A Bold Step Forward

TL;DR: The Governmental Accounting Standards Board (GASB) Statement 34, "Basic Financial Statementsand Management's Discussion and Analysis-for State and Local Governments," is the most significant government accounting standard issued since the 1930s as mentioned in this paper.

Abstract: The Governmental Accounting Standards Board (GASB) Statement 34, "Basic Financial Statementsand Management's Discussion and Analysis-for State and Local Governments," is the most significant government accounting standard issued since the 1930s. The statement replaces the current general purpose financial statements with an integrated set of fund-based and government-wide financial statements. Two types of changes are made by Statement 34. Some changes refine and improve financial statements that governments have issued for more than two decades. The other changes are the requirements for new, government-wide financial statements and management's discussion and analysis. The management's discussion and analysis is required supplementary information that precedes the financial statements and provides an analytical overview of the statements. In essence, it is a highly structured, detailed letter of transmittal. All of the financial statements required by Statement 34 are listed below. Except for the governmental fund statements, the financial statements are presented using the flow of economic resources (revenue and expense) measurement focus and accrual basis of accounting. The governmental fund statements are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. The eight fundbased statements and two governmentwide statements are: Fund-Based Financial Statements Governmental funds (Figure 1) * Statement of net assets (balance sheet) * Statement of revenues, expenditures and changes in fund balances * General fund and major special revenue funds, statement of revenues, expenditures and changes in fund balances-budget and actual. (Alternatively, the budgetary comparison statement may be presented as required supplementary information.) Proprietary funds (Figure 2) * Statement of net assets (balance sheet) * Statement of revenues, expenses and changes in net assets * Statement of cash flows (direct method required) Fiduciary funds and fiduciary component units (Figure 3) * Statement of net assets (balance sheet) * Statement of changes in net assets Government-wide Financial Statements Government-wide statement of net assets (Figure 4) Government-wide statement of activities (Figure 5) Fund-Based Financial Statements The essentials of the fund-based financial statements are illustrated in Figures 1-3; those of the governmentwide statements are illustrated in Figures 4 and 5. In reviewing the fund-based statements, observe the most notable differences between these statements and the combined statements required by current generally accepted accounting principles (GAAP): * A distinct set of financial statements is presented for each fund category. * The presentation of major (the most significant) individual governmental funds (rather than fund types) and of major individual enterprise funds. * The replacement of the proprietary fund equity classifications--contributed capital and retained earnings-with new classifications: invested in capital assets, net of related debt, restricted net assets and unrestricted net assets. * Net income is not presented for proprietary funds * Transfers are not distinguished as operating or residual equity, but are treated alike. * The direct method of reporting cash flows from operating activities is required. In addition, significant changes are made to the fund structure used by governments and the fund-based statements and government-wide statements are reconciled to achieve an integrated reporting model. Government-wide Statements The government-wide financial statements report data in separate columns for governmental activities, businesstype activities, and the primary government totals and discretely presented component units totals. …