GOVERNMENTAL ACCOUNTING STANDARDS BOARD

The Governmental Accounting Standards Board (GASB) was organized in 1984 under the auspices of the Financial Accounting Foundation to establish financial accounting and reporting standards for state and local government entities. These standards are important because external financial reporting can demonstrate financial accountability to the public. They are the basis for many legislative and regulatory decisions, as well as investment and credit policies. The foundation is responsible for selecting the seven members of GASB and its Advisory Council, funding their activities, and exercising general oversight. Except for the chairperson of GASB, all members are part time.

GASB's mission is to establish and improve standards of state and local governmental accounting and financial reporting that will (1) result in useful information for users of financial reports and (2) guide and educate the public, including issuers, auditors, and users of those financial reports. To accomplish its mission, GASB acts to:

1. Issue standards that improve the usefulness of financial reports based on (a) the needs of financial report users, (b) the primary characteristics of understandability, relevance, and reliability, and (c) the qualities of comparability and consistency
2. Keep standards current to reflect changes in the governmental environment
3. Provide guidance on implementation of standards
4. Consider significant areas of accounting and financial reporting that can be improved through the standard-setting process
5. Improve the common understanding of the nature and purposes of information contained in financial reports

GASB formulates and uses concepts to guide them in the development of their standards. These concepts provide a frame of reference for resolving accounting and financial reporting issues. This framework helps to establish reasonable bounds for judgment in preparing and using financial reports; it also helps the public understand the nature and limitations of financial reporting. GASB actively solicits and considers the views of its various constituencies on all accounting and financial reporting issues. GASB's activities are open to public participation and observation under due process procedures. These procedures are designed to permit timely, thorough, and open study of accounting and financial reporting issues. Consequently, broad public participation is encouraged in the accounting standard-setting process, which permits communication of all points of view and expressions of opinion at all stages of the process. Use of these procedures recognizes that general acceptance of the GASB conclusions is enhanced by demonstrating that the comments received during due process are considered carefully.

GUIDING PRINCIPLES

In establishing concepts and standards, the GASB exercises its judgment after research, due process, and careful deliberation. Some of the principles used by GASB are:

1. To be objective and neutral in its decision making. This principle ensures, as much as possible, that the information resulting from its standards is a faithful representation of the effects of state and local government activities. Objective and neutral means freedom from bias, precluding GASB from placing any particular interest above the interests of the many who rely on the information contained in financial reports.
2. To weigh carefully the views of its constituents in developing concepts and standards. This permits GASB to (a) meet the accountability and decisionmaking needs of the users of government financial reports and (b) gain general acceptance among state and local government preparers and auditors of financial reports.
3. To establish standards only when the expected benefits exceed the perceived costs. GASB strives to determine that proposed standards (including disclosure requirements) fill a significant need and that the costs they impose, compared with possible alternatives, are justified when compared to the overall public benefit.
4. To consider the applicability of its standards to the separately issued general-purpose financial statements of governmentally owned special entities. GASB specifically evaluates similarities of special entities and of their activities and transactions in both the public and private sectors, and the need, in certain instances, for comparability with the private sector.
5. To bring about needed changes in ways that minimize disruption of the accounting and financial reporting processes. Reasonable effective dates and transition provisions are established when new standards are introduced. GASB considers it desirable that change should be evolutionary to the extent that can be accommodated by the need for understandability, relevance, reliability, comparability, and consistency.
6. To review the effects of past decisions for appropriateness. This permits continual interpretation, amendment, or replacement of standards, when deemed necessary.

PUBLICATIONS

As of December 31, 1998, more than thirty financial accounting and reporting standards had been issued since GASB's inception. A standard pertaining to a new financial reporting model for state and local governments has been exposed and is expected to be issued in 1999 with an effective date in 2001. Copies of these standards, along with other GASB publications, can be obtained from the GASB offices at 401 Merritt 7, P.O. Box 5116, Norwalk, Connecticut 06856-5116, (203) 847-0700, or http://www.gasb.org. GASB's Web site is a subpart of the FASB (Financial Accounting Standards Board) Web site.

OTHER FINANCIAL ACCOUNTING AND REPORTING STANDARD-SETTING BODIES

Additional standard-setting bodies for the public sector are:

1. The Federal Accounting Standards Advisory Board (FASAB) was established in 1990 by three U.S. government principals: the Comptroller General, the Director of the Office of Management and Budget, and the Treasurer. FASAB's primary function is to make recommendations to the principals for financial accounting and reporting standards to be adopted for the U.S. federal government. More information is available from FASAB at 441 G Street NW, Suite 6814, Washington, D.C. 20548, (202) 512-7350, or http://www.fasab.gov.
2. The Public Sector Committee of the International Federation of Accountants (IFAC-PSC) assumed responsibility in 1998 for developing a set of financial reporting standards to be adopted worldwide by public sector entities. More information is available from IFAC-PSC at 545 Fifth Ave., 14th floor, New York, NY, (212) 286-9344, or http://www.ifac.org.

Standard-setting bodies for the private sector are:

1. The Financial Accounting Standards Board (FASB) also falls under the auspices of the Financial Accounting Foundation. Its responsibilities are to set the financial accounting and reporting standards to be applied by U.S. businesses. FASB is co-located with GASB in Connecticut and their Web site is http://www.fasb.org.
2. Financial accounting and reporting standards recommended for use by businesses throughout the world are established by the International Accounting Standards Board (IASB). More information is available from IASB at Cannon Street, London EC4M 6XH, United Kingdom; +44 20 7246 6410, or http://www.iasplus.com.

see also Government Accounting; Government Financial Reporting

bibliography

Codification of Governmental Accounting and Financial Reporting Standards as of June 30, 1998 (1998). Norwalk, CT: Governmental Accounting Standards Board of the Financial Accounting Foundation.

Freeman, Robert J., Shoulders, Craig D., and Allison, Gregory S. (1996). Governmental and Nonprofit Accounting: Theory and Practice (8th ed.) Upper Saddle River, NJ: Pearson Education Inc.

Wilson, Earl R., and Kattelus, Susan C. (2004). Accounting for Governmental and Nonprofit Entities. New York: Irwin/McGraw-Hill.

Jesse W. Hughes