Accounting & Auditing
GASB Clarifies which FASB Guidance
Applies to State and Local Governments
By Deborah Loomis, CPA
T
he Governmental Accounting Standards Board (GASB)
establishes accounting and financial reporting standards for
state and local governments, public benefit corporations,
public employee retirement systems, hospitals and other
health care providers, and colleges and universities.
to create a standard that captured the pre-1989 guidance that
governmental entities were following and created Statement No. 62.
Statement No. 62 is voluminous and covers more than 120 FASB
and AICPA pronouncements organized by topics including:
In December 2010, GASB issued Statement No. 62, Codification
of Accounting and Financial Reporting Guidance Contained
in Pre-November 30, 1989, FASB and AICPA Pronouncements,
the objective of which was to directly incorporate applicable
provisions of FASB and AICPA pronouncements issued on or
before Nov. 30, 1989, into the accounting and financial reporting
standards for state and local governments.
• Accounting Changes and Error Corrections;
On Nov. 30, 1989, GASB became the official standardsetting body for governmental entities. Paragraph 17 of
GASB Statement No. 34, Basic Financial Statements—and
Management’s Discussion and Analysis—for State and Local
Governments explains why pre-1989 FASB and AICPA
pronouncements are important to governments, stating
“reporting for governmental and business-type activities should
be based on all applicable GASB pronouncements, as well as
Financial Accounting Standards Board (FASB) Statements and
Interpretations, Accounting Principles Board (APB) Opinions,
and Accounting Research Bulletins (ARBs) of the Committee
on Accounting Procedure issued on or before Nov. 30, 1989,
unless those pronouncements conflict with or contradict
GASB pronouncements.” Under GASB Statement No. 34,
preparers of government financial statements were required
to determine which FASB and AICPA pronouncements were
applicable to them and then ascertain if the provisions of those
pronouncements conflicted with GASB standards.
• Revenue Recognition When Right of Return Exists;
Statement No. 62 provides a listing of applicable authoritative
guidance for accounting and financial reporting standards
for state and local governments. It places the guidance into
one text and thus reduces the complexity of locating and
using authoritative literature needed to prepare governmental
financial statements. It should provide for more consistent
application of the standards because it clearly identifies which
FASB and AICPA pronouncement provisions apply to state
and local governments. Statement No. 62 does not establish
any new requirements, but simply incorporates those FASB and
AICPA pronouncements that are applicable to state and local
governments into the GASB literature.
A key factor in GASB’s issuance of Statement No. 62 was the FASB’s
Accounting Standards Codification, which became the single source
of authoritative literature when it was issued in July 2009.
FASB’s codification made all previously-issued FASB and AICPA
guidance nonauthoritative. Because of this, GASB needed
6 the Asset | November 2011
• Prior-Period Adjustments;
• Disclosure of Accounting Policies;
• Contingencies;
• Capitalization of Interest Cost;
• Revenue Recognition for Exchange Transactions;
• Special and Extraordinary Items;
• Comparative Financial Statements;
• Extinguishments of Debt;
• Troubled Debt Restructuring;
• Interest Costs-Imputation;
• Leases;
• Statement of Net Assets Classification;
• Related Party Disclosures; and
• Construction-Type Contracts – Long Term.
The issuance of Statement No. 62 also eliminated paragraph 7
of GASB Statement No. 20, Accounting and Financial Reporting
for Proprietary Funds and Other Government Entities that Use
Proprietary Fund Accounting. Paragraph 7 allowed enterprise
funds and business-type activities to elect application of postNov. 30, 1989, FASB Statements and Interpretations as long as
they did not conflict with or contradict GASB pronouncements.
The requirements of Statement No. 62 are effective for financial
statements for periods beginning after Dec. 15, 2011. Earlier
application is encouraged.
GASB believes that Statement No. 62 will improve financial
reporting by codifying all sources of generally accepted
accounting principles for state and local governments into
one source. This statement brings the authoritative guidance
together in one place and that guidance will be modified, as
necessary, to recognize future changes in governments and
the needs of governmental financial statement users.
Deborah Loomis, CPA, is a sole practitioner in Liberty, Mo.,
specializing in the audits of small companies and local
governments. She currently serves as chair of the MSCPA
Accounting and Auditing Committee. Deb can be reached
at debloo@kc.rr.com.