GASB 34 Should Be Revised

By Anthony, Robert N.; Newberry, Susan M. | The Government Accountants Journal, Spring 2000 | Go to article overview

GASB 34 Should Be Revised


Anthony, Robert N., Newberry, Susan M., The Government Accountants Journal


The Governmental Accounting Standards Board (GASB) describes Statement 34 as "...the most comprehensive governmental accounting rule ever developed." Unfortunately, the statement has serious defects, but they can be remedied.

Background

In the early 20th century, many government organizations controlled spending by a system called fund accounting. In 1984, when GASB was established, state and local governments were still using the system, even though many organizations had found that an accrual accounting system provided better control at a lower cost. In 1990 GASB issued Statement 11, which required an accrual accounting system, but it was not implemented.1

In 1995 the board issued an Exposure Draft that required two sets of financial statements, one based on the accrual system, essentially as described in Statement 11 (now called the governmentwide system) and the other based on fund accounting. Statement 34 continued the requirement for two sets of statements with two sets of rules. This is the principal cause of its defects.

Government-wide Financial Statements

Interperiod Equity

The rules for the government-wide financial statements are based on the interperiod equity concept2 Basically, it means that financial performance was equitable if revenues at least equaled expenses of that year. The transactions that are included in the revenues and expenses in the current year do not quite correspond to the government-wide rules in Statement 34.

Fund-Accountinq Financial Statements

Accountability

Fund-accounting financial statements are based on accountability, which has several facets. One has to do with financial condition and results of operations. Another is compliance with a legally adopted budget. A third is "assisting in determining compliance with finance-related laws, rules and regulations." We believe reports on the funds named in Statement 34 are not necessary to meet the accountability objective. Accountability requires only a report of compliance or noncompliance-a yes/no statement.3

Analysis of Funds

Statement 34 requires that information on 11 types of funds be reported. Data reported in several funds are also available in the government-wide system, and in some cases, the rules are confusing.

As just one example, the rules for the general fund are significantly different from those applicable to the measurement of revenues and expenses in government-wide accounting. In the government-wide system, outflows of resources are measured as expenses, but in the fund-accounting system they are measured as expenditures. An expense is reported when a resource is consumed and charged to the agency consuming it. An expenditure is reported when the resource is received and charged to the agency receiving it. Thus, the two systems report different amounts for items with the same label. The confusion and extra bookkeeping required by the general fund are justified only if the resulting information describes an important aspect of performance that is not visible in the government-wide system; no such justification is given.

There also are differences in the measurement of revenues. Property taxes in fund accounting are measured as revenue when they are "available"during the period for which they are levied or shortly thereafter. But property taxes in the government-wide system are measured at the assessed amount, less an allowance for unpaid taxes.

Requiring both a fund-accounting system and a government-wide system requires more record-keeping.

Statement 34 is different from all other standards. Instead of stating which alternative, expense or expenditure, is the preferred way of reporting outflows, it requires both. Most standards require the use of expenses. No reason is given for believing that expenses are more important for business-type activities, and expenditures are more important for government activities. …

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

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 ...
Default project is now your active project.
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.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

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

GASB 34 Should Be Revised
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
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?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access 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

    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.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.