Gasb State #34 Essays - Free Essays, Term Papers, Research Papers

Gasb State #34 Essays - Free Essays, Term Papers, Research Papers Gasb State #34 On June 30, 1999 the GASB passed statement number 34. Statement 34 establishes new accounting requirements for state and local governments that are scheduled to begin on June 15, 2002. There are three phases scheduled for the implementation of statement 34, each depending on the size of the government. The largest governments must meet the requirement first while the smaller governments have more time to comply with the statement. Statement 34 will improve the governmental accounting system in many ways. First, statement 34 will create easier to understand financial statements. This will allow people other than accountants to understand the information within a government financial statement. Secondly, statement 34 will help city officials keep track of fixed assets that need to be replaced or improved. This addition is important because city officials often forget that assets have been in use for too long, resulting in costly improvements that could be avoided. Furthermore, statement 34 will allow readers to determine whether the government has improved since the last fiscal year. These goals will be accomplished in several ways. First, a management discussion and analysis (MD&A) statement will be required. Within this statement, managers will discuss the financial achievements of the governmental entity during the fiscal year. In this discussion, managers will compare the current and previous years-financial statements, and inform the reader if there has been an improvement or deterioration financially. The managers preparing the MD&A must also explain any significant fluctuation within any major accounts, as well as, any future event expected to have a major impact upon the said government. Another notable change made by statement 34 is the adoption of the full accrual method. This will greatly change the bottom line of many governmental entities. Under this system, governments will report all revenues earned in a given period. This change will give financial statement readers a better idea of the actual financial position of the government, because all revenues earned within a given period will be reported. The full accrual method will help government officials determine if citizens have paid for the benefits that have been received and if the governments financial position has changed since the previous year. A third important change that statement 34 will usher in is the way governments report activity in their major funds. Governments will no longer report their funds in aggregate form. The new model will reclassify funds into more specific individual fund listings. This change will make it easier to track specific expenditures while increasing government accountability. Another substantial change brought about by statement 34 is asset management. Governments currently record assets at the time of purchase as expenditures. The new accounting model will force governments to monitor their assets cost and value on an annual basis. This could prevent major damage to government assets that could otherwise be neglected, such as sewers and drainpipes. Governments are having mixed reactions concerning the implementation of GASB No. 34. Some states, such as Wisconsin, have already implemented the statement while others, hardly know it exists. The state controller of Wisconsin is sending out a strong message, urging all states to get an early start. Other states, such as Michigan, already use procedures similar to those of statement 34. As a result, Michigan plans to have met the requirements of statement 34 sometime in 2001. The larger states are under the most pressure, given they have the most to do and the least time to accomplish it. In most cases, in order to comply with statement 34 regulations, states will have to create new accounting software. In addition, because of the new asset management methods many states will have to value their existing assets. This will require governments to create new data collection methods. Many governments find the time constraints difficult, given the Y2K problem is still not fixed in many states. Governments, especially the larger ones, must really be on top of things to meet the time requirements of statement 34. In conclusion, GASB statement No. 34 will improve financial reporting for state and local governments in many ways. First, the reports will be easier to read and understand. The management discussion and analysis will give people with little or no accounting background a