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Analytical Review of GASB and FASB

All types of organizations are required to furnish their accounts and make them available for external users who may be interested in the well-being of these companies and decide about their investments and associations with them based on information provided to them in the financial statements. Whether an organization is privately held or owned by the government it is equally important for them to keep accounting records and publish audited financial statements. The accounting and reporting both types of companies are regulated by two separate accounting regulatory bodies that are FASB and GASB respectively. In this paper analytical review of both GASB and FASB is carried out to provide a comparison between the two accounting governing bodies in the US. Also, it will entail a difference between the modified accrual basis of accounting and full accrual accounting.

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Financial Accounting Standards Board (FASB) regulates accounting in companies that have businesses for both for-profit and not-for-profit by establishing accounting rules and regulations and working with other governing bodies to ensure that these accounting reporting standards are complied with (Copley & Engstrom, 2007). On the other hand, Government Accounting Standards Board (GASB) develops accounting standards and regulates reporting by all government-owned entities both profit-oriented or not for profit organizations in the US. The not-for-profit state-owned organizations include colleges, universities, medical centers, libraries, museums, and other recreational setups (Copley & Engstrom, 2007). Thus, both FASB and GASB have similar functions however their authority is separate and both are overlooked for their procedures and operations by Financial Accounting Foundation (FAF) (Granof, 2007).

There are several major differences in the bases for financial reporting that could be pointed out between FASB and GASB. These include the difference in emphasis on budgetary planning as a part of financial reporting which is given higher priority by GASB as a way of assessing management performance as compared to FASB that places more emphasis on setting expenditure targets and assesses management performance on meeting these targets. Under FASB the targeted audience of financial reporting is limited to a certain group of stakeholders while GASB considers viewership of financial reporting and its use by a much larger group of potential users.

In addition to these, the titles of financial statements, their types and the ways they are prepared are also different as required by these standard-setting bodies. For example, under GASB the ‘owners’ equity’ that represents changes in assets is referred to as ‘net assets’ (Granof, 2007). Moreover, state-owned organizations whether for-profit or not-for-profit organizations are required by the GASB to prepare fund statements to include details of governmental proprietary and fiduciary funds. Furthermore, under GASB the only method allowed for preparing cash flow statements is the direct method whereas FASB allows a choice between direct and indirect methods. Cash flow from operating activities is reconciled using operating income under GASB rather than net income as in FASB guidelines and also different headings are used to identify various cash elements such as cash received from debt is replaced by a decrease in funds, interest payments are shown under financing activities rather than operating activities and dividends received are put under investing activities (Copley & Engstrom, 2007). Finally, there are also differences in the way the GASB requires information to be presented in the notes attached to financial statements.

Reference List

Copley, P. A. & Engstrom, J. H. (2007). Essentials for Accounting for Governmental and Not-for-Profit Organizations. Boston: Mc Graw Hill.

Granof, M. H. (2007). Government and Not-for-Profit Accounting. New Jersey: John Wiley & Sons, Inc.

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StudyCorgi. (2022, April 26). Analytical Review of GASB and FASB. Retrieved from https://studycorgi.com/analytical-review-of-gasb-and-fasb/

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StudyCorgi. (2022) 'Analytical Review of GASB and FASB'. 26 April.

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