Running head: GASB ANDA FASB ANALYSIS PAPER

1

GASB and FASB Analysis Paper Amanda Smith ACC/ 460 Governments and Non-Profit Accounting May 5, 2012 Dorthy Galiger

GASB ANDA FASB ANALYSIS PAPER

2

GASB and FASB Analysis Paper The distinctions between accounting and not-for-profits and accounting for businesses are so different that the two disciplines warrant specialized textbooks, separate statements of concepts, and separate accounting principles and practices (Granof & Khumawala, 2011, p. 2). The Governmental Accounting Standards Board (GASB) is designed for the state and local governments (Granof & Khumawala, 2011, p. 2). With the unique characteristics of governments and their environment, the GASB has established accountability as the cornerstone of financial reporting (Granof & Khumawala, 2011, p. 2). To the GASB accountability requires governments to answer to the citizens and to rectify the use of the money and where it is going. The GASB has divided the objective of accountability into three sub-objectives; interperiod equity, budgetary and fiscal compliance, and service efforts costs and accomplishments. The interperiod equity should show if the current year citizens shifted part of the cost of services they received to future year taxpayers budget (Granof & Khumawala, 2011, p. 17). Budgetary and fiscal compliance should demonstrate if resources were obtained and used in accordance with the legally adopted budget (Granof & Khumawala, 2011, p. 17). Service efforts costs and accomplishments should provide information to assist users in assessing the service efforts costs and accomplishments of the governmental entity (Granof & Khumawala, 2011, p. 17). The Financial Accounting Standards Board objectives for not-for-profit entities are similar for that of the GASB for governments (Granof & Khumawala, 2011, p. 20). This results in accounting and reporting standards that give different looks into the financial reports of the two different types of entities (Granof & Khumawala, 2011, p. 20). The FASB stresses that external financial statements can best meet that need by disclosing failure to comply with spending

GASB ANDA FASB ANALYSIS PAPER

3

mandates that may impinge on an organizations financial performance or on its ability to provide a satisfactory level of services (Granof & Khumawala, 2011, p. 20). With modified accrual basis of accounting the focus is mainly on short term financial assets and liabilities (Granof & Khumawala, 2011, p. 41). Capital assets and long term liabilities are excluded from the balance sheet and net changes in short term financial assets and liabilities are recognized as revenues or expenses (Granof & Khumawala, 2011, p. 41). Full accrual basis of accounting is required for all businesses the focus will automatically be upon all economic resources and its balance sheet will report on all assets and liabilities, both current and noncurrent (Granof & Khumawala, 2011, p. 41). Increases or decreases in net capital assets and long term obligations are recognized as revenues or expenses (Granof & Khumawala,2011, p. 41).

As one can tell there are similarities and differences between the GASB and the FASB. Both have regulations that a business and government have to follow, with these regulations in place we can make sure that our government and businesses are handling our money correctly.

GASB ANDA FASB ANALYSIS PAPER

4

Works Cited Granof, M. H. & Khumawala, S. B. (2011). Government and not-for-profit accounting: Concepts & practices. (5th ed.) Hoboken, NJ: John Wiley & Sons.