GASB reporting model exposure draft.

AuthorGauthier, Stephen
PositionGovernmental Accounting Standards Board

In January, the Governmental Accounting Standards Board (GASB) released its much-awaited exposure draft (ED) on the governmental financial reporting model, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. For the most part, the proposals contained in the ED are closely patterned on those set forth in the GASB's related preliminary views (PV) document that was issued in June 1995.

Conceptual Foundation

The GASB set forth the fundamental objectives of general purpose external financial reporting for state and local governments in GASB Concepts Statement No. 1, Objectives of Financial Reporting. The objectives of GASB Concepts Statement No. 1 are broad, encompassing both operational and fiscal accountability. The GASB has come to believe that the type of information needed to demonstrate operational accountability and the type of information needed to demonstrate fiscal accountability are not necessarily the same. Indeed, the board is persuaded that these objectives are sometimes even at cross purposes, making it difficult to achieve both objectives using a single set of financial statements.

In the GASB's view, operational accountability can be assessed only from the perspective of the overall financial reporting entity and must necessarily focus on flows of economic resources reported using the accrual basis of accounting and depreciation. Conversely, the board believes that fund accounting is essential for assessing fiscal accountability and that governmental funds should continue to focus on flows of current financial resources and should continue to employ the modified accrual basis of accounting. Consequently, at the heart of the ED (like the PV that preceded it) is a proposal for "dual-perspective" reporting. That is to say, the GASB proposes to require that a government present one set of financial statements from the perspective of the government as an overall financial reporting entity and another set for the government's various funds. Both sets of financial statements, or "perspectives," would be of equal importance and essential for fair presentation in conformity with generally accepted accounting principles.

The GASB's goal in proposing dual-perspective reporting is to provide different types of information for different types of financial statement users. Only in this way does the GASB believe that it can realize the financial reporting objectives of GASB Concepts...

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