![]() Governmental fund activity is presented using full accrual only in the government-wide financial statements. Accountants call this the “economic resources measurement focus.” All enterprise fund activity is always presented on a full-accrual basis. Full accrualįull accrual (as described above) is consistently reporting the financial effects of activity in the reporting period during which the underlying activity occurred. With GASB’s Statement 34, they essentially created three different ways to illustrate the same information (we call these “basis of accounting”), including full accrual, modified accrual, and budgetary basis. Governments utilizing the GAAP BARS manual can use any bookkeeping method during the fiscal year (often this is a method that enables efficient comparison with budgets), but the annual financial report must conform to GAAP. Instead, GAAP for governments lagged and large pension and OPEB obligations grew without recognition during the related reporting periods. If that had been the case, the future pension obligations, along with what is known as “other post-employment benefits” (OPEB), such as medical benefits, would have been expensed when earned (and when the related service to the community was being performed). Under GAAP reporting, related future payments earned while providing service to the public should be recorded during the fiscal period in which it was earned. A common example (and the topic of much discussion these days) is the extent to which retirement obligations have accumulated while the resources to meet these obligations has lagged. ![]() We recognize utility rate revenues earned during the reporting period regardless of when utility bills were actually invoiced or paid in that same period (We call these accrued revenues and illustrate the outstanding balance due with a “receivable” account).īy consistently reporting the financial effects of activity in the reporting period during which the underlying activity occurred, we are illustrating the impact on the overall economic condition of the entity for that fiscal year. Another example would be recognition of revenues in the reporting period that revenue was earned regardless of when the cash was received - such as billing for utilities. For example, if the agency acquires an asset that will provide service for many years, that asset should be “expensed” over the years for which it will provide service (i.e., “depreciation”). Intent of GAAPĪ focus for GAAP is the effect of activity, which occurs in a given fiscal year regardless of when the financial aspects of this activity actually occur. The Washington State Auditor’s Office (SAO) bases the principles for accounting and financial reporting found in its GAAP guidance on the GASB’s Codification of Governmental Accounting and Financial Reporting Standards. ![]() Established in 1972, the FAF is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut responsible for the oversight, administration, financing, and appointment of the GASB and the Financial Accounting Standards Board (FASB). The Financial Accounting Foundation (FAF) supports and oversees the GASB. The GASB develops and issues accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to taxpayers, public officials, investors, and others who use financial reports. The GASB standards are recognized as authoritative by state and local governments, state Boards of Accountancy, and the American Institute of CPAs (AICPA). state and local governments that follow Generally Accepted Accounting Principles (GAAP). ![]() The GASB website provides the following:Įstablished in 1984, the Governmental Accounting Standards Board is the independent, private-sector organization based in Norwalk, Connecticut, that establishes accounting and financial reporting standards for U.S. Generally Accepted Accounting Principles (GAAP) for government are primarily found in the work of the Government Accounting Standards Board (GASB). Generally Accepted Accounting Principles (GAAP) ![]() The last will evaluate pros and cons to each approach. This article describes the GAAP-reporting option, and the next will discuss the cash-basis reporting option. The first described the authority and context for the two reporting options for Washington local governments. This blog article is the second of a series of four. ![]()
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