Governmental Accounting Standards Come of Age: Highlights from the First 20 Years

Article excerpt

He who every morning plans the transaction of the day and follows that plan, carries a thread that will guide him through the maze of the most busy life. But where no plan is laid, where the disposal of time is surrendered merely to the chance of incidence, chaos will soon reign.

--Victor Hugo

The Governmental Accounting Standards Board was organized in 1984 to establish and improve financial reporting standards for state and local governments. The GASB, as originally constituted, was composed of five members, including four part-time members and a full-time chairman. Jim Antonio, the first chairman, presided over the GASB from its inception until June 1995. He and Marty Ives, the Board's first vice-chairman and director of research, decided that one of the first items of business would be to develop a project agenda. Therefore, with the help of its constituents, the GASB identified those areas of state and local governmental financial reporting that most needed improvement, prioritized the identified areas as projects, and developed a project agenda to address them.

The history of the GASB can largely be traced by studying its original plan--the project agenda the GASB ultimately approved in the summer of 1984. This article uses that agenda as a basis for summarizing the major activities of the GASB during its first 20 years.

Of course, no one could have anticipated all the issues that would need to be addressed in the 46 statements, six interpretations, 12 technical bulletins, and two concepts statements that have been issued by the GASB through 2004. Numerous projects have been added to the technical agenda and completed on such important issues as the format and content of the statement of cash flows, financial reporting for other postemployment benefits, compensated absences, debt refinancings, nonexchange transactions, asset impairments, and disclosures about deposits and investments. Nevertheless, the foresight of those preparing that initial technical agenda was remarkable.

THE ORIGINAL AGENDA

The original agenda, which was established after extensive due process, included nine substantive projects. Two of these projects could be considered "administrative" in nature.

The first administrative project, which resulted in the issuance of GASB Statement No. 1, Authoritative Status of NCGA Pronouncements and AICPA Industry Audit Guide, set forth the authoritative status of the governmental financial reporting standards that were in existence when the GASB was established. The GASB replaced the National Council on Governmental Accounting (NCGA) as the body that would establish financial reporting standards for state and local governmental units, and the first GASB statement recognized the statements and interpretations issued by its predecessor body as being authoritative. In addition, the American Institute of Certified Public Accountants (AICPA) through its State and Local Government Industry Audit Guide had established certain financial reporting standards prior to the creation of the GASB. Like the NCGA statements and interpretations, the GASB considered these standards authoritative, but subject to later modification.

The second administrative project was to develop and maintain a codification of effective financial reporting standards for state and local governments, including those standards established by the NCGA and the AICPA prior to the GASB's formation. The first codification, which was considered authoritative, was issued in 1985. Since then, the GASB has issued an additional 17 authoritative codifications and now publishes revised annual editions of Codification of Governmental Accounting and Financial Reporting Standards and Original Pronouncements.

Five of the seven remaining items on the original agenda involved technical topics that would result in major changes in state and local governmental financial reporting. …