Accounting and Financial Reporting

GASB Measurement Focus/Basis of Accounting Project

The Government Finance Officers Association (GFOA) recognizes and supports the Governmental Accounting Standards Board's (GASB) authority to establish generally accepted accounting principles (GAAP) for government.

The GASB, in December 1987, issued an exposure draft of a proposed statement on "Measurement Focus and Basis of Accounting--Governmental Funds" (MF/BA) which, if adopted as is, will introduce a new emphasis on accountability and inter-period equity. The exposure draft calls for this guidance to be adopted by governments for their fiscal periods beginning after December 15, 1989.

The GASB plans to implement this proposed statement together with the results of other projects relating to intergovernmental grants, entitlements, shared revenues and non-exchange transactions. However, the proposed statement specifically indicates that issues relating to recognition and measurement in governmental funds for pension expenditures, other post-employment benefits, special termination benefits, claims and judgments, and related risk management transactions, and capital improvement special assessment transactions are being considered in other GASB projects. In addition, the GASB also has a major financial reporting project in progress. All these projects represent major financial issues. The due process leading to separate resolution of these other issues may also lead to results that are conceptually inconsistent with those in the proposed MF/BA exposure draft. The GFOA believes that in order for the MF/BA proposed statement to be generally accepted, concurrent resolution of these other projects is required.

The GFOA recommends that the GASB resolve all these issues and require their implementation as of the same date so that governments can make all significant adjustments at once. To accomplish this, the GASB needs to provide at least a one-year period from the issuance of the final statement to the first of the initial year of implementation. In addition, the GFOA recommends governments be provided a three year implementation window to permit governments to determine the impact, prepare the public, adjust or modify internal accounting procedures and address the significant policy decisions pertinent to these newly recognized liabilities on an as-incurred basis. The GFOA also recommends that the GASB consider the possibility of a phased implementation for the effects of one or more of the issues listed above.

The GASB needs to provide substantial guidance on how governments and their elected officials will explain the significant changes that will result from complying with the new accounting standards. Specifically, the GASB should complete the financial reporting project so that preparers, attestors, governmental officials and other users have an opportunity to know not only how, but why, financial statements are henceforth to be presented in this manner.

The GFOA supports the underlying concept that financial statements should strive to present accountability and to measure interperiod equity. However, the GASB must address these issues before the proposed MF/BA will be acceptable to the government community.

  • Publication date: May 1988