Both are composed of a seven-member board of directors, both are nongovernmental agencies and both share a similar mission centering on accounting and financial reporting standards. Despite these similarities, however, their focus and effects on the statement of cash flows is significantly different. Accounting Principles and Standards The FASB has been, sincethe organization responsible for creating and publishing public sector standards of financial accounting and reporting guidelines called generally accepted accounting principles. Inthe GASB was created and immediately began establishing similar accounting principles and standards for private sector nonprofit government agencies.
And this statement may cause public water system accountants, financial advisors, and auditors to scramble for new technical and accounting information so that they can understand the differences between these two terms: Accounting changes may happen faster for some public water systems than others, but it will depend upon their size.
See the sidebar at right for more information about when systems must adopt GASB standards. Regardless of the size of your water system, now is the time to prepare: Proper planning and Gasb fasb of the GASB system are the keys to keeping pace with public water systems of the future.
GASB is a private, nonprofit organization formed in to develop and improve accounting and financial standards for state and local governments.
The board has seven members and is supported by a full-time staff. A clean opinion means you have good credit and is very important when a state or local government wants to issue bonds, procure financing for long-term construction projects, and obtain performance bonds.
While the future requirements will still contain some original accounting information, GASB mandates a more comprehensive approach to financial statement preparation. An informed user should be able to review this new statement format and determine the overall condition of a government or a public water system, especially concerning its progress toward infrastructure repair or replacement.
How will GASB be implemented? Under the current reporting method, revenue and expenditures are recorded in the fiscal year in which they are received or paid cash-basis accounting. Under the GASB method, governments must account for revenues and expenditures for the period in which they are earned or incurred accrual-basis accounting.
In addition, all current and long-term assets and liabilities, such as infrastructure and general obligation debts, need to be reported within the balance sheet. GASB defines infrastructure assets as long-lived capital assets associated with governmental activities that are permanent in nature and have a longer useful life than most capital assets.
Water systems are one example of infrastructure assets. Buildings are not included unless they are an ancillary part of the infrastructure network. GASB is designed to help inform the general public as to how well the government maintains infrastructure assets using preventive maintenance verses replacement.
Larger systems need to begin using GASB this year, while medium-sized and smaller systems will start in subsequent years. In the first year that agencies are required to report the value of infrastructure assets, they only need to report the value of newly acquired or recently built infrastructure assets.
Once the appropriate initial phase is determined, governments must retroactively capitalize and report all general infrastructure assets acquired, renovated, or improved since See the sidebar on page 33 for implementation dates.
The Amendments to the Safe Drinking Water Act require capacity development programs to be in place for all states. Capacity development means that a state helps its drinking water systems improve their finances, management, infrastructure, and operations so they can provide safe drinking water consistently, reliably, and cost-effectively.
See the fall issue of Water Sense for more information about capacity development. State agencies implementing capacity development programs should be able to help with GASB requirements, and also help determine the cost and depreciation of systems.
State agencies responsible for capacity development programs will need to become sufficiently knowledgeable about GASB in order to help provide assistance. Why is it important for a municipal or public water system to comply? The financial analysis will give a more complete picture of the overall financial stability of the state and local governments once the GASB conversion is completed.
This analysis will give auditors the necessary information to decide whether current-year revenues were sufficient to cover the costs of current-year services.
This information also will allow the analyst to determine whether the rates currently charged are adequate to meet the future needs for loan repayments.
Financial consultants and accountants will face the task of placing values on existing assets, infrastructure under construction, and future projects.
Values for assets that are currently being depreciated will be adjusted to reflect the new requirements. GASB allows enough flexibility for state and local governments to adapt the new pronouncement.GASB 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, FASB and AICPA Pronouncements, appears to have addressed any concerns public utilities may have about their use of FASB pronouncements, especially ASC for regulated accounting.
A major comparison is that both the FASB and the GASB both report to the Financial Accounting Foundation’s Board of Trustees ”(barnweddingvt.com).
The FASB works by their Rules of Procedure which describe the operating procedures. The Relationship Between FASB and IASB Jennifer Purvis ACC March 14, Delphine L. Agnor Wolsker The Relationship Between FASB and IASB Introduction The International Accounting Standards Board (IASB) was created after the Financial Accounting Standards Board (FASB) to establish a single set of accounting procedures and standards for.
The FASB and GASB documents are also similar in that both single out the interest (discount) rate assumption for special attention. This is because the rate at which projected future benefits are discounted to the present has a greater effect on pension expense than any other single assumption.
GASB Overview 1 FASB The Financial Accounting Standards Board (FASB) was formed in to address the need for a more consistent set of guidelines for all accountants.
oversight for FASB and GASB? GAAP - $ Question Click to see answer. Financial Accounting Foundation. GAAP - $ Answer Click to return to Jeopardy Board. What are three conceptual differences between GASB and FASB? GAAP - $ Question Click to see answer - Mission of accountability vs.