GASB proposes to improve government financial reporting model

The Governmental Accounting Standards Board is proposing a set of improvements in how state and local governments report on their financial condition.

GASB issued the proposals Friday on how to improve some of the main components of government financial reports and asked for the public’s feedback. They are among the first significant proposals issued under GASB’s new chairman, Joel Black, who succeeded longtime chairman David Vaudt on July 1.

The proposals aim to improve the effectiveness of financial reports by providing more information for making decisions and assessing a government’s accountability, while also addressing certain application issues.

The exposure draft includes proposals to establish or modify existing accounting and financial reporting requirements related to the application of the short-term financial resources measurement focus and accrual basis of accounting in governmental funds, replacing the existing current financial resources measurement focus and modified accrual basis of accounting. Other proposals relate to the management discussion and analysis part of the financial statements, the presentation of governmental fund financial statements, as well as the presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position. Other changes deal with unusual or infrequent items, long with budgetary comparison information.

The proposed changes aim to improve financial reporting in different ways. For example, the proposed short-term financial resources measurement focus and accrual basis of accounting might improve the consistency of the information in governmental fund financial statements. The proposed changes to the presentation of governmental fund financial statements would make the short-term nature of the information more obvious and understandable, and more clearly distinguish them from the long-term perspective of the government-wide financial statements.

GASB is asking for input on the exposure draft by Feb. 26, 2021. The board is also planning a series of public hearings and user forums on the proposals in March and April 2021 to allow stakeholders to offer their views. More information can be found in the document.

Courtesy of GASB