Reporting model proposal.

• Author: Gauthier, Stephen
• Position: Governmental Accounting Standards Board

In recent years, the Governmental Accounting Standards Board (GASB) has focused its attention on how to improve the framework that state and local governments use to present financial information in their annual reports. Last year, the GASB issued an invitation to comment (ITC) document that outlined two different approaches the board could take toward improving the current financial reporting model. After analyzing the responses it received to the ITC document, the GASB decided to combine features from both of these two approaches into a single financial reporting model. The GASB is now seeking comments on this proposed model by means of a preliminary views (PV) document, The Governmental Financial Reporting Model: Core Financial Statements, which was issued in late June.

Dual Perspective Reporting

Current financial reporting for state and local governments features various "levels" of financial reporting (i.e., combined financial statements, combining financial statements and individual fund financial statements). These various levels of financial reporting all present the same data but at different levels of detail. This process of presenting the same financial information at increasing levels of detail is known as the "pyramid approach."

The GASB proposes in its PV document to eliminate the pyramid approach to financial reporting. Instead of providing the same information at different levels of detail, the GASB proposes that governments be required to present different types of information to meet the needs of different users. Governments would be required to present highly aggregated information from the entity-wide perspective (e.g., just one or two columns for all of a government's activities) to meet the needs of users concerned with a government's operational accountability and interperiod equity. Governments also still would be required to provide information from a fund perspective to meet the needs of financial statement users concerned with a government's accountability for its current financial resources.

It is important to note that under this proposal a government would not be considered to be simply the sum of its funds. That is to say, some of the information reported from the entity-wide perspective (e.g., certain fixed assets and long-term obligations) would not be reported at all from the fund perspective. Therefore, there would be no direct tie between the financial statements reported from the fund perspective and those reported from the entity-wide perspective. Governments would be permitted to present a reconciliation between the entity-wide perspective financial statements and the fund perspective financial statements, but they would not be required to do so. The basic financial statements for both of these proposed perspectives are listed in Exhibit 1.

MFBA

Under current accounting and financial...