases where the government determines it would be misleading to exclude an organization that does not meet the financial accountability concept from its financial reports, the proposed Statement would clarify the manner in which that determination should be made.
“Our re-examination of Statement 14 showed that it is generally effective, but that there is a need for greater clarity on certain issues,” states Robert H. Attmore, chairman of the GASB. “This proposed Statement would enhance the public’s ability to assess accountability by ensuring that a government’s financial report includes all of the appropriate organizations and by enhancing consistency and comparability across governments.”
The proposed Statement also would amend the criteria for “blending,” or the reporting of component units as if they were part of the primary government. Finally, it would clarify the reporting of equity interests in legally separate organizations. Provisions of the proposed Statement would be effective for financial statements for periods beginning after June 15, 2012, with earlier application encouraged.
GASB constituents are asked to review the ED and provide written comment by June 30, 2010. The ED may be downloaded from the GASB’s website at www.gasb.org. Instructions on how to submit comments are contained in the ED.
The GASB plans to have a public hearing at its regular meeting on August 3, 2010, beginning at 1 p.m. at its offices in Norwalk, Connecticut. Interested parties may attend in person or participate by telephone. Details on how to participate are available at www.gasb.org.
About the Governmental Accounting Standards Board
The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board’s diverse constituency, including preparers and auditors of government financial statements, users of those statements, and members of the academic community. More information about the GASB can be found at its website www.gasb.org.