The User's Perspective

May 2006

What Is the GASB Doing Now?

            The major projects on the GASB’s current technical agenda are described briefly below, along with their likely impact on the information you find in state and local government financial reports, when you can expect the GASB to publish draft documents and final standards, and who to contact at the GASB with questions. (Phone numbers and email addresses for all GASB staff can be found at the GASB Web site,

Sales and Pledges of Receivables and Future Revenues

            Some governments were having difficulty determining if certain transactions should be considered a sale of receivables or future revenues, as opposed to the pledging of receivables or future revenues against borrowed amounts that must be repaid. The GASB proposed in 2005 that such transactions be treated as borrowings unless they meet certain conditions. Significant among these conditions is that, to be considered a sale, a government should not have any continuing active involvement in the receivables or revenues.

            Impact on the financial report: The differences between a sale and a borrowing are significant. A borrowing would result in a liability being reported in the financial statements, and the resources the government receives from the transaction would not be considered revenues. An outright sale of a receivable would result in gain or loss in the statement of activities but would also remove the sold asset from the books. The project will also resolve issues related to sales and borrowings within a government. For example, if a government sells a future revenue stream to a blended component unit (the finances of which are combined with those of the primary government), should that lead to recognizing an asset, considering that the primary government could not report the future revenue as an asset?

            Key dates: A final Statement is planned for the third quarter of this year.

            Lead staff: Ken Schermann.


            This project is considering if and how to report a government’s derivatives in its financial statements. It is also dealing with potential improvements to the information that governments disclose in the notes about their derivatives. (See the article about the derivatives project in this issue.)

            Impact on the financial report: Most derivatives are not currently reported in the financial statements, yet they represent potential resources a government could draw upon or claims against a government’s resources. Putting them in the financial statements would more accurately reflect a government’s financial health and annual bottom line. More useful information in the notes would help the public better understand the nature of these largely-unknown financial arrangements and their inherent risks.

            Key dates: The GASB published a proposal in the form of a Preliminary Views document on April 28. It was accompanied by a plain-language supplement written for financial statement users and other non-accountants. The public comment deadline is July 28. In the interim, the GASB is conducting events to give the public opportunities to offer feedback. Details can be found in this issue’s article on derivatives and in the documents.

            Lead staff: Randy Finden.

Conceptual Framework—Financial Statement Elements

            Concepts projects do not establish standards; they provide a foundation to guide future standards-setting by the Board. The project is intended to lead to the GASB’s fourth Concepts Statement, which would set forth definitions of the building blocks of financial statements, such as assets, liabilities, and inflows and outflows of resources.

            Impact on the financial report: Minimal, at least at first. However, once published, the Concepts Statement will inform the Board’s future decisions about the standards it sets. The definition of a liability, for example, will influence the Board’s decisions about what obligations to require governments to report in the financial statements.

            Key dates: An Exposure Draft is scheduled to be released in the third quarter of 2006, with a final document due six to nine months later.

            Lead staff: Roberta Reese.

Fund Balance Reporting

            Another article in this issue describes some of the reporting issues associated with fund balance, one of the most widely used pieces of information in the entire financial report. The GASB is exploring solutions to the reporting issues that have arisen and has tentatively decided to issue an Invitation to Comment (ITC) containing alternative methods of reporting fund balance that may better meet the public’s information needs.

            Impact on the financial report: Very significant. Fund balance information is a staple of analysis for a broad range of people from rating agency analysts to city council staff, public employee unions to taxpayer advocates. The project could ultimately lead to changes ranging from improvements in the current categories of fund balance to an entirely new approach to reporting it.

            Key dates: The GASB is developing the ITC, which is scheduled to be issued in the fourth quarter of 2006 with a 90-day comment period. Proposed standards are tentatively scheduled to be published for public comment in the second quarter of 2007, leading to a final standard in the first quarter of 2008.

            Lead staff: Ken Schermann, Dean Mead.

Pollution Remediation Obligations

            When a government faces a potential obligation to clean up pollution, should a liability be reported in relation to that obligation? What cleanup costs should be reported in the financial statements? This project has developed a set of circumstances that would lead a government to calculate those costs and liabilities and has proposed a method, the expected cash flow technique, for measuring them.

            Impact on the financial report: The Board’s proposals would result in pollution cleanup liabilities being reported in the financial statements sooner and, in many cases, in larger amounts than under current standards.

            Key dates: This project has proceeded in two stages. A Preliminary Views document was issued for public review in 2005. After analyzing and responding to the comments it received, the GASB published proposed standards earlier this year. The comment period ended May 1. The Board will begin to review the public comments at its May 31–June 2 meeting and tentatively plans to issue a final statement by the end of 2006.

            Lead staff: Wes Galloway.

Intangible Assets

            When governments began to report capital assets in their financial statements, under Statement 34, they were faced for the first time with the prospect of having to report intangible assets. However, the GASB did not have standards for identifying and valuing intangibles. This project is intended to fill that void.

            Impact on the financial report: This project would bring many of this type of asset onto the financial statements for the first time, which could improve a government’s financial position (as measured by net assets) and increase its annual expenses (if the value of intangible assets is depreciated or amortized).

            Key dates: The GASB began deliberations on this project in April. Proposed standards are scheduled for the fourth quarter of 2006 and a final standard is planned for the second quarter of 2007.

            Lead staff: Greg Driscoll.

Conceptual Framework—Recognition and Measurement Attributes

            The Elements project defines what assets, liabilities, and other financial statement items are, and this project will establish overarching principles to guide decisions about whether they should appear in the statements and when, as well as about how the number that is reported should be determined—for example, fair value versus historical cost.

            Impact on the financial report: As with the Elements project, the initial impact should be minimal. However, future decisions about accounting and financial reporting requirements will be influenced by it. In general, a more clearly specified conceptual framework should lead to better and more consistent standards, which should produce more useful and usable information in financial reports.

            Key dates: The Board is scheduled to begin deliberations on this project in October. An Exposure Draft is tentatively expected to be released for public comment in the first quarter of 2008, leading to a final Concepts Statement a year later.

            Lead staff: Terry Patton.