Under the standard, state and local governments that have qualifying fundraising foundations would be required to include, through discrete presentations, the financial activities of those foundations in their financial statements. Previously, many governments did not report the financial activities of those foundations in their financial statements.
In commenting on the new standard, GASB Project Manager Ken Schermann stated, "In the present reporting environment, some entities include in their financial statements the balances and transactions of their related fundraising organizations, whereas others either disclose limited information in the notes or provide no information at all. The standard should bring a greater level of comparability to financial reporting."
Statement 39 amends Statement 14 to provide additional guidance to determine whether certain organizations for which the primary government is not financially accountable should be reported as component units based on the nature and significance of their relationship with a primary government.
The standard sets forth criteria on which a government is required to provide a discrete presentation that publishes financial information about its own activities as well as those of the affiliated organization.
Generally, a legally separate, tax-exempt, fundraising organization whose primary purpose is to raise or hold significant resources for the benefit of a specific governmental unit should be included as a component unit of that governmental unit’s financial reporting entity.
The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2003.
Copies of Statement 39 can be ordered through the GASB Order Department by telephoning 800-748-0659 or by placing an order online at www.gasb.org.
About the Governmental Accounting Standards Board (GASB)
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.