Governmental Accounting Standards Board (GASB): What is GASB?

Governmental accounting refers to the specialized field of accounting that focuses on financial management and reporting in the public sector. It involves the recording, analysis, and reporting of financial transactions and activities undertaken by government entities, such as federal, state, and local governments, as well as other organizations and agencies.

The primary objective of governmental accounting is to provide accurate financial information to support decision-making, demonstrate accountability, and ensure proper stewardship of public funds. Unlike private-sector accounting, governmental accounting has some unique characteristics and reporting requirements due to the nature of government operations and the various stakeholders involved.

​The three types of governmental accounting are:

Fund Accounting: Fund accounting is the primary accounting method used by governmental entities. It focuses on tracking and reporting financial information for specific funds or account groups. Each fund is treated as a separate accounting entity with its own set of self-balancing accounts. Fund accounting is used to ensure the proper management and accountability of public funds, as well as to comply with legal and regulatory requirements.

Government-wide Accounting: Government-wide accounting, also known as entity-wide or consolidated accounting, provides a view of the financial activities and position of the entire government entity. It consolidates the financial information from all funds and accounts into a single set of financial statements. Government-wide accounting is designed to provide a broader perspective on the financial performance and overall financial health of the government.

Proprietary Accounting: Proprietary accounting is used for government-owned business-like activities that are operated similar to commercial enterprises. This type of accounting is used for activities such as utilities, transportation systems, and other revenue-generating operations. Proprietary accounting follows accounting principles similar to those used in the private sector, focusing on the measurement of revenues, expenses, assets, and liabilities associated with these business-type activities.

These three types of accounting work together to provide a comprehensive financial picture of governmental entities, allowing for effective financial management, accountability, and reporting.

Established in 1984, the Governmental Accounting Standards Board (GASB) is an independent, private-sector organization that develops and issues accounting and financial reporting standards for U.S. state and local government.

The GASB is overseen by the Financial Accounting Foundation (FAF), an independent, not-for-profit organization that oversees and finances both the GASB and the Financial Accounting Standards Board (FASB).

The GASB is also advised by the Governmental Accounting Standards Advisory Council (GASAC), an organization that was established by the FAF’s Board of Trustees to advise the GASB on its agenda, priorities and procedural matters. Importantly, the GASAC doesn’t vote on board matters or make decisions about standards. Instead, it provides the GASB with contextual information about the diverse individuals that GASB may impact. This empowers the GASB to understand diverse views and make informed decisions accordingly.

The collective mission of the GASB, the FASB and the FAF, according to the FASB website, is, “to establish and improve financial accounting and reporting standards to provide useful information to investors and other users of financial reports and educate stakeholders on how to most effectively understand and implement those standards." Learn more about the difference between GASB vs. FASB.

Need help with GASB 87 compliance? Check out our comprehensive GASB 87 Implementation Guide.

The GASB board includes seven diverse board members – including a chairman and a vice chairman –all of whom are expected to have a deep understanding of governmental accounting and finance. Each board member is appointed by the FAF Board of Trustees for a 5-year term, and the chairman is the only full-time member of this board.

In addition to these board members, the GASB also assembles expert consultative groups and task forces to help them research standards and execute major projects.

The Governmental Accounting Standards Board sets standards that follow Generally Accepted Accounting Principles (GAAP).These standards are intended to promote financial reporting and provide useful information to groups and individuals who use financial reports, including public officials, investors and taxpayers.

GASB standards are recognized by:

• State and local governments
• State Boards of Accountancy
• The American Institute of CPAs (AICPA)

Many individuals and organizations – including taxpayers, legislators, holders of municipal bonds and oversight bodies – use this information to make investments and shape public policy. Government officials can also use GASB standards to demonstrate their financial accountability and responsibility.

GASB, FASB and FAF trustees all relate to one another in the following way:

• The FAF is essentially the “parent” organization. Its trustees oversee GASB and FASB, appointing board members and streamlining the standard-setting process, which the FAF management provides council and services to support standard setting.
• GASB and FASB are boards that set high-quality accounting and financing standards. While GASB sets these standards for state and local governments, FASB is charged with setting these standards for public companies, private companies and nonprofits in the U.S.

The GAAP, or Generally Accepted Accounting Principles, are the standards set by GASB, FASB, the American Institute of Certified Public Accountants (AICPA)and the United States Securities and Exchange Commission (SEC).

The goal of the GASB is to provide reliable, transparent and comparable government financial data. To help ensure that this happens, the GASB follows many due process activities before issuing new standards. These activities are announced publicly, and broad public participation is encouraged. They include:

• Input from an GASAC advisory task force.
• The publication of a discussion document that the public can comment on.
• The public distribution of an Exposure Draft of proposed standards. Again, the public is open to comments.
• Review of existing literature on related subjects.
• Public hearings and forums on its due process documents.

The GASB is funded primarily by accounting support fees paid by brokers and dealers who trade in municipal bonds. The funding mechanism was established by Section 978(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).

The current lease accounting standard is GASB No. 87.

The standard specifically:

• Requires that all leases be reported as a capital lease/financing lease.
• Eliminates the classification of an operating lease unless the lease is a short-term lease, characterized as 12 months or less.
• Provides for three accounting treatments: short-term leases, contracts that transfer ownership, and contracts that do not transfer ownership.
• Requires that a lessee recognizes a lease liability and an intangible right-to-use lease asset and that a lessor recognizes a lease receivable and a deferred inflow of resources.

You can learn more about GASB 87 and how to find a software that can facilitate GASB 87 compliance here.

• ASC 842
• IFRS 16
• GASB 87
• FASB
• IASB

Lucernex is a lease accounting software that helps organizations comply with accounting standards, including the Governmental Accounting Standards Board (GASB) standards. Lucernex allows you to centralize and organize all lease-related information, such as lease terms, payment schedules, and critical dates. This ensures that the necessary data is readily available for compliance with GASB standards.