GASB Continues Building Conceptual Framework

August 14, 2006 (PLANSPONSOR.com) - The Governmental Accounting Standards Board (GASB) has released its fourth Concepts Statement, Elements of Financial Statement, which defines the seven elements of financial statements by government auditors.

The GASB said in a news release that the Concepts Statement forms its conceptual framework, providing a foundation to guide the board’s development of accounting and financial reporting standards for government entities.

The news release said that GASB has to define the basic building blocks of financial reporting to develop a conceptual framework appropriate for the government environment.

GASB said a central feature of each of the proposed definitions of elements is a resource. In that light, GASB said, the most recent document defines the elements of statements of financial position as:

  • Assets – resources the entity presently controls.
  • Liabilities – present obligations to sacrifice resources or future resources that the entity has little or no discretion to avoid.
  • A deferred outflow of resources – a consumption of net resources by the entity that is applicable to a future reporting period.
  • A deferred inflow of resources – an acquisition of net resources by the entity that is applicable to a future reporting period.
  • Net assets – the residual of all other elements presented in a statement of financial position.

The proposal also defines elements of resource flow statements as:

  • Outflow of resources – a consumption of net resources by the entity that is applicable to the reporting period
  • Inflow of resources – an acquisition of net resources by the entity that is applicable to the reporting period.

“Today’s proposed Concepts Statement reflects our ongoing commitment to develop a more robust conceptual framework that can better guide the Board in its decisionmaking, promote high-quality accounting standards, and make the process for developing those standards more consistent,” said Robert Attmore, chairman of the GASB, in the news release. “Moreover, an improved framework will also aid financial statement preparers and auditors as they evaluate transactions for which there are no existing standards.”

The proposed Concepts Statement would be the GASB’s fourth. Previously:

  • in May 1987, the board issued Concepts Statement No. 1, Objectives of Financial Reporting.
  • in April 1994, GASB issued Concepts Statement No. 2, Service Efforts and Accomplishments Reporting.
  • in April 2005 GASB issued Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements.

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