Introduction
The Government Accounting Standards Board (GASB) is a body that ensures that accounting practices by government agencies are of high standards (Granof & Wardlow, 2010). This is accomplished through ongoing research in different areas of the accounting discipline, and particularly those that pertain to government entities. GASB has a web site that outlines the activities that it’s currently carrying out in a given period. More importantly, the website provides the public with access to different accounting projects that the board is carrying out. The projects that are yet to be conducted are made available in the form of exposure draft and members of the public are welcome to appraise the projects before they are implemented. This paper seeks to evaluate the benefits of providing public comments to exposure drafts; determine the critical elements of a current exposure draft (An amendment of the GASB statements No. 10 and No. 62); and analyze the impact of the proposal on government agencies.
The benefits of providing public comments to exposure drafts
The GASB is a part of the government, critical function of the government is to serve the interests of the people. Matters of financial accounting are usually of great importance to the public (tax payers) who are really interested in knowing how their cash is being used by the Government. Thus the projects that are undertaken by the GASB such as the amendment of the GASB statements No. 10 and No. 62 are of great importance to the public due to the fact that they affect them directly. There are various advantages that will come with the proposed changes mentioned above. First, the current project will ensure consistency in reporting by government entities which move in the right direction following the confusion that had been witnessed earlier. By weighing the comments for and against the exposure draft, one can tell whether it has been validated or invalidated by the public or whether it’s in the public’s interest. Secondly, the public comments provides the GASB Board with an opportunity to improve areas that were left out in the draft and therefore be in a better position to solve the problem being addressed in the draft. Thirdly, the opinions and comments enable the GASB to have a rough idea of how the proposed changes will be received by the public. Lastly and most importantly, the fact that people have commented on the exposure draft is enough to ensure that the public is made aware of the drafted changes which may otherwise have come as a complete surprise to them (Granof & Wardlow, 2010).
The critical elements of the analyzed exposure draft, amendment of the GASB statements No. 10 and No. 62
The GASB exposure draft being evaluated seeks to amend GASB statements No. 10 and No. 62. The amendments are aimed at improving accounting and financial reporting for different governmental financial reporting entities (GASB, 2011). The proposed statement seeks to clear the confusion that led to the issuance of two recent pronouncements, Statement No.54, Fund balance Reporting and Governmental Fund Type Definitions, And No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (GASB, 2011).
The proposal seeks to amend statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues. This will eliminate the provision that constrain the fund-based approach in reporting of an entity’s risk financial activities to the general fund and the internal service fund type (GASB, 2011). In effect, government agencies would use statement 54 to decide on the classification of the fund in regard to the nature of the activity(s) that are to be reported.
Statement 62 will also be amended by the modification of the particular guidance on accounting for, first, the operation of lease payments that differ from a straight line basis and secondly, the distinction between the initial investment and the principal amount of a purchased loan or group of loans (Granof & Wardlow, 2010). With this change, the uncertainties that come with the application of statement No. 13 (Accounting for operating of leases with scheduled Rent increases) will have been effectively eliminated. This will facilitate operations that are consistent with what is stipulated in statement No. 48, Sales and pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues (GASB, 2011).
The impact of the proposal on governmental agencies
Prior to the proposed changes, several government reporting entities had been confused with how to deal with conflicting guidance that resulted from two recent pronouncements, Statements No. 54 and No. 62, explained above (GASB, 2011). With the changes proposed in the exposure draft, the government agencies will be able to provide consistent financial reporting. This will intern uphold the importance of financial reports issued by government agencies, as accountability documents. In other words, the changes will help restore the fast disappearing relevance of financial reporting in government institutions. As stated on the GASB website such entities may be state or local governmental entities (GASB, 2011).
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References
GASB. (2011). Proposed Statement of the Government Accounting Standards Board: An Amendment of GASB Statements No.10 and No. 62, Norwalk; Government Accounting Standards Board.
Granof, H. & Wardlow, P. (2010). Core Concepts of Government and Not-For-Profit Accounting, London; Wiley and Sons