You have to admire the Governmental Accounting Standards Board.In 2007, it will be deliberating some of the trickiest, thorniest accounting issues in contemporary governmental finance.

One of the most challenging of GASB's projects is that of its conceptual framework, the philosophical foundation on which all its other standards will eventually rest.

GASB research manager Terry Patton emphasizes the crucial importance of the project. "The conceptual framework project is the basis for the board to make decisions about the future of financial reporting standards," he said. "Therefore, although it may not seem to be of immediate importance to our constituency, it has important long-term implications."

In August, the board issued proposed definitions of key elements of financial statements, such as assets and liabilities, and concepts that will underlie work on standards in the future. The board is taking an approach that defines each element by its inherent characteristics, rather than deriving definitions from a primary element.

Comments on the proposal were generally supportive, the most common suggestion being a call for more examples to illustrate the concepts. The board hopes to issue a final document by the end of June.

With concepts in elements set, the board plans to move on to recognition and measurement attributes, the concepts that determine what information goes into financial statements. In what could become a very long deliberation, the board will seek a better understanding of the purpose of governmental financial statements.

The deliberations will go on to grapple with historical cost versus fair value measurement - one of the most difficult, controversial and far-reaching issues in accounting today. Though the board hopes to issue an exposure draft by November 2008, any of a number of thorny issues could lead to delays.


Some of the fair value questions are already being broached in a project on derivatives. In a preliminary views document issued back in April of last year, the board proposed that all derivatives be entered in the balance sheet at fair value, with fair value changes being reported as gains and losses in income, except for hedging gains and losses, which would be reported on the balance sheet as deferrals. Redeliberations will continue through early 2007, with an exposure draft due in first quarter.

The board is still receiving comments on an invitation to comment on how well today's fund balance reporting is meeting the needs of investors, creditors, citizens and other users of governmental financial statements. The document suggests ways to improve consistency in the way that governments set aside fund balances for specific purposes. The document suggests various remedies and alternative definitions of fund types and components that would clarify their intentions. The board hopes to propose a new standard on the subject in the second quarter of 2007, with a final statement possible by early 2008.

The board is also wrapping up an exposure draft of a proposed standard on intangible assets - their definition, recognition criteria, measurement and amortization. It will expand on the requirements in Statement 34, Basic Financial Statements and Management's Discussion and Analysis, specifying, essentially, that anything that meets the description of an intangible will be considered a capital asset. The comment period is expected to extend to late March, and a final statement may be issued by June.

The first months of 2007 will also see comment letters on a proposed standard that would require governments to provide enhanced disclosures and supplementary information about pension plans. It should bring current pension disclosure requirements in line with those recently required for other post-employment benefits. The board expects to issue a final statement in May 2007.

GASB is also working on a number of research projects. One is on Phase 2 of the project on economic condition reporting, on additional information that should be included in financial reports or reported separately in a different document. The board expects to discuss the research in the second quarter of 2007.

GASB staff is also researching electronic financial reporting. The board may consider developing a standard for financial reports delivered in that medium. The board may also develop a prototype electronic reporting model.

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