GASB Issues Proposals Designed to Improve Government Financial Reports and Establish Recognition Concepts
Norwalk, CT, September 28, 2018—The Governmental Accounting Standards Board (GASB) today issued a Preliminary Views proposing improvements to key components of the financial reporting model. In a separate, related document, the Board also proposed new concepts intended to guide the Board in developing standards on recognition in financial statements.
GASB Chairman David A. Vaudt said: “What the Board ultimately is trying to do through these companion projects is provide better information to financial statement users. These proposals are designed to enhance both the value and clarity of the information reported in financial statements,” he added.
Stakeholders are asked to review and provide input on the proposals contained in the two Preliminary Views by February 15, 2019.
Financial Reporting Model Improvements
The Preliminary Views, Financial Reporting Model Improvements, presents the Board’s current thinking on targeted improvements to the financial reporting model—the blueprint for the annual audited financial report. The proposals are designed to improve the model’s effectiveness in providing information essential to decision making and assessing a government’s accountability.
The proposed improvements include:
- A short-term financial resources measurement focus for governmental funds that recognizes short-term transactions and other events when incurred and long-term transactions and other events when due
- A format for governmental fund financial statements that distinguishes between current and long-term resource flows
- Clarified explanations of operating and nonoperating revenues and expenses
- An additional subtotal in proprietary fund financial statements for operating income (loss) and noncapital subsidies
- Presentation of all budgetary comparison information as required supplementary information and required presentation of two variance columns
- Communication of major component unit information either in the government-wide statements or in combining financial statements
- A new schedule of government-wide expenses by natural classification as supplementary information in comprehensive annual financial reports.
Recognition of Elements of Financial Statements
The Preliminary Views, Recognition of Elements of Financial Statements, presents the Board’s current views on concepts related to recognition of elements of financial statements, such as assets and liabilities.
Recognition concepts encompass two aspects of state and local government financial statements:
- The measurement focus of a specific financial statement determines what items should be reported.
- The related basis of accounting determines when those items should be reported.
The Preliminary Views also proposes a recognition framework for both the short-term financial resources measurement focus (proposed for use in governmental fund financial statements in the companion Preliminary Views) and the economic resources measurement focus (used in government-wide, proprietary fund, and fiduciary fund financial statements).
Issuing the two documents concurrently is intended to provide stakeholders with a conceptual context for how elements of financial statements would be recognized and then to see how those elements would be presented within the financial reporting model.
The documents also contain alternative views to some of the proposals.
Share Your Comments
Written comments should be addressed to the Director of Research and Technical Activities, Project No. 3-25 (Financial Reporting Model Improvements) or Project No. 3-20 (Recognition of Elements of Financial Statements), and emailed to firstname.lastname@example.org.
A series of public hearings and user forums on the Preliminary Views documents are scheduled as follows:
- March 5, 2019, Rosemont, IL
- March 12, 2019, Atlanta, GA
- March 14, 2019, Flushing, NY
- March 6, 2019, Rosemont, IL
- March 14, 2019, Flushing, NY.
About the Governmental Accounting Standards Board
Established in 1984, the GASB is the independent, private-sector organization, based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for U.S. state and local governments that follow Generally Accepted Accounting Principles (GAAP). These standards are recognized as authoritative by state and local governments; state Boards of Accountancy; and the American Institute of CPAs (AICPA). The GASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to taxpayers, public officials, investors, and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the GASB. For more information, visit www.gasb.org.