Initial GASB Statement Proposed in Extensive Effort to Review Current Disclosure Requirements

Norwalk, CT, June 30, 2000—The Governmental Accounting Standards Board today issued a proposed Statement that would establish, modify, and rescind certain current requirements to disclose information in the notes to state and local government financial statements. The Exposure Draft, Certain Financial Statement Note Disclosures, is the first proposal to result from the GASB’s far-reaching endeavor to review all existing note disclosure requirements to ensure they continue to be useful and relevant to the needs of financial statement users.

The GASB’s current five-year strategic plan, adopted in 1997, called for the regular review of existing accounting standards as soon as sufficient time had passed to allow a thorough determination of their effectiveness. The first phase of the GASB’s disclosure review, which culminated in this proposed Statement, concentrated on requirements effective by 1994.

“A principal result of this project was the affirmation that the majority of note disclosures continue to provide information that is vital to financial statement users,” said GASB Project Manager Roberta Reese. “Our constituent research, however, did reveal several areas that needed to be improved.”

The Exposure Draft would rescind the current requirement to report the method a government uses for encumbrances, and would also eliminate the recommendation to report certain budgetary information. Prominent among new note disclosures proposed are requirements to provide more complete information about amounts due to and from a government’s funds at the end of the fiscal period and about financial transfers among those funds during the year. Another proposal would lead to more detailed information about future debt service and lease payments.

“The current disclosures of interfund activity and long-term obligation requirements are limited,” explained GASB Project Manager Randal Finden. “These proposals should provide the information users need to understand these important financial issues.”

The Exposure Draft also proposes note disclosures regarding: actions taken to remedy significant violations of finance-related legal or contractual provisions; short-term debt activity; better explanations of the activities accounted for in financial statement columns; and details about significant individual accounts that are aggregated within larger balances in the financial statements.

In addition to the Exposure Draft, a plain-language supplement is available to enable a greater share of the public to participate knowledgeably in the standards-setting activities of this project. The supplement—the first produced by the GASB—presents the proposed Statement using less technical language and focuses on the impact the Statement would have on the information users will find in financial statements.

“The GASB is hopeful that the plain-language supplement will enable more users of governmental financial information to comment on the note disclosure proposals,” said GASB Project Manager Dean Mead. “Users are in the best position to help the GASB understand whether or not these proposals will fulfill their information needs.”

The ninety-day comment period on the Exposure Draft ends September 29, 2000. The GASB invites written comment on its proposals. The public may provide additional feedback by speaking at one of three public hearings and a special forum scheduled for the fall—September 19 in Tempe, AZ, October 10 in New York City (including the forum), and November 15 in St. Petersburg, FL.

During the comment period, single copies of the Exposure Draft and plain-language supplement are available free of charge from the GASB Order Department (800-748-0659).

The GASB is the independent private sector 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 state and local government financial statements, users of those statements, and members of the academic community. More information about the GASB can be found at this website.