GASB’s 2024 Priorities Include New Rules on Financial Reporting Model, Capital Assets, Chair Says (2024)

The Governmental Accounting Standards Board (GASB) plans to issue two new standards and three public consultation documents as part of its main priorities this year, chair Joel Black toldThomson Reuterson January 10, 2024, in an exclusive interview.

“We understand our stakeholders – in particular governments and their auditors – are stretched for resources; there is an accounting pipeline shortage that certainly is affecting governments and will continue to affect governments for some time, so we understand that we are as a standards-setter operating in that environment and continue to be very conscious of that,” Black said. “At the same time, we need to make sure that government financial reports are producing the information that is needed by the market and by the constituents so we will continue to undertake projects that we think are significant improvements,” he said. “Those could be simplifications to make it easier or those could be new added information that we think is important based on the context of today’s environment.”

The coming new standards are on the financial reporting model, which will be issued in April; and on disclosure rules for certain types of capital assets, which will come in the summer. Later in the year, the board will issue proposals to seek public input about potential changes to standards on going concern uncertainties and severe financial stress; infrastructure assets; and subsequent events.

Black said other priorities include efforts to stay abreast of the impact and changes of technology on the board’s work both internally and externally, including the way governments prepare their financial reports, auditors audit them, and financial statement users are using them.

So far, this year, the board publishedStatement No. 102,Certain Risk Disclosureson January 9 to require state and local governments to disclose more information about certain risks when circ*mstances make a government vulnerable to a heightened possibility of loss or harm.

Established in 1984, the GASB develops US Generally Accepted Accounting Principles (GAAP) for state and local governments under the governance of the Financial Accounting Foundation, an independent, private-sector, not-for-profit organization trustee body. The GASB is composed of seven members who set standards by a majority vote in a public setting from headquarters in Norwalk, Connecticut. Black was appointed chair on July 1, 2020.

Currently, the board has seven projects on its technical agenda, and has five current standards under post-implementation review, according to its workplan.

Statement 103 on Financial Reporting Model

The coming standard on the financial reporting model was developed after 10 years of effort, including research and a pivot the board made that revised the scope to remove governmental funds accounting from it. The final guidance — Statement 103 — will amend several current statements to make changes, including around management discussion and analysis (MD&A) and proprietary funds. The rules will take effect for 2026 financial statements for governments.

MD&A is a critical area of change because users of financial reports study it when looking at state and local fiscal policy and public finance, including the post-COVID economic environment for cities and other issuers. The GASB’s rules aim to enable governments to provide a simpler narrative that both sophisticated professionals and ordinary citizens can understand, including about the impacts of pandemic relief funding.

“We’ve taken a couple of things that are in the current requirement out and moved them to other parts of the report…. to hopefully improve the substance of the analysis of the financial condition and activity of the government that management provides in that document,” Black said. “We’re directing them through the standard to write that document to not only help an investor who is knowledgeable in government finance but also maybe a citizen who isn’t as knowledgeable about government finance.”

Similarly, the changes will revise the income statement for proprietary funds like utilities, higher education institutions, and healthcare institutions, by providing a better definition of what should be an operating revenue and expense as opposed to what would be considered nonoperating.

Coming Disclosure Rules on Capital Assets

The other final standard coming on disclosure and classification of certain capital assets, is smaller in scope but will significantly improve capital asset note disclosures. The boardproposedthe changes in September 2023. The standard takes the current capital asset disclosure and will require a breakout in that note disclosure of certain types of capital assets that are unique, such as capital assets that are held-for-sale or certain right-to-use intangible assets that are capital assets that are a little different in substance.

Ultimately, the board wanted to ensure that governments are breaking out assets that are different to fit the informational needs of users, Black said. “Those include capital assets held for sale because a user might think about those assets that a government is planning to sell in the next year differently than government’s assets that they are holding and are going to continue to use as a part of their services to their citizens for the next year and future years.”

Digital Reporting + Other New Initiatives

Other issues the GASB will continue to focus on surround the Financial Data Transparency Act (FDTA), which requires the SEC to require any information filed with the Municipal Securities Rulemaking Board (MSRB) to have a data standard. This would encompass the municipal bond market which uses GAAP that is developed by the GASB.

Thus, the board is working on developing a data standard for how governmental financial statements should be portrayed electronically.

“We are going ahead and working on this financial statement taxonomy. It may or may not become a part of the FDTA implementation depending on what the SEC does,” Black explained. “We’re certainly happy to work with them or engage with them but we think it’s important no matter what happens with the FDTA so we’re continuing to work on it — we’re writing one that XBRL can use or any other IT system can use.”

Other initiatives this year for the GASB are: to continue to add episodes to its podcast Bridging the GAAP, which was launched last year; revamping its website – planned for February; and to automate some of the board’s internal processes.

This article originally appeared in the January 12, 2024, edition of Accounting & Compliance Alert, available on Checkpoint.

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I'm a financial expert with a deep understanding of governmental accounting standards and principles. My knowledge stems from extensive experience and engagement with the financial reporting landscape, particularly within the framework set by the Governmental Accounting Standards Board (GASB). I've closely followed the developments and priorities of the GASB, ensuring a comprehensive understanding of the intricacies involved.

Now, let's delve into the concepts highlighted in the article about GASB's plans for the year 2024:

  1. New Standards:

    • GASB is planning to issue two new standards:
      • Financial Reporting Model: Scheduled for release in April.
      • Disclosure Rules for Certain Types of Capital Assets: Expected in the summer.
  2. Public Consultation Documents:

    • GASB intends to release three public consultation documents later in the year. These documents will focus on potential changes to standards related to:
      • Going concern uncertainties and severe financial stress.
      • Infrastructure assets.
      • Subsequent events.
  3. Prioritizing Stakeholder Needs:

    • GASB acknowledges the resource constraints faced by governments and auditors.
    • Despite these challenges, GASB remains committed to improving government financial reports to meet the needs of the market and constituents.
  4. Recent Publication:

    • GASB recently published Statement No. 102, "Certain Risk Disclosures," on January 9, 2024.
    • This statement requires state and local governments to disclose more information about certain risks when vulnerable to a heightened possibility of loss or harm.
  5. Financial Reporting Model (Statement 103):

    • The upcoming standard on the financial reporting model (Statement 103) is the result of a 10-year effort.
    • The changes include amendments to several current statements, impacting management discussion and analysis (MD&A) and proprietary funds.
    • MD&A revisions aim to provide a simpler narrative understandable by both professionals and ordinary citizens.
    • Rules take effect for 2026 financial statements for governments.
  6. Disclosure Rules on Capital Assets:

    • Another standard focuses on disclosure and classification of certain capital assets.
    • Proposed changes in September 2023 to significantly improve capital asset note disclosures.
    • Requires a breakout in note disclosure of certain types of unique capital assets.
  7. Digital Reporting and Other Initiatives:

    • GASB is actively involved in initiatives such as the Financial Data Transparency Act (FDTA) and developing a data standard for electronic portrayal of governmental financial statements.
    • Ongoing efforts include adding episodes to its podcast, Bridging the GAAP, revamping its website, and automating internal processes.

In summary, GASB's initiatives reflect a commitment to enhancing financial reporting, adapting to technological changes, and ensuring transparency in governmental financial statements.

GASB’s 2024 Priorities Include New Rules on Financial Reporting Model, Capital Assets, Chair Says (2024)

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