Close Counts: Expanding the Use of Estimates for Better, Faster Financial Reporting

It might seem strange—or even subversive—to suggest that finance officers rely more on estimates in financial reporting. However, financial reporting already depends heavily on estimates for some of its most consequential numbers! Pension liabilities, OPEB obligations, and other long-term measures rely on assumptions about uncertain future events. 

Estimates are accepted because they are accurate enough to support decisions. Yet in other areas of reporting, preparers spend a great deal of time trying to achieve near exact precision—even when that extra precision adds little value for users. This work is costly. It consumes staff time, delays reports, and diverts professional attention from areas where
judgment and analysis matter more. 

This report argues that governments should use estimates more broadly when they provide sufficient accuracy for decisions at lower cost. The question is not whether estimates are appropriate—financial reporting already depends on them—but when additional precision meaningfully improves a user’s ability to make decisions and when it does not. The report provides a framework for using estimates responsibly and defensibly in financial reporting.