NEWS RELEASE 12/06/11
GASB Proposes Financial Projections for Assessing Economic Condition of Governments
Norwalk, CT, December 6, 2011
—The Governmental Accounting Standards Board (GASB) today proposed that state and local governments should present five-year projections of cash inflows, cash outflows, and financial obligations that would accompany their financial statements as required supplementary information. The objective of this requirement is to better enable taxpayers, bond holders, and other interested parties to assess a government’s financial health.
The GASB is seeking public comment on its proposals, which are outlined in Preliminary Views, Economic Condition Reporting: Financial Projections.
Based on its research and input from financial statement users, preparers, and auditors, the GASB believes that the following information is necessary to assist users in assessing a government’s economic condition:
- Projections of cash inflows and cash outflows, with explanations of the known causes of fluctuations
- Projections of the financial obligations, including bonds, pensions, other postemployment benefits, and long-term contracts, with explanations of the known causes of fluctuations
- Projections of annual debt service payments, including principal and interest Narrative discussion of governments’ dependencies on other governments to provide its services.
“The GASB is issuing this document for public comment because of significant concerns expressed by users of state and local government financial reports regarding the importance of understanding whether governments are on a financially sustainable path,” said GASB Chairman Robert Attmore. “The current economic downturn has emphasized what has been known for a long time: information is not always publicly available regarding the financial challenges facing governments.”
The GASB proposed that financial projections should be (a) based on current policy, (b) informed by historical information, and (c) adjusted for known events and conditions that will affect the government’s finances during the projection periods. Governments would be required to present projections for at least the next five fiscal years. The projections would be reported as required supplementary information following the notes to the financial statements.
The GASB is seeking public comment on the Preliminary Views through March 16, 2012. The full text of the Preliminary Views is available for download at www.gasb.org
The GASB will host two public hearings to obtain feedback on the Preliminary Views from interested individuals and organizations:
- March 29, 2012, 8:30 a.m. PDT, in Los Angeles, California
- April 17, 2012, 8:30 a.m. EDT, in New York City.
More details, including instructions for registering to participate in the hearings, can be found in the front of the Preliminary Views.
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.