Government Accounting

GASB issued Concepts Statement no. 4, Elements of Financial Statements, which defines the basic elements of state and local financial statements. Integral to the definitions is the concept of a resource as an item with a present capacity to provide service. The statement defines the elements of statements of financial position as:

  Assets —resources with present service capacity that the government presently controls.

   Liabilities —present obligations to sacrifice resources that the government has little or no discretion to avoid.

   Deferred outflow of resources —a consumption of net assets by the government that is applicable to a future reporting period.

   Deferred inflow of resources —an acquisition of net assets by the government that is applicable to a future reporting period.

   Net position —the residual of all other elements presented in a statement of financial position.


Concepts Statement no. 4 also defines deferred outflows and inflows of resources as distinct financial statement elements for the first time. The statement may be ordered at or by calling 800-748-0659.

An increase in the number and dollar amounts of governmental derivative contracts has led GASB to propose new reporting standards for state and local governments. GASB said the ED, Accounting and Financial Reporting for Derivative Instruments, would make derivatives transactions more transparent to the public by requiring that the fair values of all derivatives be reported as assets or liabilities in financial statements.

“Governments engage in derivatives transactions primarily to minimize identified financial risks they face, but those derivatives may themselves expose governments to other risks,” GASB Chairman Robert Attmore said in a statement. “To understand the inherent risks that derivatives pose to the financial health of governments, the public needs the improved information this proposal would require.”

The ED and a plain-language supplement that summarizes the proposed standards are available at Comments are requested by Oct. 26.


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