Academic journal article Journal of Accountancy

What Should Governments Include in Their Financial Reports?

Academic journal article Journal of Accountancy

What Should Governments Include in Their Financial Reports?

Article excerpt

The International Federation of Accountants released a study that examines the definition of the government financial reporting entity and the variety, of ways governments construct financial reports. IFAC Study no. 8, The Government Financial Reporting Entity, describes the broad characteristics government reporting entities should possess and how they should be accountable for the resources they control.

Governments control significant resources and a wide range of users are dependent on their financial reports. "The definition of the government reporting entity is crucial for good accountability," said Bruno Chiomento, IFAC technical manager. "A poor definition gives governments plenty of opportunity to leave important agencies or departments with large liabilities, such as Social Security, off the balance sheet."

Donald H. Chapin, chief accountant of the General Accounting Office and a member of the IFAC public sector committee, told the Journal that setting a standard for consolidated financial statements for governments was a serious problem that is not easily resolved. "First, governments must decide the basis of consolidation, whether it is the allocation of funds or majority control or ownership," said Chapin. "For example, the United States has a good statement on the reporting entity, but compared to other governments there are some real anomalies in its definition." Chapin said the U.S. definition of federal government excludes the federal reserve banks. "Those issue approximately $400 billion of currency in circulation that many think should be in the consolidated financial statements."

The study lists examples of rules in different countries for identifying the boundaries of reporting entities and the definition of ownership and control and the criteria for combining separate financial statements from entities or funds operated by a government. It is designed to contribute to the policy debate on the relevance, understandability and comparability of financial reporting by governments.

Copies of the study can be obtained for $10 by calling the IFAC at (202) 302-5952.


* The Department of Education (DOE) postponed until June 30, 1997, its deadline for compliance audits required of lenders with student loan portfolios of $5 million or less under the Federal Family Education Loan Program. …

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