Academic journal article Journal of Accountancy

Closing the Gaps in GAAP: GASB's Implementation Guides Play an Integral Role in Governmental Accounting

Academic journal article Journal of Accountancy

Closing the Gaps in GAAP: GASB's Implementation Guides Play an Integral Role in Governmental Accounting

Article excerpt

EXECUTIVE SUMMARY

* GASB regularly issues implementation guides, which are staff "question and answer" (Q&A) documents that are intended to reflect the GASB staff's understanding of the board's intent when it adopted the related statements.

* Implementation guides have a relatively low level of authority in the government GAAP hierarchy in SAS no. 69. but they have become increasingly vital to CPAs who must apply GASB standards in preparing and auditing the financial statements of state and local governments.

* Individual professionals have a responsibility to comply with higher-level authoritative guidance, in accordance with the GAAP hierarchy, if they determine that a conflict exists between an implementation guide and more authoritative guidance in GASB statements of standards or interpretations.

* Since 2003, GASB has issued a Comprehensive Implementation Guide each year with questions relating to existing standards added, deleted or modified as the staff and the board deem necessary. This means financial statement preparers and auditors must stay abreast of the guide's ever-changing content.

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A standard setter's job is far from complete when it issues a new accounting statement. Sure, the drafters may have a clear understanding of the official language, but it's almost impossible to conceive of every practical effect the new rule will have on how financial statement preparers do their jobs. That's where GASB's implementation guides come into play.

The Governmental Accounting Standards Board (GASB) issues the guides, which are staff "question and answer" (Q&A) documents. They are intended to reflect the GASB staff's understanding of the board's intent when it adopted the related statements. In recent years, the board issued the guidance more contemporaneously with the adoption of new standards to provide immediate answers to the rank-and-file who must apply the new rule.

Implementation guide projects are announced publicly, and the draft is exposed to the board and an advisory committee. However, implementation guides do not receive the public exposure and input required in adopting statements, interpretations and technical bulletins. Although an implementation guide will not be issued if a majority of the board members object to its issuance, the guides are not adopted by the board but are issued under the authority of the GASB director of research and technical activities.

Implementation guides have a relatively low level of authority in the government GAAP hierarchy (only "other accounting literature" is lower), but they have become increasingly vital to CPAs who must apply GASB standards in preparing and auditing the financial statements of state and local governments. This article discusses the growing importance of the guides, provides an update of the most recent Comprehensive Implementation Guide, and points out the responsibility of preparers to carefully evaluate and apply the latest guidance it contains.

EXPANDED ROLE

Two recent developments have made the guides critical to understanding and properly implementing government GAAP. First, the guides' breadth of coverage has become increasingly more comprehensive. Second, the advent of the "comprehensive" implementation guide means that:

* New questions (and thus new guidance) can be added periodically without the need for a substantial enough body of questions to justify a separate guide.

* Old questions can be deleted or their answers can be modified.

* The guidance in guides on a specific statement can be incorporated directly into the revisions of the comprehensive guide.

BREADTH OF COVERAGE

In GASB's earlier years (the board was founded in 1984), individual implementation guides were issued covering only a specific standard or closely related standards on a specific topic (for example, deposits and investments, cash flows, risk financing, reporting entity, pensions and investments). …

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