NEWS RELEASE 08/14/06

Proposed GASB Concepts Statement Defines the Seven Elements of Governmental Financial Statements 

Norwalk, CT, August 14, 2006—The Governmental Accounting Standards Board (GASB) today proposed its fourth Concepts Statement, Elements of Financial Statements, defining the seven elements of governmental financial statements. When considered collectively, Concepts Statements form the GASB’s conceptual framework which provides a foundation to guide the Board’s development of accounting and financial reporting standards.

In order to develop a conceptual framework appropriate for the government environment, the Board needs to define even the most basic building blocks of financial reporting. A central feature of each of the proposed definitions of elements is a resource, which is an item with a present capacity to provide service. Accordingly, today’s proposal defines the elements of statements of financial position as:

  • Assets—resources the entity presently controls
     
  • Liabilities—present obligations to sacrifice resources or future resources that the entity has little or no discretion to avoid
     
  • A deferred outflow of resources—a consumption of net resources by the entity that is applicable to a future reporting period
     
  • A deferred inflow of resources—an acquisition of net resources by the entity that is applicable to a future reporting period
     
  • Net assets—the residual of all other elements presented in a statement of financial position.

Today’s proposal also defines elements of resource flows statements as:

  • Outflow of resources—a consumption of net resources by the entity that is applicable to the reporting period
     
  • Inflow of resources—an acquisition of net resources by the entity that is applicable to the reporting period.

“Today’s proposed Concepts Statement reflects our ongoing commitment to develop a more robust conceptual framework that can better guide the Board in its decision making, promote high-quality accounting standards, and make the process for developing those standards more consistent,” said Robert H. Attmore, chairman of the GASB. “Moreover, an improved framework will also aid financial statement preparers and auditors as they evaluate transactions for which there are no existing standards.”

The proposed Concepts Statement would be the GASB’s fourth to date. In May 1987, the Board issued Concepts Statement No. 1, Objectives of Financial Reporting. In April 1994, GASB issued Concepts Statement No. 2, Service Efforts and Accomplishments Reporting. In April 2005, GASB issued Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements.

The Board expects to soon begin work on a fifth Concept Statement focusing on recognition and measurement attributes.

The GASB is currently seeking constituent comment on the proposed Concepts Statement, Elements of Financial Statements. The comment deadline is November 17, 2006. The GASB will also be conducting a public hearing in association with this project its regular meeting on November 30, 2006, beginning at 1 p.m. in Norwalk, CT. The public may participate in person or over the telephone.


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.