Governmental Accounting Standards Board (GASB)

Definition

The Governmental Accounting Standards Board (GASB) is an independent, non-profit organization established in 1984 that sets accounting and financial reporting standards for U.S. state and local governments. It aims to improve the clarity, consistency, and comparability of financial information used in the management and oversight of public resources. The GASB is overseen by the Financial Accounting Foundation (FAF), which also oversees the Financial Accounting Standards Board (FASB).

Role and Purpose

The primary purpose of the GASB is to create detailed and comprehensive standards that ensure transparency and accountability in governmental financial reports. These standards help various stakeholders—including taxpayers, public officials, investors, and auditors—evaluate the financial condition and performance of governmental entities.

Key Objectives

Improving Public Accountability: Ensuring the standards provide complete and accurate financial information for the public.
Consistency and Comparability: Making financial reports consistent and comparable across different governmental units.
Financial Management: Providing information that helps in decision-making and enhances the effectiveness of financial management within governments.

Examples

Statement No. 34: Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. This statement establishes new requirements for the basic financial statements and supplementary information of state and local government entities.
Statement No. 54: Fund Balance Reporting and Governmental Fund Type Definitions. This statement changes how fund balances are reported and clarifies the definitions of different types of governmental funds.

Frequently Asked Questions (FAQs)

What is the primary purpose of the GASB?

The primary purpose of the GASB is to create accounting standards that improve the transparency, reliability, and consistency of financial reporting for U.S. state and local governments.

Who oversees the GASB?

The GASB is overseen by the Financial Accounting Foundation (FAF), which also oversees the Financial Accounting Standards Board (FASB).

Are GASB standards mandatory?

While GASB standards are not legally binding, they are generally accepted as authoritative and are commonly followed by state and local governments in the United States.

How does the GASB develop new accounting standards?

The GASB engages in a rigorous process that includes research, public exposure drafts, and consultations with stakeholders before issuing a final standard.

How can the public access GASB standards?

GASB standards and publications are accessible through the GASB’s official website, where users can purchase or sometimes access documents at no charge.

Financial Accounting Standards Board (FASB): The organization responsible for establishing accounting standards for private-sector businesses in the United States.
Governmental Funds: The funds used by government entities to account for financial transactions.
Generally Accepted Accounting Principles (GAAP): A framework of accounting standards widely followed in the U.S.
Financial Accounting Foundation (FAF): The organization responsible for overseeing the activities of both the FASB and the GASB.

Online References

Suggested Books for Further Studies

“Governmental and Nonprofit Accounting: Theory and Practice” by Robert J. Freeman and Craig D. Shoulders
“Introduction to Governmental and Not-for-Profit Accounting” by Martin Ives, Joseph R. Razek, and Gordon A. Hosch
“Wiley GAAP for Governments 2020: Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments” by Warren Ruppel
“Essentials of Accounting for Governmental and Not-for-Profit Organizations” by Paul A. Copley

Accounting Basics: “Governmental Accounting Standards Board (GASB)” Fundamentals Quiz

### What does the GASB stand for? - [x] Governmental Accounting Standards Board - [ ] General Accounting Standards Board - [ ] Global Accounting Standards Board - [ ] Governmental Advisory Standards Board > **Explanation:** GASB stands for Governmental Accounting Standards Board, the organization responsible for setting accounting standards for state and local governments in the U.S. ### Under whose oversight does the GASB operate? - [ ] The U.S. Treasury - [ ] The Securities and Exchange Commission (SEC) - [x] The Financial Accounting Foundation (FAF) - [ ] The Internal Revenue Service (IRS) > **Explanation:** The GASB operates under the oversight of the Financial Accounting Foundation (FAF), which also oversees the Financial Accounting Standards Board (FASB). ### What is the main goal of GASB standards? - [ ] To ensure profitability - [ ] To reduce taxation - [x] To improve the clarity and consistency of governmental financial reporting - [ ] To integrate government operations > **Explanation:** The main goal of GASB standards is to improve the clarity, consistency, and comparability of financial information for state and local governments. ### How are GASB standards developed? - [ ] Through government mandates - [ ] By consulting private corporations - [x] Through research, public exposure, and stakeholder consultations - [ ] Via executive orders > **Explanation:** GASB standards are developed through a process that includes extensive research, public exposure drafts, and consultations with stakeholders. ### Are GASB standards legally enforceable? - [ ] Yes, by federal law - [ ] Yes, by state law - [ ] No, but they are suggested by the IRS - [x] No, but they are widely accepted as authoritative > **Explanation:** While GASB standards are not legally binding, they are widely accepted as the authoritative standard in public sector financial reporting. ### Which type of governments does GASB primarily serve? - [ ] Federal government - [x] State and local governments - [ ] International governments - [ ] Corporate entities > **Explanation:** GASB primarily sets standards for U.S. state and local governments to follow to ensure consistent and clear financial reporting. ### What kind of information does GASB aim to provide through its standards? - [ ] Confidential investment strategies - [ ] Public political data - [x] Transparent and accountable financial information - [ ] Proprietary business plans > **Explanation:** GASB aims to provide transparent and accountable financial information through its standards to assist various stakeholders in evaluating government financial performance. ### Which GASB statement provides the basic framework for governmental financial statements? - [ ] Statement No. 1 - [x] Statement No. 34 - [ ] Statement No. 54 - [ ] Statement No. 99 > **Explanation:** GASB Statement No. 34 establishes the basic framework and requirements for state and local government financial statements and supplementary information. ### What is typically a key feature of GASB financial reporting standards? - [ ] Profit maximization strategies - [x] Transparency and consistency - [ ] Minimizing government spending - [ ] Emphasizing cash-based accounting > **Explanation:** A key feature of GASB financial reporting standards is to provide transparency and consistency in financial information. ### Which organization also sets accounting standards under the oversight of FAF similar to GASB? - [ ] Internal Revenue Service (IRS) - [x] Financial Accounting Standards Board (FASB) - [ ] Securities and Exchange Commission (SEC) - [ ] Government Accountability Office (GAO) > **Explanation:** Like the GASB, the Financial Accounting Standards Board (FASB) also sets accounting standards under the oversight of the Financial Accounting Foundation (FAF).

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Governmental Accounting Standards Board (GASB)