This paper will compare and contrast GASB and FASB accounting by explain the objectives of the two boards, explain how the two boards are similar, explain how the two boards are different, and explain how modified accrual basis of accounting differs from

University Degree Business and Administrative studies

GASB & FASB

GASB & FASB Analysis Paper

Bridget Burns

ACC/460 – Government and Non-Profit Accounting

June 29, 2009

Two organizational authorities create standards for non-business accounting. These authoritative accounting and financial reporting standard-setting bodies are the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB). The GASB is the standard-setting body for government entities. The FASB is the standard-setting body for all nongovernmental entities, including not-for-profit organizations. This paper will compare and contrast GASB and FASB accounting by explain the objectives of the two boards, explain how the two boards are similar, explain how the two boards are different, and explain how modified accrual basis of accounting differs from full accrual basis of accounting.

Objectives

The overall objective of financial reporting is to meet the information needs of statement users. The GASB and the FASB have developed objectives of financial reporting that stress the importance of providing information that enables users to assess interperiod equity and compliance with budgetary (or spending) mandates (Granof, M. H. 2007. p 28). GASB objectives of accountability are interperiod equity, budgetary and fiscal compliance, and service efforts and accomplishments by assessing economy, efficiency, and effectiveness. FASB objective is to provide that information should be useful in ‘‘assessing how managers of a non-business organization have discharged their stewardship responsibilities (Granof, M. H. 2007. p 20).’’ Both GASB and FASB share objectives of being objective in decision making, weigh constituents views carefully while developing standards, promulgate standards when cost effective, bring changes with minimal disruption, and to amend or replace standards in a timely fashion.

How GASB and FASB are similar

GASB and FASB objectives both endorse the notion that financial reporting encompasses information on service efforts and accomplishments (Granof, M. H. 2007. p 21). GASB and FASB have many similar objectives. Both boards have the authority to set standards regarding financial reporting that will be useful to the user of the reports. Each board has an advisory council. The boards share a facility in Norwalk, Connecticut.

How GASB and FASB are different

The FASB stresses that external financial statements can “best meet the need by disclosing failure to comply with spending ...

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How GASB and FASB are similar

How GASB and FASB are different

The FASB stresses that external financial statements can “best meet the need by disclosing failure to comply with spending mandates that may impinge on an organization’s financial performance or on its ability to provide a satisfactory level of service” whereas GASB makes budgetary and fiscal compliance a central concern of financial reporting (Granof, M. H. 2007. p 20). The GASB currently has a full-time chairman and six part-time members while the FASB has seven full-time members, including the chairman (Granof, M. H. 2007. p 24). FASB is funded by the Securities and Exchange Commission (SEC) and GASB is funded by contributions and sales of their publications.

How modified accrual basis accounting differs from full accrual accounting

Full accrual basis of accounting recognizes revenue and expenses when they occur regardless to when the cash is paid or received. Modified accrual basis is a combination of cash and full accounting basis. With modified accrual basis, the revenue is recognized when measurable (cash flow can be estimated) and available (within 60 days). Full accrual accounting matches expenses with revenue while modified accrual accounting recognizes expenses when incurred without matching to revenue. Government funds financial statements use the modified accrual method but government activities are reported on a full accrual method on government-wide financial statements.

This paper compared and contrasted GASB and FASB accounting by explaining the objectives of the two boards, explaining how the two boards are similar, explaining how the two boards are different, and explaining how modified accrual basis of accounting differs from full accrual basis of accounting. The GASB and the FASB have developed objectives of financial reporting that stress the importance of providing information that enables users to assess interperiod equity and compliance with budgetary (or spending) mandates (Granof, M. H. 2007. p 28). The GASB and FASB have many similarities and differences. Government funds financial statements use the modified accrual method but government activities are reported on a full accrual method on government-wide financial statements.

References

Granof, M. H. 2007. Government and Not-for-Profit Accounting: Concepts and Practices, 4th edition. Hoboken, NJ: John Wiley & Sons, Inc.