Clarifying GASB Statement No. 34: help for preparers and auditors of governmental financial statements.

• Position: Governmental Accounting Standards Board

State and local governments faced a major change in the way they did financial reporting when, on June 30, 1999, the Governmental Accounting Standards Board (GASB) issued GASB Statement No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments. GASB Statement No. 34 established new requirements for U.S. state and local governments that prepare their financial reports in conformity with generally accepted accounting principles (GAAP). The new rules substantially changed the appearance and content of government financial statements.

To help practitioners address the new accounting requirements and related auditing issues, the AICPA developed a new Audit and Accounting Guide, Audits of State and Local Governments (GASB 34 Edition). The Guide addresses the audits of basic financial statements and consideration of required supplementary information (RSI) and other supplementary information (SI) prepared in conformity with the new governmental financial reporting model required by GASB Statement No. 34 and related pronouncements.

The new Guide revises the AICPA's 1994 Audit and Accounting Guide Audits of State and Local Governmental Units (Non-GASB 34). The Non-GASB 34 Guide is updated annually for conforming changes and will remain effective for audits of state and local governments for which the auditor is not required to apply or has not elected to early-apply the new Guide's provisions in accordance with effective date provisions.

New Guide's effective date

The GASB 34 Guide is effective for audits of a state or local government's financial statements for the first fiscal period ending after June 15, 2003, in which the government applies or is required to apply GASB Statements No. 34 or No. 35. The new Guide discusses various issues relating to the transition to the provisions of GASB 34.

The Guide is the result of the efforts of an AICPA task force established in mid-1999. According to Venita Wood, CPA, CGFM, project manager for the task force, "The revision was warranted by the major change in financial statements the governments would be preparing." Since the early 1900s, governments have used a different financial reporting model than the private sector. Accountable for their use of resources, governments used accounting and financial reporting to demonstrate compliance with finance-related legal and contractual restrictions. Accordingly, they used separate funds to segregate financial...