GASB fund balance reporting standard gets positive review

By Ken Tysiac

GASB’s standard for fund balance reporting and governmental fund type definitions for state and local governments achieves its purpose, a review panel has found.

The Financial Accounting Foundation (FAF) issued the post-implementation review report Wednesday on GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The standard was issued in 2009 to provide clearer, more structured classifications of fund balances and to clarify the definitions of existing types of governmental funds.

Statement No. 54 introduced five fund balance classifications—nonspendable, restricted, committed, assigned, and unassigned. The standard more clearly defined all five types of governmental funds—general, special revenue, capital projects, debt service, and permanent funds.

After consulting with stakeholders including auditors, preparers, financial statement users, and academics, the review team concluded that Statement No. 54:

  • Succeeded in making fund balance classifications easier to understand and clarifying fund type definitions. Some stakeholders, though, indicated that under the standard it is difficult to distinguish between committed and assigned fund balances.
  • Provided financial statement users with useful information.
  • Is understandable, can be applied as intended, and enables reliable reporting.
  • Did not prompt significant costs for implementation or continuing application.
  • Achieved its expected benefits.

Although all preparers and most auditors participating in the review said information is reported reliably as a result of Statement No. 54, some auditors, financial statement users, and academics disagreed, primarily because they believe the standard has not been applied consistently.

In a letter to the co-chairs of FAF’s Standard-Setting Process Oversight Committee, GASB Chairman David Vaudt said the board will consider the application issues state and local governments have encountered with certain provisions of the standard.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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