GASB to take a fundamental look at financial statements

By Ken Tysiac

GASB will take a fundamental look at the reporting model for state and local government financial statements in an effort that aims to enhance the information available for decision-making and assessing a government’s accountability.

In adding a new project to its technical agenda Tuesday, GASB committed to examining a financial reporting model that was established in 1999 through Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, and subsequent related pronouncements.

“The current model has been fully in effect for a decade,” GASB Chairman David Vaudt said in a news release. “It is an important part of effective standards setting to routinely seek to improve existing standards that have been in effect for some time.”

The board will consider concerns about the complexity of the current financial reporting model and the potential effects on the timeliness of financial reporting, Vaudt said.

The current structure of state and local government financial reporting was established in Statement No. 34, which set the foundation for the format and contents of the basic financial statements, certain related notes to the financial statements, and required supplementary information, including management’s discussion and analysis (MD&A).

One of the most significant additions to the reporting model that resulted from Statement No. 34 was the introduction of governmentwide financial statements including accrual information, which includes the reporting of infrastructure, other capital assets, and long-term liabilities.

GASB’s reexamination will take into account research GASB’s staff has conducted over the past two years with users, preparers, and auditors of governmental financial statements, who have shared views on how the financial reporting model is functioning.

Potential areas of improvement in the model include:

  • MD&A: Options for enhancing the financial statement analysis section of MD&A will be explored. Guidance may be clarified for presenting currently known facts, decisions, or conditions expected to have a significant effect on financial position or results of operations.
  • Governmentwide financial statements: Alternatives will be explored for the format of the statement of activities. GASB will assess whether the value of the information provided by a governmentwide statement of cash flows would outweigh the costs of providing that information.
  • Major funds: GASB will explore options for providing additional information about debt service funds.
  • Governmental fund financial statements: The board will explore a conceptually consistent measurement focus and basis of accounting and develop a related presentation format for governmental fund financial statements.
  • Proprietary fund financial statements: Options will be explored for enhancing the consistency and usefulness of presenting operating and nonoperating revenues and expenses.
  • Budgetary information: GASB will explore options for enhancing the consistency of the presentation method and the value of budgetary information.

GASB will look for opportunities to reduce the complexity of financial statements in each of these areas, which may improve the timeliness of reporting. Deliberations are scheduled to begin in October, and the board expects to issue an initial due process document by the end of 2016.

Ken Tysiac ( is a JofA editorial director.


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