The GASB issues

New Accounting Proposals

T he Governmental Accounting Standards Board issued a proposal on the accounting and financial reporting for nonexchange transactions. Such transactions occur when governments give or receive something of value and do not directly receive or give something of equal value in return, such as certain taxes, grants, contributions or donations. Comments on the proposal, Accounting and Financial Reporting for Nonexchange Transactions, are due by June 20 .

According to Penny Wardlow, GASB research manager, little guidance currently exists on the accrual basis of accounting for nonexchange transactions. She also said the financial reporting standards for such transactions were limited in scope and needed clarification. To make recognition easier, the GASB grouped nonexchange transactions into four classes:

1. Derived tax revenues . These include taxes imposed on exchange transactions, such as sales and personal and corporate income taxes.
2. Imposed nonexchange revenues . These include taxes other than those imposed on exchange transactions, such as property taxes and fines.
3. Government-mandated nonexchange transactions . These occur when a government at one level provides resources to a government at another level and requires that government to use the resources for a specific purpose, such as federal programs that state or local governments are mandated to perform.
4. Voluntary nonexchange transactions . These result from legislative or contractual agreements entered into willingly by two or more parties, such as certain grants or private donations.

Wardlow said the proposed standards would force governments to analyze the substance of a transaction rather than pay attention only to its label. “It also would solve the problem of having different governments around the country use different terms for the same thing,” said Wardlow. For example, she said franchise taxes were not really taxes but, rather, they were exchange transactions. “Just because something is called a fee doesn’t mean that in substance it cannot be a nonexchange transaction,” said Wardlow.

The proposal will go hand in hand with the GASB’s new financial reporting model proposal that was issued in January (see JofA, Apr.97 ). “If the new model is finalized, all governments will have to prepare entitywide financial statements that include accounting for nonexchange transactions,” said Wardlow. “We are hoping people will consider this proposal while they look at the new reporting model exposure draft because it covers an important part of what their new financial statements would look like under full accrual accounting.” Public hearings on accounting for nonexchange transactions will coincide with hearings on the new reporting model. The proposed effective date is June 15, 2000.

One copy of the exposure draft is available without charge until the comment deadline from the GASB order department by calling 203-847-0700, ext. 555.