GASB Refreshes Framework for Standard Setting
GASB was established in 1984 as the independent organization that establishes and improves accounting and financial reporting standards for U.S. governmental entities. GASB has developed a framework to guide the standard-setting process that serves two functions: to state the objectives of financial reporting and provide definitions of financial statement elements. The conceptual framework creates a foundation for financial accounting and establishes consistent standards that highlight the nature, function and limitations of financial reporting. Concepts Statements identify the objectives and fundamental principles of financial reporting that can be applied to address numerous accounting and financial reporting issues. They assist GASB in considering the merits of alternative approaches to financial reporting and facilitate the development of well-reasoned accounting and financial reporting standards. Concepts Statements do not prescribe the accounting and financial reporting standards that apply to a particular item or event.
GASB has several long-term projects underway to update the conceptual framework, as well as a substantial overhaul of the financial reporting model and revenue and expense recognition.
In February, GASB released an exposure draft that would update portions of Concepts Statement 3. The proposal defines the criteria for financial statement note disclosure, including:
- The types of information to be disclosed
- The types of information that are not appropriate
- Note disclosure should be essential to financial statement users’ analyses for making decisions or assessing accountability
Comments on this proposal are due by April 17. GASB plans to hold a public hearing on May 17 in New Orleans. Redeliberations will consider comments from these hearings and forums, comment letters and other due process feedback.
While these comprehensive projects are expected to take several years, your comments and input are vital throughout this process, particularly in the early stages.
Conceptual Framework: Recognition
This project will develop recognition criteria for whether information should be reported in state and local governmental financial statements and when that information should be reported.
Financial Reporting Model—Re-Examination of Statements 34, 35, 37, 41 & 46 & Interpretation 6
This project will make improvements to the financial reporting model to enhance the model’s effectiveness in providing information that is essential for decision making and enhance the ability to assess a government’s accountability and address certain application issues.
Revenue & Expense Recognition
The project’s objective is to develop a comprehensive model for the classification, recognition and measurement of revenues and expenses. Guidance will be added to address exchange and exchange-like transactions.
BKD continues to monitor the GASB standard-setting process. Visit our BKD Thoughtware® page on GASB issues to learn more. For more information on how these issues could affect your organization, contact your BKD Trusted Advisor™.