What is the Governmental Accounting Standards Board (GASB)?
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."
Who is on the Government Accounting Standards Board?
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 (you can find the names of current board members here).
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.
What does the GASB do?
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.
Who follows GASB Standards?
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.
What is the difference between GASB and FASB?
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.
What does GAAP mean?
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).
How Does the GASB Set Accounting Standards?
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.
Who Pays for the GASB?
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).
What is the Current GASB Standard?
The current lease accounting standard is GASB No. 87. The current expected due date for GASB 87 adoption is June 15, 2021, although GASB favors early adoption.
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.