NEWS RELEASE 06/26/07

GASB Defines Elements of Financial Statements

Norwalk, CT, June 26, 2007—The Governmental Accounting Standards Board (GASB) has issued Concepts Statement No. 4, Elements of Financial Statements, defining the basic elements of state and local government financial statements. Together, the GASB’s Concepts Statements form a conceptual framework that provides a foundation to guide the Board’s development of accounting and financial reporting standards.

The Board has defined these fundamental building blocks of financial reporting in order to further develop the basic conceptual foundation for considering the merits of alternative approaches to financial reporting, and to help the GASB develop well-reasoned financial reporting standards. The concept of a resource—an item with a present capacity to provide service—is central to the definitions. Accordingly, the new Concepts Statement defines the elements of statements of financial position as:

  • Assets—resources with present service capacity that the government presently controls
     
  • Liabilities—present obligations to sacrifice resources that the government has little or no discretion to avoid
     
  • A deferred outflow of resources—a consumption of net assets by the government that is applicable to a future reporting period
     
  • A deferred inflow of resources—an acquisition of net assets by the government that is applicable to a future reporting period
     
  • Net position—the residual of all other elements presented in a statement of financial position. 

Concepts Statement 4 defines deferred outflows and inflows of resources as distinct financial statement elements for the first time. The Concepts Statement also defines elements of resource flows statements as:

  • Outflow of resources—a consumption of net assets by the government that is applicable to the reporting period
     
  • Inflow of resources—an acquisition of net assets by the government that is applicable to the reporting period. 

“One of the keys to establishing consistently effective standards is building them on a solid conceptual foundation,’’ said Robert H. Attmore, chairman of the GASB. “Definitions of assets, liabilities, and other financial statement elements are cornerstones of that foundation.”

Previous Concepts Statements addressed the objectives of financial reporting, service efforts and accomplishments reporting, and communication methods. The Board’s next Concepts Statement is expected to address recognition and measurement attributes.

Concepts Statement 4 (Product Code GC04) can be ordered through the GASB’s order department at 800-748-0659 or via its website at www.gasb.org.


About the Governmental Accounting Standards Board

The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board's diverse constituency, including preparers and auditors of government financial statements, users of those statements and members of the academic community. More information about the GASB can be found at its website www.gasb.org.