What You Need to Know About: Reexamining the Financial
Reporting Model

The Board’s most important pre-agenda research effort is the reexamination of the financial reporting model. The implications are significant because “the model” is the single blueprint that lays out the structure and content of the financial reports issued by state and local governments in the United States.
The implications are significant because “the model” is the single blueprint that lays out the structure and content of the financial reports issued by state and local governments in the United States.


Developing a new model for annual governmental financial reporting was one of the key tasks facing the GASB when it was established 30 years ago. In 1999, after 15 years of research, deliberation, and due process, the Board issued Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. That pronouncement established the required contents of state and local government financial reports: the basic financial statements, notes to the financial statements, and required supplementary information.

Though GASB pronouncements are meant to be durable and effective in all stages of the economic cycle, the Board issues standards with the expectation of reexamining them periodically, and modifying them when necessary, to ensure that they continue to meet their objectives (most notably, providing information that the public needs to make decisions and assess government acountability). The Board looks at the effectiveness of its standards in light of changes in the government environment, considering newly emerged transactions, financial innovations, and the impact of subsequently issued standards. Generally, a major GASB pronouncement should have been fully implemented for at least five years to be appropriately evaluated.

Now that the financial reporting model—Statement 34 and related pronouncements—has been in effect for a sufficient period, the Board has decided to conduct research that will allow it to answer a number of questions: Has the model enhanced the understandability and usefulness of the general purpose external financial report? What parts work best and which need improvement? How is the information in the financial report being used? Have any problems arisen that affect a government’s ability to comply with the standards? How have the costs of applying the standards compared with the benefits?

In late 2013, the staff conducted 11 research roundtables in eight cities across the country and gathered input from some 150 participating auditors, preparers, and users of governmental financial statements. In addition, staff is analyzing nearly 400 annual financial reports prepared by a broad, random sample of governments of differing sizes and types, and staff is reviewing academic and other publications addressing issues relating to Statement 34.

Once the staff has analyzed the information gleaned through these efforts, it will identify what areas require further research and develop separate surveys to gather input from financial statement preparers, auditors, and users. The surveys will be followed by interviews with preparers, auditors, and users to delve deeper into the issues raised in the surveys. Research activities are scheduled to continue through spring 2015. More information on the pre-agenda research on the financial reporting model is available on the GASB website.