What are the two distinct sets of financial statements that GASB 34 requires?
|
The Governmental Accounting Standards Board issued Statement No. 34, creating a new accrual-based financial reporting model. This study examines whether information from this model is associated with the default risk (a proxy for fiscal distress) of municipal governments and whether this information is incremental to that provided by the fund-based, modified-accrual reporting model. Ordered logistic regressions are used to analyze financial data from 2005 for a sample of 409 municipalities that participated in the Government Finance Officers Association award program. This study extends the work of Plummer et al. (2007) to municipal governments. In addition to the financial position indicator variable (total net assets/total revenues) examined by Plummer et al. (2007), this study provides evidence of the relevance of three other financial indicators (change in net assets/total net assets; total liabilities/total assets; and current assets/current liabilities). We also find that these accrual-based indicators provide information incremental to the fund-based model and that one fund-based measure (total fund balances/total fund revenues) also provides information incremental to the accrual indicator. These results are consistent with perceptions of regulators and others who expect accrual accounting to be a better measure of the economic costs of running a government than the traditional fund-based model. Show
Data Availability: Contact the authors. GASB 34 is a set of accounting standards established by the Government Accounting Standards Board which requires government entities to report the value of their capital assets on their financial statements. The Governmental Accounting Standards Board (GASB) oversees and works to improve government-related accounting and financial reporting. History of GASB 34GASB Statement No. 34 was created in June 1999, and its standards are currently voluntary. However, some states and municipalities may integrate GASB standards into state or local laws. Purpose of GASB 34GASB standards have been revised in order to make governmental financial reports easier to read as well as ensure that the data provided in the reports were useful to all those using them. Visualize financial viabilityFor government organizations, GASB 34 standards should provide a clearer picture of the organization’s financial viability, Predict financial accounting requirementsGASB 34 helps to predict future financial reporting requirements. Improve the quality of services delivered to the publicGASB 34 standards ensure the transparency of all spending by states, cities, towns, villages, school districts, and public utilities. Thus, increased public insight democratizes governmental financial activities. GASB 34 RequirementsGASB 34 lays out the financial statements that government entities should provide for review. This includes required supplementary information, including budgetary comparison schedules, as well as financial data for enterprise and internal service funds. Accrual based accounting systemGASB 34 sets forth several requirements including an accrual-based accounting system where expenses and revenues are recorded on basic financial statements in the same fiscal year they occur. Asset management and reportingOrganizations also need to report the value of infrastructure assets and deferred maintenance costs, which can be easily tracked in a CMMS system. Although this data is valuable for transparency to taxpayers, this reporting model is also critical in helping any organization gauge ongoing maintenance requirements. By understanding the complete costs associated with deferring maintenance, government officials may be able to make a better case for raising governmental funds to invest in preventive or predictive maintenance activities. Governmental funds are reported as incomeFinally, GASB 24 requires that things like federal grants are recorded as income. Although all governmental accounting requires reporting of income, including contributed capital will make it more challenging for government organizations to increase rates or tax contributions. Reasons to Adhere to GASB 34 StandardsAdhering to GASB 34 reporting standards also helps organizations earn a good credit rating, which can assist leadership in obtaining loans, low interest rates, needed bonds, or other sources of financial support. GASB FAQsWhat does GASB stand for?Governmental Accounting Standards Board (GASB) Who uses GASB 34 ?Government officials within states, cities, towns, villages, school districts, and public utilities use GASB 34. Why is GASB 34 important?The goal of GASB 34 was to improve financial transparency within state and local governments fiscal reports. The GASB 34 increases governmental accountability by allowing citizens to participate in deciding operating budgets of state and local governments. What is the difference between GASB and FASB?Whereas the GASB focuses on the government and its agencies, the FASB includes public companies in the United States. The FASB establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). Both the GASB and FASB increase public transparency into the financial statements of trusted institutions, however, they differ in their scope. What are the two government wide financial statements required by GASB statement 34?Required governmental fund statements are a balance sheet and a statement of revenues, expenditures, and changes in fund balances. Required proprietary fund statements are a statement of net assets; a statement of revenues, expenses, and changes in fund net assets; and a statement of cash flows.
What does GASB 34 require?GASB 34 Requirements
GASB 34 lays out the financial statements that government entities should provide for review. This includes required supplementary information, including budgetary comparison schedules, as well as financial data for enterprise and internal service funds.
What financial statements are required for governmental funds?The financial statements used to present governmental funds are:. Government-wide financial statements: Statement of net position. Statement of activities.. Fund financial statements: Balance sheet. Statement of revenues, expenditures and changes in fund balances.. What is the purpose of GASB 34?GASB 34 provides a comprehensive framework for financial reporting with the objective of making annual reports easier to understand and more useful to the people who rely upon the financial condition contained therein.
|
