GASB'S STATEMENTS 34 AND 37 – NOT JUST FOR “OUR FRIENDS IN ACCOUNTING”
Abstract:The world of governmental financial management is in a state of fundamental transition. By its own admission, the Governmental Accounting Standards Board's (GASB) overhaul of its financial reporting model for governmental agencies, as codified in its Statements 34 and 37, is nothing short of revolutionary. The change is so wide-ranging, so massive, that implementation alone is scheduled over a seven year period, as measured from the date of adoption of Statement 34 by GASB.
Unfortunately, the tendency among many governmental managers is to regard GASB's pronouncements as consisting of “technical accountancy” issues, to be handled by the accounting staff and the independent auditor. Nothing could be farther from hard, cold reality or more deleterious to a career in the long run.
Through Statements 34 and 37, GASB is purposefully moving governmental financial reporting to more closely emulate private sector reporting. Private sector reporting is about fairly reporting the full cost and value of operations of the organization to shareholders, investors, creditors and employees by the management team. Failure to achieve and maintain a desired financial status as reported in the financial statements often leads to changes in management, even changes in Board members. This cause and effect relationship is not lost on GASB.
What is a “reporting model”? What exactly is “financial status” and how is it measured? How is financial status to be disclosed in the new reporting model? What impact does such reporting have for strategic organizational management? How does “Management's Discussion and Analysis” (MD&A) impact the senior management team? What impact will the valuation of capital assets have on enterprise organizations? What about asset management – will the new reporting requirements assist in funding “deferred maintenance”? And what about “depreciation” versus preservation – is GASB trending toward a disclosure of unfunded maintenance? What are the ramifications for the lending industry? How will it impact my rate structure? My bond rating? These and many other related questions should be on the mind of every utility manager.
Document Type: Research Article
Publication date: January 1, 2002
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