Governmental Accounting Standards Board

The Governmental Accounting Standards Board (GASB) is the independent organization that establishes accounting and financial reporting standards for U.S. state and local governmental entities that follow generally accepted accounting principles. Its guidance is designed for the accountability, budgetary, service, and financing questions that make government reporting different from business reporting.

Key Takeaways

• GASB covers U.S. state and local governmental entities, including many cities, counties, school districts, public authorities, and public employee retirement systems.
• FASB covers nongovernmental U.S. GAAP reporters; FASAB develops GAAP for federal entities.
• Governmental financial reports may include both government-wide statements and fund statements, which use different measurement focuses and can report the same transaction differently.
• GASB issues standards, but laws, audit requirements, bond agreements, grant terms, and other authorities determine how compliance is enforced for a particular government.
• Analysts should identify the reporting entity, fund type, measurement focus, and basis of accounting before comparing amounts.

What GASB Does

GASB develops standards for recognition, measurement, presentation, and disclosure in state and local governmental financial reports. It operates under the oversight of the Financial Accounting Foundation, which also oversees FASB.

Government reporting serves a broader accountability function than a profit-focused business report. Readers may need to assess whether public resources were raised and spent as authorized, whether current revenues covered current services, whether infrastructure and long-term obligations are sustainable, and whether financial burdens have shifted to future taxpayers.

Which Standard Setter Applies?

The word government is not enough to determine the reporting framework. Identify the entity and jurisdiction first.

Some organizations require additional analysis. For example, a legally separate hospital, university, utility, or retirement system may be governmental or nongovernmental depending on its ownership, governance, and reporting-entity facts.

Government-Wide and Fund Reporting

GASB Statement No. 34 established a reporting model that includes government-wide financial statements and fund financial statements for general-purpose governments. These views answer different questions.

Because the measurement focus differs, fund balance is not the same as government-wide net position, and a governmental fund expenditure is not always the same as government-wide expense.

Practical Example: A Fire Truck Purchase

Assume a city pays $600,000 cash for a fire truck expected to provide service for 10 years. Ignore residual value and financing for this simplified example.

In a governmental fund, the city may report a $600,000 capital outlay expenditure in the acquisition year because the fund statements emphasize current financial resources. In the governmental activities column of the government-wide statements, the city generally capitalizes the truck and reports depreciation over its useful life. Straight-line depreciation would be $60,000 per year.

The reconciliation between the two statement sets explains why the fund reported a $600,000 expenditure while government-wide expense for the year may include only $60,000 of depreciation. Neither view is automatically wrong; each uses a different measurement focus to answer a different financial question.

Important GASB Reporting Areas

GASB standards address more than fund accounting. Important areas include:

• the financial reporting entity and component units;
• government-wide and fund financial statements;
• pensions and other postemployment benefits;
• leases, subscription-based information technology arrangements, and public-private partnerships;
• infrastructure and capital assets;
• revenue recognition, grants, and nonexchange transactions;
• debt, refundings, and conduit debt obligations; and
• required supplementary information and note disclosures.

The applicable standard and effective date should be verified for the reporting period. A numbered GASB Statement may also have been amended by later pronouncements.

How GASB Develops Standards

GASB uses public due process that can include research, stakeholder outreach, public meetings, preliminary views or other consultation documents, exposure drafts, comment letters, public hearings, redeliberation, and issuance of a final Statement. Concepts Statements explain objectives and foundational ideas but do not replace transaction-specific standards.

The Governmental Accounting Research System (GARS) organizes authoritative state and local governmental GAAP and related literature. Historical summaries are useful for context, but an accounting conclusion should be tied to the current authoritative guidance and its effective date.

How Investors and Citizens Use GASB Reports

Municipal bond investors, oversight bodies, taxpayers, and analysts may use GASB financial reports to examine:

• unrestricted and restricted resources;
• recurring revenues relative to service costs;
• debt service and long-term borrowing capacity;
• pension and other postemployment benefit obligations;
• capital asset condition and infrastructure commitments;
• transfers, interfund balances, and one-time financing sources; and
• component units or activities outside the primary government’s general fund.

Budget documents can add useful context, but an adopted budget is not a substitute for audited GAAP financial statements. The two documents can use different scopes and accounting bases.

Common Mistakes

• Applying corporate ratios directly to governmental statements without considering fund structure, tax powers, service obligations, and restricted resources.
• Comparing general fund balance with government-wide net position as if they measure the same thing.
• Treating every public hospital, university, or utility as a GASB reporter without checking whether it is a governmental entity.
• Assuming a balanced budget means the government has no long-term pension, debt, infrastructure, or other obligations.
• Relying on the original text of an older GASB Statement without checking later amendments and current effective guidance.

Authoritative Sources

• GASB: Standards and Guidance
• GASB Statement No. 34 summary and standard
• FASAB: Standards and Guidance for federal entities

Related Terms

• GAAP: The applicable body of generally accepted accounting principles for a particular reporting jurisdiction and entity type.
• FASB: The standard setter for nongovernmental entities that follow U.S. GAAP.
• IASB: The board that develops IFRS Accounting Standards.

FAQs

This page is educational. Governmental accounting conclusions depend on entity classification, applicable law, current standards, transaction facts, and the reporting period.