GASB Standard on Fund Balance Reporting Worked Well

A 2009 accounting standard that state and local governments have been using for reporting on their fund balances and fund types has mostly achieved its original purpose, according to a new report.

The report, from the Financial Accounting Foundation, described a post-implementation review of the Governmental Accounting Standards Board’s Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions.

GASB Statement 54 aimed to improve the usefulness of information in financial reports about fund balances by providing clearer, more structured fund balance classifications, and by clarifying the definitions of existing governmental fund types.

The post-implementation review team concluded that overall, Statement 54 resolved the main issues underlying its stated need by introducing easier to understand fund balance classifications and clarified fund type definitions. While some of the feedback indicated it was still difficult to distinguish between committed and assigned fund balances, the 2009 standard was still considered to be an improvement over the prior literature.

Statement 54 also provided users of financial statements with more decision-useful information, according to those surveyed. They found the standard to be understandable, and it could be applied as intended, allowing fund balance and governmental fund type information to be reported reliably.

The report also found the changes made to financial and operating practices as a result of the standard were not significant or unexpected. There were no significant unanticipated consequences as a result of its adoption. Overall, implementation and continuing application costs associated with the standard were not significant and were consistent with the GASB’s expectations. Overall, the report found, Statement 54 achieved its expected benefits. 

“The PIR process has provided some important stakeholder feedback on the benefits and costs of Statement 54 in light of actual experience in using and preparing the information,” said GASB Chairman David A. Vaudt in response to the PIR report. “On behalf of the GASB, I would like to thank the Foundation for undertaking this important process and all of the individuals and organizations who gave their time to share their insights and experiences with the PIR staff.”

The next post-implementation review of a GASB standard is not expected not be conducted for a few years because the PIR team has completed all the reviews it has planned of significant GASB standards that have been effective for at least two years.

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