GASB #34 Reporting Model
In June 1999, the members of the Governmental Accounting Standards Board (GASB) unanimously approved issuance of the long-awaited statement on the financial reporting model project. GASBS No. 34, Basic Financial Statementsóand Managementís Discussion and Analysisófor State and Local Governments, makes dramatic changes in the way state and local governments report their finances to the public.
Under the new financial reporting model, GASBS No. 34, paragraph 7, requires general purpose governments to present the following basic financial statements and RSI in order for the financial statements to be in accordance with GAAP:
- Managementís discussion and analysis (MD&A
- Government-wide financial statements
- Fund financial statements
- Notes to the financial statements
- RSI, including budgetary comparison schedules, infrastructure condition data, and other data required by previous GASB pronouncements, if applicable
Donít be alarmed at the implementation of GASB #34. In most cases it will only affect the accountant or auditor.
GASB #34 is a reporting model change only. It changes not only the wording but the presentation of financial procedures or methods being used. GASB #34 is used primarily at fiscal year end in preparation of the year end financial statements.
Managementís Discussion and Analysis (MD&A)
The MD&A is a narrative report prepared in an easy-to-read format by the governmentís financial manager. It should contain the following items:
- introduce the basic financial statements, and
- provide an analytical overview of the governmentís financial activities for the year based on the financial managerís knowledge of the transactions, events, and conditions reflected in the financial report and the fiscal policies that control the governmentís operations. Use of charts, tables, and graphs is encouraged.
GASBS No. 34 was amended by GASBS No. 37 to make it clear that while the following eight components of MD&A are stated in general rather than specific terms, the information must be confined to the following:
1. A brief discussion of the relationships of the basic financial statements to each other and the major differences in the information provided in each. 2. A comparison in condensed form of information presented in the government-wide financial statements for the current and prior year. 3. An analysis of the governmentís overall financial position and results of operations to help users determine whether financial position has improved or deteriorated due to current-year activities. 4. An analysis of significant changes that occurred in individual funds and any limitations that might affect the availability of fund resources in the future. 5. An analysis of significant budget variances (original versus final budget and final budget versus actual results) for the general fund or its equivalent, including reasons for those variances that may affect future services or liquidity. 6. A summary of significant capital asset and long-term debt activity with a discussion of commitments and limitations that may affect future financing of planned facilities or services. 7. A discussion of infrastructure assets (if the government has elected not to depreciate such assets). 8. A description of facts, conditions, or decisions of which management was aware on or before the audit report date that is expected to have a significant effect on financial position or results of operations after the reporting date.
The Government Accounting Standards Board (GASB) adopted a three-phase implementation schedule so that smaller government agencies with fewer resources could benefit from report preparation and audit experiences of larger government agencies. However, if an entity is considered a component unit of a larger government agency, the component unit must implement GASB #34 in the same year as the primary government agency.
GASB 34 Effective Dates
I Entities with total annual revenues of $100 million or more Must implement for reporting periods beginning after June 15, 2001 For PHAs with Fiscal Year End of June 30, 2002 II Entities with total annual revenues between $10 million, but less than $100 million Must implement for reporting periods beginning after June 15, 2002 For PHAs with Fiscal Year End of June 30, 2003 III Entities with total annual revenues less than $10 million Must implement for reporting periods beginning after June 15, 2003 For PHAs with Fiscal Year End of June 30, 2004