What You Need to Know:
The Financial Reporting Model Reexamination

The Governmental Accounting Standards Board (GASB) is now considering how to improve the governmental financial reporting model—the blueprint of state and local government financial statements.

Guidance that could be impacted by this project includes Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, and other related pronouncements.

Statement 34 set the contents of financial statements in place today, ushered in important innovations to general purpose external financial reporting, and made it possible to more fully assess a government’s overall financial health.
Issued in 1999, Statement 34 set the contents of financial statements in place today, ushered in important innovations to general purpose external financial reporting, and made it possible to more fully assess a government’s overall financial health.

Why Did the GASB Embark on This Project?


Once Statement 34 was implemented, users of financial statements had access to a comprehensive, big-picture view of a government’s financial health along with information that would allow them to better assess how much it costs each year to provide services.

In recent years, reexamination of the model has become a high priority for the GASB’s primary stakeholders. The Board’s advisory group—the Governmental Accounting Standards Advisory Council—for a number of years ranked reexamination of the financial reporting model as a top priority. The Board added the topic to its slate of pre-agenda research activities in 2013.

In September 2015, the GASB decided that, based upon the results of two years of extensive research, it was important as part of its commitment to maintaining the effectiveness of its standards to reexamine the financial reporting model.

What Are Potential Areas of Improvement?


While the results of the research conducted by the staff indicate that most components of the financial reporting model remain effective, they highlighted a number of areas that could be improved.
While the results of the research conducted by the staff indicate that most components of the financial reporting model remain effective, they highlighted a number of areas that could be improved. The reexamination will consider several key areas of the model, including:
  • Governmental Fund Financial Statements
  • Government-Wide Financial Statements
  • Major Fund Reporting
  • Management’s Discussion and Analysis
  • Budgetary Comparison Information.
In conjunction with this reexamination, the Board’s efforts to develop recognition concepts for information presented in governmental funds have resumed. The GASB’s conceptual framework project on recognition, which had been put on hold pending a decision on whether the financial reporting model should be reexamined, recommenced in October.


What’s Ahead?

The overall objective of the many improvements being considered is to enhance the effectiveness of the financial reporting model in providing information essential for decision-making and assessing a government’s accountability.

The overall objective of the many improvements being considered is to enhance the effectiveness of the financial reporting model in providing information essential for decision-making and assessing a government’s accountability. The project also is intended to address application issues.

One of the primary criticisms of governmental financial reports is they are not available on a timely basis. Over the course of the project, the Board will keep a keen eye out for appropriate changes to the financial reporting model that could positively impact the timeliness of government financial reports.

Depending on how the Board ultimately elects to define the project’s scope, the reexamination may continue into 2021. The Board began deliberations in October 2015 and anticipates issuing an initial due process document for public comment and feedback by the end of 2016.

As always, sharing your views with the Board will be a critical element of a successful outcome in this process.