From the Chairman's Desk
By David A. Vaudt, GASB Chairman

Reexamining the Financial Reporting Model


I want to share some thoughts with you about the most significant pre-agenda research effort currently underway at the GASB, the potential reexamination of the financial reporting model.

The financial reporting model is the blueprint that provides the structure and content of state and local government financial reports in the United States.
As you know, the financial reporting model is the blueprint that provides the structure and content of state and local government financial reports in the United States.

In this column, I’ll offer my perspective on what the Board is looking into, why it’s important to do that, and why this is the right time to begin the process.

Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, was issued in 1999 after 15 years of research, deliberation, and due process. That pronouncement established the required contents of state and local government financial reports.

The required contents include the basic financial statements, notes to the financial statements, and required supplementary information, including Management’s Discussion and Analysis. Because it represented a significant departure from current practice at the time, not everyone was overly enthusiastic about implementing Statement 34, and certainly it is true that there was additional work necessary to comply.

Now that the financial reporting model has been in effect for several years, enough time has passed for all stakeholders to be well acquainted with both its strengths and its weaknesses.
Now that the financial reporting model has been in effect for several years, enough time has passed for all stakeholders to be well acquainted with both its strengths and its weaknesses. It is therefore an appropriate time to revisit the financial reporting model standards to see if they are meeting their stated objectives and providing information for decision making and assessing accountability.

The intention here is to determine if we can make the financial reporting model better. Are there improvements that could be made? Are there opportunities to make it more effective?
The intention here is to determine if we can make the financial reporting model better

If you have heard anyone say, “They’re going to get rid of this,” or “They’re adding a whole new section that does this,” allow me to set your mind at ease: No decisions of any kind regarding changes have been made. It is simply far too early for anything like that to be considered.

I can tell you that, from a procedural standpoint, a reexamination of the financial reporting model would closely follow the FAF Post Implementation Review Process, which in essence means that we began with a review of our project archives, studied all relevant academic and other research, and are now engaged in the stakeholder input stage.

To begin gathering this input, the staff conducted 11 research roundtables in 8 cities around the country with stakeholders from general purpose and special-purpose governments.

Using the feedback from the roundtables, a survey was developed for preparers, which has since been administered. A survey for auditors is now underway; a survey for governments using the modified approach to report their infrastructure assets is scheduled to take place beginning in August; and a survey for users is scheduled to take place beginning in September.
If you have ideas about how the financial reporting model can be made more effective or otherwise improved going forward, please share your thoughts with us.

Once we’ve analyzed what we’ve heard from survey participants, we’ll develop an interview protocol and conduct in-depth interviews with stakeholders over the first half of 2015.

In closing, if you have ideas about how the financial reporting model can be made more effective or otherwise improved going forward, please share your thoughts with us.

View an article on the financial reporting model that appeared in the first issue of the GASB Outlook.


David A. Vaudt
GASB Chair