The Government Financial Reporting Entity

By Ives, Martin | The Government Accountants Journal, Spring 1995 | Go to article overview

The Government Financial Reporting Entity


Ives, Martin, The Government Accountants Journal


The entity concept is fundamental to financial reporting. The boundaries of a financial reporting entity help to set the boundaries of accountability, of actual and potential resources and liabilities, of exposure to risk. They help to establish what information is relevant to a particular set of financial statements and what is not. This article comments on two significant pronouncements in process concerning the government financial reporting entity: a proposed statement of the Governmental Accounting Standards Board (GASB), entitled, The Financial Reporting Entity-Affiliated Organizations, and a proposed concepts statement of the Federal Accounting Standards Advisory Board a (FASAB), entitled Entity and Display.

Defining the governmental financial reporting entity is no easy matter. I believe it is more difficult than defining the private sector financial reporting entity. Some of the difficulty results from the increasing complexity of the form of government. For example, from the ability of a government to create organizations either by statute or under a state's corporation or not-for-profit corporation laws. (See author's "What Is a Government" in The Government Accountants JOURNAL Spring 1994). Part of the difficulty results from the fact that governmental "ownership" occurs through the creation and appointment process, rather than through the issuance and purchase of stock certificates. And part of it, particularly in reporting, results from the differing financial relationships between the governmental parent and its various component units.

Recognizing both the importance of the subject and the difficulty of the issues, the GASB made the reporting entity one of its first projects on the road to revamping the financial reporting model. The result was GASB Statement 14, The Financial Reporting Entity, issued in 1991 and effective in 1993. This standard, developed after extensive research and deliberation, gave effect to preparer and user experience with earlier standards developed in part by the State Government Accounting Project and issued by the National Council on Governmental Accounting.

GASB Statement 14 is based on a notion of "financial accountability." The Statement distinguishes between a primary government and its component units. The primary government is the nucleus of the reporting entity. Other organizations must be included in the reporting entity if the primary government is able either to impose its will on those organizations, or there is a potential for the organizations to provide specific financial benefits to, or impose specific financial burdens on the primary government. A primary government may also be financially accountable for government organizations that are fiscally dependent on it. Terms like "impose its will," "financial benefit/burden" and "fiscally dependent" are defined in Statement 14 and applications of the terms are illustrated both in the Statement and in an Implementation Guide published by the GASB.

When the GASB issued Statement 14, it was aware that other organizations existed that might logically be considered part of the reporting entity even if they did not fit the definition established by the Board. The reason they do not fit the definition is that the primary governments do not create them, do not appoint their governing bodies and do not have a fiscal dependency relationship as defined by Statement 14. And yet, some of these organizations play a significant role in the finances of the primary government, raising funds, making expenditures and performing other activities on their behalf. Most often, these organizations are affiliated with colleges, but some are affiliated with hospitals, museums and elementary and secondary schools. They generally carry such names as "[X College] Foundation," "Development Foundation." "Athletic Association," "Research Foundation," or "Alumni Association."

Financial reporting concerning these affiliated organizations has been in limbo for a long time, both in the public and in the private sectors.

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

The Government Financial Reporting Entity
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.