GASB Statement No. 34 Accounting and Financial Reporting Alternatives
GASB Statement No. 34 includes numerous accounting and financial reporting
alternatives, which are provisions that permit an unconditional choice between two or
more approaches. In several situations, that Statement encourages the use of one
alternative over another. The following table lists those alternatives, identifies those that
are encouraged, and provides recommendations of staff of the Office of the State Auditor.
Topic
•
MD&A
Description of Alternative
and Encouraged Methods
and Presentations
Reference
Using charts, graphs, and tables is
encouraged to enhance the
understandability of the MD&A.
GASB 34, ¶9
The OSA strongly encourages the use of
charts, graphs, and tables in the MD&A. The
use of these tools can greatly enhance the
presentation of financial results. However,
keep in mind how the report will be duplicated
to ensure that the duplication method will
effectively show the intended results in the
report.
The OSA’s recommendations will depend on
the complexity of the statements for each
individual reporting entity. The more
complex the reporting entity becomes, the
more cumbersome the statements become with
additional information.
•
A total column for the reporting
entity as a whole may or may not
be presented.
GASB 34, ¶14
The OSA suggests, if a reporting entity has
discrete component units that are reported, to
not provide a total column for the reporting
entity as a whole. However, if it is just the
primary government that needs to be reported,
a total column for the primary government
must be provided.
•
Prior-year data may or may not be
presented.
Government-wide financial
statements (GWFS)
GWFS—statement of net
assets
Presentations
•
Presenting the statement using a
net assets format, rather than a
balance sheet format, is
encouraged.
•
6/26/02
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
Presenting assets and liabilities in
order of their relative liquidity,
rather than classifying them as
between current and long-term, is
encouraged.
GASB 34, ¶14
The OSA generally recommends that because
of the complexity of two-year presentations
that governments only report current year data
at the government-wide level. The MD&A
will provide certain data to compare current
year and prior year data. In less complex
presentations two-year presentations can be
beneficial.
GASB 34, ¶30
The OSA encourages the use of the net assets
format for the statement of net assets. This is
the format that has been encouraged by the
GASB and is an alternative format that may be
more easily understood by many readers of
financial statement information
GASB 34, ¶31 and
fn23
The OSA would agree with the GASB and
encourage the use of presenting in order of
their relative liquidity rather than as current
and long-term. However, please note that
liabilities whose average maturities are greater
than one year should be reported in two
components – the amount due within one year
and the amount due in more than one year.
1
Description of Alternative
and Encouraged Methods
and Presentations
Topic
Capital assets
•
Accumulated depreciation may be
reported on the face of the
statement of net assets or
disclosed in the notes.
•
GWFS—statement of
activities
Capital assets may be reported in
detail, such as by major class of
asset (for example, infrastructure,
buildings and improvements,
vehicles, machinery and
equipment).
Level of detail
•
Presenting data at a more detailed
level than by function (for
governmental activities) or
segment (for business-type
activities) is encouraged if that
provides more useful information
without reducing
understandability.
•
Presenting a statement of
activities as other supplementary
information is encouraged for
(a) governments that want to
present disaggregated data for
their multiple-function enterprise
funds beyond what is required for
segment reporting and (b) specialpurpose governments engaged
only in business-type activities
Indirect expenses
•
None, some, or all indirect
expenses may be allocated among
functions.
6/26/02
•
If indirect expenses are allocated,
a column totaling direct and
indirect expenses may or may not
be presented.
•
Administrative overhead charges
for “centralized” expenses may be
eliminated or not. Disclosure is
required if those charges are not
eliminated.
Reference
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
GASB 34, ¶20
We recommend that capital assets be
presented net of accumulated depreciation in
the financial statements. The additional
information showing amounts at gross should
be presented in the notes to the financial
statements.
GASB 34, ¶20
The OSA would recommend keeping the face
of the financial statements as uncomplicated
as possible. Since the assets should be
reported by major classes in the notes to the
financial statements we would recommend to
have two classes of assets on the statement of
net assets and those are: Non-depreciable and
Depreciable.
GASB 34, ¶40
The OSA believes the function levels provide
the level of detail necessary for governmental
activities within the Statement of Activities.
Detail by significant activity may be needed
for business type activity and component
units.
GASB 34, ¶123
Once again, the OSA would encourage this
reporting if the government feels that
reporting this information as RSI would aid
the users in better understanding the results of
the organization or fund.
GASB 34, ¶42
The OSA would not recommend allocating
indirect expenses to the other functions on the
statement of activities. The exception to this
is if a valid, reasonable, and equitable
methodology can be derived to allocate certain
indirect expenses to the appropriate functions.
GASB 34, ¶42
The OSA does not have a recommendation.
The entity must present separate columns for
indirect and direct expenses, but entities
should decide whether having a total column
aids in the understandability of the financial
statements or clutters up the statement .
GASB 34, ¶43
The OSA does not have a recommendation.
The entity should decide whether eliminating
these expenses aid in a more fair presentation
of the financial statements.
2
Description of Alternative
and Encouraged Methods
and Presentations
Topic
Depreciation expense
•
Depreciation expense on
noninfrastructure capital assets
used by more than one function
may, depending on the extent of
the functions involved, be
(a) allocated ratably as a direct
expense among functions,
(b) reported as a separate line
item, or (c) reported in an
“indirect” function (such as
“general government”). A
disclosure is required on the face
of the statement if a separate line
item is used.
Reference
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
GASB 34, ¶44
Where non-infrastructure capital assets are
used by more that one function, the OSA
would suggest the depreciation expense be
allocated if a valid, reasonable, and equitable
methodology can be derived for allocation of
depreciation expense. If this is not possible
the OSA suggests that depreciation expense be
reported on a separate line item, but indicate
that this line item excludes direct depreciation
expenses of the various programs.
•
Depreciation expense on general
infrastructure assets may be
reported as a direct expense of the
function associated with the
capital outlay or as a separate line
item.
GASB 34, ¶45
Depreciation expense of this kind should be
reported as a direct expense of the function
associated with the capital outlay.
•
An enterprise fund may or may
not be used to report any activity
for which a fee is charged to
external users for goods or
services. (There are three
situations in which the use of an
enterprise fund is required.)
GASB 34, ¶67
The OSA recommends that the reporting
entity keep the reporting as simple as possible
as long as it is felt that the activity is fairly
stated in the financial statements. Therefore,
if the reporting entity is not required by one of
the three situations to report as an enterprise
fund, the decision should be based on the
significance of the activity and the effect on
the complexity of the financial statements.
•
An internal service fund may or
may not be used to report any
activity that provides goods or
services to other funds,
departments, or agencies of the
primary government or its
component units, or to other
governments. However, to use an
internal service fund, the
reporting government has to be
the predominant participant in the
activity.
GASB 34, ¶68
The OSA recommends that entities review the
use of internal services funds. Internal
service funds provide a reasonable means of
charging other departments or funds for
services. Since internal service funds are
eliminated into either governmental or
business activities at the government-wide
level it adds to the amount of reconciling and
adjusting entries needed to prepare the
government-wide financial statements.
Major funds
•
Any governmental or enterprise
fund may be presented as a major
fund. (There is a two-step t est for
determining which governmental
and enterprise funds must be
reported as major funds.) The
General Fund is always a major
fund.
GASB 34, ¶76
The OSA suggests that only funds that meet
the two-step test be presented as major funds.
However, entities should review other funds if
it is felt that the information that would be
shown by presenting a nonmajor fund would
be very helpful in the reading of the financial
statements. Please note that the nonmajor
funds will be shown in a combining schedule.
Proprietary fund financial
statements
•
The financial position statement
may be presented using either a
net assets format or a balance
sheet format.
GASB 34, ¶91,
fn39, and ¶98
The OSA suggests a net assets format be used
for reporting the proprietary funds financial
position.
Fund classification
6/26/02
3
Topic
•
Description of Alternative
and Encouraged Methods
and Presentations
Reference
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
In the financial position
statement, the difference between
assets and liabilities may be
labeled either fund net assets or
fund equity. (Regardless of the
label used, however, the net assets
or equity should be displayed in
the three components as discussed
in GASB 34, ¶98.)
GASB 34, ¶91,
fn40
•
Revenues may be reported either
(a) net of discounts and
allowances with the discount or
allowance amount presented
parenthetically in the financial
statement or in a note to the
financial statements or (b) gross
with the related discounts and
allowances reported directly
below the revenue amount
GASB 34, ¶100,
fn41
Fiduciary fund financial
statements
•
The components of net assets—
invested in capital assets, net of
related debt; restricted; and
unrestricted—may or may not be
presented in the statement of
fiduciary net assets. (Other GASB
Statements require specific equity
presentations for certain fiduciary
funds.)
GASB 34, ¶108
Normally, a reporting entity will not have all
of these components, however, for those
components they do have, the reporting entity
should include the components if it provides a
more understandable, consistent, and fair
presentation of the net assets.
Infrastructure assets
•
Networks or subsystems of
networks of infrastructure assets
may be reported using the
modified approach or by reporting
depreciation expense. (Two
requirements for using the
modified approach have to be
met.)
GASB 34, ¶23
The OSA would generally recommend that the
reporting entity not use the modified approach
but rather report depreciation expense. It
appears that it would actually be less
complicated to report depreciation than to
meet the two requirements for the modified
approach and then do the condition
assessments of the infrastructure assets.
•
For infrastructure assets reported
using the modified approach,
condition assessments may be
performed using statistical
samples or on a cyclical basis.
GASB 34, ¶23, fn
19
•
Governments that do not use the
modified approach but that gather
the information required to be
presented as RSI were they to use
that approach are encouraged to
provide that information as other
supplementary information.
GASB 34, ¶133,
fn58
1
The OSA recommends the account name net
assets be used. The OSA believes that the net
assets label will be more widely understood by
all parties who may read the financial
statements.
The OSA suggests the use of showing the
revenues net of discounts and allowances and
then showing the information in the notes to
the financial statements. This allows the face
of the financial statements to be kept simple.
The OSA suggests that the reporting entity
develop a written approved policy as to which
method appears to be the most effective and
efficient way to provide fair presentation of
the modified approach.
If the entity has the information available and
believes it is valuable to financial statement
readers then the OSA would encourage you to
present this information.
Similar guidance concerning the retroactive reporting of general infrastructure assets is
provided in GASB Statement No. 35, Basic Financial Statements—and Management’s
Discussion and Analysis—for Public Colleges and Universities, paragraph 10.
2
See footnote 1.
6/26/02
4
Topic
•
Description of Alternative
and Encouraged Methods
and Presentations
Reference
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
Phase 1 and 2 governments (those
with total annual revenues of $10
million or more in the first fiscal
year ending after June 15, 1999)
may limit retroactive reporting of
general infrastructure assets to
major general infrastructure assets
acquired, renovated, restored, or
improved in fiscal years ending
after June 30, 1980, although
retroactive reporting of nonmajor
networks of general infrastructure
assets is encouraged.1
GASB 34, ¶148,
¶154, and ¶156
As stated, GASB 34 encourages the reporting
of the nonmajor networks of the infrastructure
assets. The OSA would also encourage
reporting the nonmajor networks, but entities
should consider the cost benefit of
determining these retroactive amounts for
nonmajor systems.
•
Phase 3 governments (those with
total annual revenues of less than
$10 million in the first fiscal year
ending after June 15, 1999) are
not required to retroactively
report general infrastructure
assets, although retroactive
reporting of major general
infrastructure assets and nonmajor
networks of general infrastructure
assets is encouraged.2
GASB 34, ¶148
and ¶156
The OSA expects that for most phase 3 small
cities, towns and other governmental units that
the cost of accumulating retroactive amounts
for infrastructure outweighs the benefit. For
phase 3 counties the OSA encourages the
retroactive reporting of infrastructure assets.
The information needed to determine
retroactive amounts is generally expected to
be available for counties. It also would
increase comparability between counties
within Minnesota if they are all accounting for
these assets.
•
If the actual historical cost of
existing major general
infrastructure assets is not
practically determinable,
historical cost may be estimated
using any approach that complies
with the intent of GASB 34.
GASB 34, ¶155
The OSA suggests to the reporting entities that
they review the methods mentioned in
paragraphs 158-160 and determine which
method for estimating the cost of a particular
asset is the most reasonable. The OSA then
suggests that the entity keep records that
document how the costs were derived.
Works of art, historical
treasures, and similar
assets
•
Capitalization is encouraged, but
not required, for collections that
are not capitalized at June 30,
1999, and that are (a) held for
public exhibition, education, or
research in furtherance of public
service, rather than financial gain;
(b) protected, kept unencumbered,
cared for, and preserved; and
(c) subject to an organizational
policy that requires the proceeds
from sales of collection items to
be used to acquire other items for
collections.
GASB 34, ¶27 and
fn22
The OSA encourages reporting entities to
capitalize these types of assets providing there
is a reasonable way to devise a cost for them
and the amounts are significant.
Depreciation
•
Any established depreciation
method may be used, including
composite methods.
GASB 34, ¶22,
¶161, ¶163, and
¶164
Each reporting entity needs to determine
which depreciation method(s) will most fairly
present the financial statements. Each entity
then needs to devise the appropriate approved
written policies. For the ease of accounting
composite methods are encouraged.
•
Depreciation may be based on the
estimated useful life of a class of
assets, a network of assets, a
subsystem of a network, or
individual assets.
6/26/02
GASB 34, ¶22 and
161
Each reporting entity needs to determine the
estimated useful lives that will most fairly
present the financial statements.
5
Description of Alternative
and Encouraged Methods
and Presentations
Topic
Private-sector standards and
previous GASB
proprietary activity
standards
•
For estimated useful lives,
governments can use (1) general
guidelines obtained from
professional or industry
organizations, (2) information for
comparable assets of other
governments, or (3) internal
information.
GASB 34, ¶161
•
Business-type activities and
enterprise funds may use all postNovember 30, 1989 FASB
pronouncements unless they
conflict with or contradict GASB
pronouncements, or they may use
none of them.
GASB 34, ¶17 and
¶94
•
Using the same application of
FASB pronouncements for all
enterprise funds is encouraged.
•
FASB Statement No. 71,
Accounting for the Effects of
Certain Types of Regulation, and
related pronouncements issued on
or before November 30, 1989,
may or may not be applied to
qualifying enterprise funds.
•
Budgetary information
6/26/02
Reference
The following standards may be
applied prospectively to
governmental activities in the
government-wide financial
statements: (1) APB Opinions No.
12, Omnibus Opinion—1967, and
No. 21, Interest on Receivables
and Payables, except for deepdiscount or zero-coupon debt,
(2) GASB Statement No. 23,
Accounting and Financial
Reporting for Refundings of Debt
Reported by Proprietary
Activities.
•
Budgetary comparison
information should be presented
as required supplementary
information (RSI), unless the
government elects to report it as a
basic financial statement. (RSI is
the encouraged presentation.)
•
Reporting the variance between
the final budget and actual
amounts is encouraged but not
required.
GASB 34, ¶94
GASB 34, ¶95
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
See above. Whichever useful life is used, it
should be based on the entities own
experience, the most appropriate useful life.
The OSA and others are accumulating
resources on estimated useful lives.
The OSA encourages entities not to use post
November 30, 1989, FASB pronouncements.
The OSA encourages entities to remain
consistent and use the same application of
FASB pronouncements for all enterprise
funds.
The OSA encourages entities to not apply
these pronouncements.
GASB 34, ¶146
The OSA encourages prospective reporting
with these standards but not retroactive
reporting.
GASB 34, ¶130, fn
53
The OSA recommends reporting required
budgetary comparisons as required
supplementary information. Entities should
present budget information in the basic
financial statements if they feel it is an
important part in maintaining accountability
for their government’s operations.
GASB 34, ¶130
The OSA encourages showing these variances
as long as the statements do not become
confusing.
6
Topic
•
Component unit financial
information
6/26/02
Description of Alternative
and Encouraged Methods
and Presentations
Reference
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
The variance between original
and final budget amounts may or
may not be presented.
GASB 34, ¶130
Each entity needs to determine if this
information aids in reviewing the entity’s
financial statements, although generally it is
better to leave the financial statements as
simple as possible.
•
Budgetary comparison schedules
may be presented using (a) the
same format, terminology, and
classifications as in the budget
document or (b) the format,
terminology, and classifications in
a statement of revenues,
expenditures, and changes in fund
balances.
GASB 34, ¶131
Generally, readers of financial statements are
familiar with the format in b; therefore, the
OSA would suggest that this may be the better
format to use. However, each entity must
determine which format would better meets its
needs and aids readers of the financial
statements in understanding the results of the
entity.
•
If the budgetary comparison
schedules are presented as RSI,
required information that
reconciles budgetary information
to GAAP information may be
presented either in a separate
schedule or in notes to RSI.
Information about each major
component unit can be provided
by (a) presenting each major
component unit in a separate
column in the GWFS,
(b) including combining
statements of major component
units in the basic statements after
the fund financial statements, or
(c) presenting condensed financial
statements in the notes to the
financial statements. Alternatives
(a) and (b) include nonmajor
component units aggregated in a
single column.
GASB 34, ¶131
•
GASB 34, ¶126
Each entity needs to determine which method
is the most efficient and effective presentation.
Generally, it will be based on the number of
reconciling items.
This determination needs to be made by each
reporting entity. Much of what is decided
should be determined by reviewing how many
component units the primary government has,
and how complex these component units are.
The better presentation will be presenting each
major component unit in a separate column in
the GWFS. However, each reporting entity
needs to determine which presentation is the
best and fairest.
7
Topic
Single-program governments
•
•
Description of Alternative
and Encouraged Methods
and Presentations
Special-purpose governments
engaged in a single governmental
program may combine their
GWFS and fund financial
statements using a columnar
format that reconciles individual
line items of fund financial data to
government-wide data in a
separate column on the face of the
financial statements. Descriptions
of reconciling items should be
presented either on the face of the
financial statements, in an
accompanying schedule, or in the
notes to the financial statements.
If special-purpose governments
engaged in a single governmental
program present separate GWFS
and fund financial statements,
they may present their
government-wide statement of
activities using a different format
(such as a single column format).
Reference
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
GASB 34, ¶136
and fn62
Each entity must decide which presentation
mostly fairly presents their financial
statements and provides the greatest
readability. The OSA suggests that the
statements be combined in this instance. This
provides a simpler format due to their being
fewer statements or schedules that need to be
prepared.
GASB 34, ¶136
The OSA suggests that each entity devise the
format that most fairly presents the operations
of the entity and makes it easily readable by
the users of the statements.
“Not-for-profit”
governments
•
Governments that reported as of
June 30, 1999, using the AICPA
Not-for-Profit model as defined in
GASB Statement No. 29, The Use
of Not-for-Profit Accounting and
Financial Reporting Principles by
Governmental Entities, but that
do not meet the GASB 34 criteria
for the use of an enterprise fund
may nevertheless use enterprise
fund accounting and financial
reporting.
GASB 34, ¶147
If an entity has been using enterprise fund
accounting in the past and has determined that
this format most fairly presents the financial
results of that entity, then the entity should
continue to use enterprise fund accounting and
financial reporting.
Public employee retirement
system (PERS)
reporting
•
PERS that administer more than
one defined benefit pension plan
or postemployment healthcare
plan may (1) present a separate
column for each plan on its
financial statements or (2) present
combining statements for those
plans as part of its basic financial
statements.
GASB 34, ¶140
This will need to be an individual decision
depending mainly on the number of plans to
be reported. If the number to be reported are
few (three or less), then it would be advisable
to present a separate column for each plan. If
it is more than this, then it may be advisable to
present a combining statement.
•
For all plans other than defined
benefit pension plans or
postemployment healthcare plans,
a PERS is encouraged to present
combining financial statements.
GASB 34, ¶141
We would encourage the combining
statement.
----------------------------------------Transition Requirements---------------------------------------Effective date
6/26/02
•
Application of GASB 34
provisions earlier than the
required effective dates is
encouraged.
GASB 34, ¶142
and ¶148
The OSA encourages reporting entities with
the wherewithal to implement the statement
early.
8
Topic
•
MD&A 3
Description of Alternative
and Encouraged Methods
and Presentations
Reference
Office of the State Auditor
(OSA) Unofficial Staff
Recommendations
In the first period Statement 34 is
applied, prior period governmentwide data may or may not be
presented. (If not presented, a
statement should be made that
comparative government-wide
data will be presented in the
future.)
GASB 34, ¶145
Each entity needs to determine for themselves
whether prior period government wide data
will be presented or not. Each entity needs to
be in contact with their auditors to discuss this
issue. To make implementation easier it may
be advisable to wait for the second year.
•
If in the first period Statement 34
is applied comparative
government-wide data is not
presented, comparative analyses
of key elements of total
governmental and total enterprise
funds is encouraged.
GASB 34, ¶145
The OSA encourages reporting entities to
provide comparative analyses of key elements
in the MD&A.
Private-sector and previous
proprietary activity
standards
•
The following standards are not
required to be retroactively
applied to governmental activities
in the government-wide financial
statements: (1) APB Opinions No.
12 and No. 21, except for deepdiscount or zero-coupon debt,
(2) FASB Statement No. 34, and
(3) GASB Statement No. 23.
GASB 34, ¶146
The OSA encourages prospective reporting
with the applicable requirements.
Infrastructure assets
•
If, during the transition period,
information is not available for all
networks of infrastructure assets,
those networks for which
information is available may be
reported.
GASB 34, ¶150
The OSA encourages reporting entities to
report all of the information that is available.
3
Similar guidance concerning management’s discussion and analysis (MD&A) transition
is provided in GASB Statement No. 35, paragraph 11.
6/26/02
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