GASB issues standard on accounting changes and error corrections


The Governmental Accounting Standards Board released guidance Monday to improve the accounting and financial reporting requirements for accounting changes and error corrections by state and local governments.

GASB Statement No. 100, Accounting Changes and Error Corrections, offers more straightforward guidance that aims to produce information that’s simpler to understand and more reliable, relevant, consistent and comparable across different state and local governments for making decisions and determining accountability.

GASB’s previous standards on accounting changes and error corrections — in GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements — stemmed from decades-old guidance dating back to the 1970s. Pre-agenda research by GASB’s staff found some diversity in how the existing standards were applied in practice, including issues with choosing the relevant category of accounting change or error correction.

Statement 100 defines the following categories:

  • Changes in accounting principles;
  • Changes in accounting estimates;
  • Changes to or within the financial reporting entity; and,
  • Corrections of errors in previously issued financial statements.

Statement 100 prescribes accounting and financial reporting for each category of accounting change in addition to error corrections. It requires:

  • Changes in accounting principle and error corrections be reported retroactively by restating prior periods;
  • Changes in accounting estimate be reported prospectively by recognizing the change in the current period; and,
  • Changes to and within the financial reporting entity be reported by adjusting beginning balances of the current period.

The new standard also explains how accounting changes and error corrections should be shown in financial statements, disclosed in notes, and presented in the required supplementary information and supplementary information.
Statement 100 includes some of the requirements of Statement 62 but offers clearer explanations. In terms of classification, a notable change relates to changes to or within the financial reporting entity, which previously didn’t encompass changes within the reporting entity, such as a change from discrete presentation of a component unit to blended presentation or vice versa. In terms of note disclosures, Statement 100 requires state and local governments to disclose the effects of each accounting change and error correction on their beginning balances in a tabular format.

GASB chair Joel Black

Scott Areman Photography

“Governments and other stakeholders should find many of the requirements of Statement 100 familiar,” said GASB chair Joel Black in a statement. “But they should find the understandability of the guidance greatly improved, and financial statement users should benefit from the new tabular disclosure.”

 The requirements of Statement 100 take effect for accounting changes and error corrections made in fiscal years starting after June 15, 2023, and all reporting periods afterward, but GASB is encouraging earlier application.


Source link

Next Post

Too Much Inventory Can Harm Your Business - 10 Tips

[ad_1] Running a business successfully takes accurate planning and forecasting. It’s normal to have the number of clients you service fluctuate over time and for business to come in surges and spurts. Some industries are busier at specific times of the year and find recurring downtimes that fit predictable patterns. […]

You May Like