By Grippo, Frank; Sigel, Joel
The National Public Accountant , Vol. 46, No. 7
BASIC FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR STATE AND LOCAL GOVERNMENTS
Governmental Accounting Standards Board (GASB) Statement Number 34 is one of the most significant changes in governmental accounting. It is effective for larger government in fiscal years beginning after June 15, 2001, for medium government in fiscal years beginning after June 15, 2000, and for smaller government in fiscal years beginning after June 15,2001. The pronouncement sets forth the accounting and financial reporting requirements for general purpose outside financial reporting by state and local governments, including standards for management's discussion and analysis, the basic financial statements, and supplementary information. Management's Discussion and Analysis introduces the basic financial statements and furnishes an analytical overview of the government's financial activities. Government-wide financial statements show data concerning the reporting government as a whole except for its fiduciary affairs. These statements have separate columns for the governmental and business type activities of the primary government and component units. Fund financial statements for the primary government's governmental, proprietary, and fiduciary funds are shown after the government wide statements. These statements present data about major funds individually and non-major funds in the aggregate for governmental and enterprise funds. Fiduciary statements present financial data regarding fiduciary funds and related aspects. After the footnotes to the financial statements, supplementary information should be presented including budgetary comparison information.
Management's Discussion and Analysis should include a brief discussion of the basic financial statements along with relationships between the statements, major differences in information furnished by the statements, condensed financial information comparing the present year to the previous year, analysis of whether financial position has gotten better or worse and why, and an appraisal of balances and transactions of individual funds.
Financial Statement Presentation and Reporting
Government-wide financial statements show information for the overall government without presenting individual funds or fund types. Government-wide financial statements should be based on accrual accounting. An emphasis should be on presenting economic resources and their valuation.
Fund financial statements should be used to report detailed information about the primary government. Governmental fund reporting emphasizes the sources, uses, and balances of current financial resources and typically has a budgetary emphasis. Statements required include the balance sheet and statement of revenues, expenditures and changes in fund balance. Proprietary fund reporting concentrates on operating income determination, changes in net assets, financial position, and cash flows. Accordingly, statements required include the balance sheet (or statement of net assets), statement of revenues, expenses, and changes in fund net assets (or fund equity) and the statement of cash flows. Fiduciary fund reporting focuses on net assets and changes in net assets. Typical statements for the fiduciary fund are the statement of fiduciary net assets and the statement of changes in fiduciary net assets.
Capital assets are reported at historical cost. The cost associated with a capital asset includes deferred interest and charges necessary to put the asset into existing use and location. Depreciable capital assets are presented at book value. Donated capital assets are shown at fair market value plus ancillary charges. Depreciation on capital assets is over their anticipated expected lives with the exception that we use the modified approach in the event the capital assets are of an infrastructure nature or are inexhaustible. Depreciation may be computed by either individual assets, subsystem of a network, network of assets, or by asset category. …