Financial Reporting Model Reexamination

What Is the Financial Reporting Model Reexamination?

In September 2015, the GASB added a project to its agenda to reexamine the blueprint of state and local government financial reporting. The project is meant to result in improvements to the financial reporting model, including Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, and other related pronouncements.

When it was issued in 1999, Statement 34 set the formats and measurement focuses 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.

The Statement also introduced important changes to the content and appearance of the governmental annual financial report, including the additions of management’s discussion and analysis, government-wide financial statements, and major fund reporting.
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What Do the Preliminary Views Documents Include?

The Governmental Accounting Standards Board (GASB) issued a Preliminary Views on September 28, 2018 proposing improvements to key components of the financial reporting model. In a separate, related document, the Board also proposed new concepts intended to guide the Board in developing standards on recognition in financial statements.

Financial Reporting Model Improvements

The Preliminary Views, Financial Reporting Model Improvements, presents the Board’s current thinking on targeted improvements to the financial reporting model—the blueprint for the annual audited financial report. The proposals are designed to improve the model’s effectiveness in providing information essential to decision making and assessing a government’s accountability.
The proposed improvements include:
  • A short-term financial resources measurement focus for governmental funds that recognizes short-term transactions and other events when incurred and long-term transactions and other events when due
  • A format for governmental fund financial statements that distinguishes between current and long-term resource flows
  • Clarified explanations of operating and nonoperating revenues and expenses
  • An additional subtotal in proprietary fund financial statements for operating income (loss) and noncapital subsidies
  • Presentation of all budgetary comparison information as required supplementary information and required presentation of two variance columns
  • Communication of major component unit information either in the government-wide statements or in combining financial statements
  • A new schedule of government-wide expenses by natural classification as supplementary information in comprehensive annual financial reports. 
The Preliminary Views considers improvements in selected areas of the existing financial reporting model. The Board plans to address enhancement of other areas of the model in a subsequent proposal.

Recognition of Elements of Financial Statements

The Preliminary Views, Recognition of Elements of Financial Statements, presents the Board’s current views on concepts related to recognition of elements of financial statements, such as assets and liabilities.
Recognition concepts encompass two aspects of state and local government financial statements:
  • The measurement focus of a specific financial statement determines what items should be reported.
  • The related basis of accounting determines when those items should be reported. 
The Preliminary Views proposes that an item being considered for recognition in financial statements would be evaluated using a hierarchy for recognition of elements. The hierarchy would require the Board follow a specific order of elements when considering if an item should be recognized and as what element (for example, as an asset, deferred outflows of resources, or expense).
The Preliminary Views also proposes a recognition framework for both the short-term financial resources measurement focus (proposed for use in governmental fund financial statements in the companion Preliminary Views) and the economic resources measurement focus (used in government-wide, propriety fund, and fiduciary fund financial statements).
Issuing the two documents concurrently is intended to provide stakeholders with a conceptual context for how elements of financial statements would be recognized and then to see how those elements would be presented within the financial reporting model.
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Why Did GASB Add the Financial Reporting Model Project to the Agenda?

Reexamination of the model had become a high priority issue to GASB stakeholders. For a number of years the Governmental Accounting Standards Advisory Council— The Board’s advisory group—has 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. While the results of extensive research conducted over two years by the staff indicate that most components of the financial reporting model remain effective, they did highlight a number of areas that could benefit from improvements.

In September 2015, the GASB decided that based upon the research results it was important, as part of its commitment to maintaining the effectiveness of its standards, to reexamine the current financial reporting model now that it has been in place for a sufficient period of time.

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What is the Objective of the Reexamination?

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 and to address application issues.

Throughout this project, a key part of the Board’s work will be to look for opportunities to reduce the complexity and the length of the financial statements. Over the course of the project, the GASB will keep a keen eye out for appropriate changes to the financial reporting model that could positively impact the timeliness of government financial reports.

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Share Your Views

Written comments should be addressed to the Director of Research and Technical Activities, Project No. 3-25 (Financial Reporting Model Improvements) or Project No. 3-20 (Recognition of Elements of Financial Statements), and emailed to
A series of public hearings and user forums on the PVs are scheduled as follows:
Public Hearings
  • March 5, 2019, Rosemont, IL (near O’Hare airport)
  • March 12, 2019, Atlanta, GA
  • March 14, 2019, Flushing, NY (near LaGuardia airport)
User Forums
  • March 6, 2019, Rosemont, IL (near O’Hare airport)
  • March 14, 2019, Flushing, NY (near LaGuardia airport) 
Infographic on Financial Reporting Model Events

To register to attend, click here.
The deadline for written notice of intent to participate is February 15, 2019. Additional information is available in each of the Preliminary Views.
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