In September 2018,the Governmental Accounting Standards Board (GASB) issued two preliminary views (PV) documents, Financial Reporting Model Improvements and Recognition of Elements of Financial Statements. The first is a follow up to the invitation to comment (ITC) on the same project, issued in 2016. That project grew out of a reexamination of the current financial reporting model, which was put in place by GASB Statement No. 34, Basic Financial Statements--and Management's Discussion and Analysis --for State and Local Governments, issued nearly 20 years ago. The second PV reexamines part of a conceptual framework PV from 2011, the remaining part of which went on to become GASB Concepts Statement No. 6, Measurement of Elements of Financial Statements. This article will provide an overview of the financial reporting "conceptual framework" for U.S. state and local governmental entities, and then look ahead to what may be on its way.
The GASB develops concepts statements in order to:
* Identify the objectives and fundamental principles of financial reporting.
* Provide the Board with the basic conceptual foundation for considering the merits of alternative approaches to financial reporting and help the GASB develop well-reasoned accounting and financial reporting standards.
* Assist preparers, auditors, and users in better understanding the fundamental concepts underlying accounting and financial reporting standards. (1)
To date, the GASB has issued six concepts statements, and two more are visible on the horizon (the first of those being the Recognition PV already mentioned). The existing concepts statements address:
Objectives of Financial Reporting.
Service Efforts and Accomplishments (superseded by Concepts Statement No. 5).
Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements.
Elements of Financial Statements.
Service Efforts and Accomplishments Reporting (an amendment of Concepts Statement No. 2).
Measurement of Elements of Financial Statements.
This discussion will not focus on the service efforts and accomplishments concepts but will discuss GASB Concepts Statements Nos. 1, 3, 4, and 6, as well as what may become Statements Nos. 7 and 8.
Concepts Statement No. 1, Objectives of Financial Reporting (Cons. 1) established general purpose external financial statements (GPEFS) and the general purpose financial statements and supplementary information that comprise them, and, as the purview of the GASB, distinguishing GPEFS from other kinds of financial reports such as budgets and reports to grantors. Cons. 1 identifies accountability as the primary purpose of GPEFS and citizens, legislative and oversight bodies, and investors and...