New Accounting Rules for Special Assessments

By Trebby, James P.; Yahr, Robert B. | Akron Business and Economic Review, Spring 1990 | Go to article overview

New Accounting Rules for Special Assessments


Trebby, James P., Yahr, Robert B., Akron Business and Economic Review


New Accounting Rules For Special Assessments

When the National Council on Governmental Accounting (NCGA) revised the basic accounting principles for governmental units in 1979, its final product--NCGA Statement No. 1[4]--was generally acknowledged as eliminating several inconsistencies in governmental accounting and, in many instances, simplifying governmental accounting procedures. However, one issue that was neither fully resolved at that time nor through subsequent NCGA actions was the accounting for special assessments. Consequently, the conclusions in NCGA Statement No. 1 regarding the accounting for these assessments continued to attract much criticism.

Probably the primary reasons for this criticism were that (1) special assessment bonds were recorded as a liability rather than as an "other financing source" and (2) the modified accrual basis of accounting was used for these activities, where revenues had to be both "measurable" and "available" in order to be recognized. Because of these requirements, the NCGA concluded that the only "other financing sources" for special assessment funds were operating transfers from other governmental funds (such as the general fund) and that only the current portions of special assessments were revenue. Since construction-related expenditures were recognized immediately as incurred, it was normal for a special assessment fund to report a deficiency throughout most of its life. Thus, this fund's "artificial" deficit led to potentially misleading inferences regarding the fund's (and possibly the governmental unit's) financial health.

Additional criticism also resulted from the argument that special assessment activities (especially those involving capital improvements) were no different from activities presently being accounted for in other funds--notably the capital projects and debt service funds. The ambiguity of the NCGA statement's conclusions regarding service assessments was also noted, since questions had arisen regarding whether a separate special assessment fund was even required for these activities.

Because of these concerns, the Governmental Accounting Standards Board (GASB) placed this topic on its active agenda shortly after the Board's inception in 1984. Its initial public document was an October, 1985, Discussion Memorandum[1] that explored the alternative accounting treatments. After considering the input received from various respondents, the GASB reported its tentative conclusions in a July, 1986, Exposure Draft[2]. Again, additional comments were received from the public, and, after making several revisions, the GASB issued its final pronouncement, "Accounting and Financial Reporting for Special Assessments" (GASB Statement No. 6)[3] in January, 1987.

As a result of the Board's deliberations, new accounting and reporting procedures for special assessments must now be implemented. These requirements, the most notable of which includes the termination of the separate fund type for special assessments, are effective for financial statements issued for periods beginning after June 15, 1987, and are applicable for all state and local governmental entities that levy special assessments. Thus, all governmental units on a calendar year must comply with these new standards in their 1988 financial statements.

THE NATURE OF SPECIAL ASSESSMENTS

Special assessments are typically divided into two categories, those providing capital improvements and those providing services. In addition, when special assessment bonds are issued by the municipality to provide resources for some capital improvements, the municipality's legal responsibility for that debt can vary significantly. This section summarizes the particular aspects of special assessments that influenced the GASB's eventual conclusions.

Capital improvement assessments have two separate phases, a construction activity and a financing activity.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

New Accounting Rules for Special Assessments
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.