Financial statements of any type of entity (governmental or business) must be comparable from one accounting period to another. In any type of industry it is necessary to adopt accounting principles that best reflect the entity’s respective practice. Changes in accounting principles are often required to improve reliability and relevance of the financial statements. Financial statements of an entity must be presented consistently with other entities that are involved in the same line of practice. Ultimately, this allows users of the financial statements to interpret the performance and position of the entity in comparison to those in the same practice. Governmental reporting is no different than the reporting of the private sector in the aspect of the continual search for improvement in the comparability of financials. As stated above, the more streamlined financial statements are within a sector allows for better performance measures and can provide access to fair financial reporting. In seeking enhanced reporting the Governmental Accounting Standards Board (GASB) issued Statement No. 44 as an amendment to the statistical section portion of the National Council on Governmental Accounting (NCGA) Statement 1, Governmental Accounting and Financial Reporting Principles. In this study I focus on three main aspects. First, I define the downfalls of NCGA Statement 1 within the statistical section of the financial statements and the origin of GASB Statement 44. I will also give a brief definition of the statistical section and its importance. It is imperative to grasp the specific impact of the statistical section and the reasons for implementation. Second, I investigate the objectives of the statistical section and the specific intentions of the GASB Statement No. 44. Finally, I consider the presentation details required in GASB Statement No. 44 and how reporting was improved in the statistical section of the governmental financials. To further emphasize the presentation details in the statement I will provide examples from numerous cities financial reports for visual representation.
II. Background & Research
GASB Statement No. 44 Origin
GASB Statement No. 44, Economic Condition Reporting: The Statistical Section, is designed to reflect the significant changes in government reporting, while including the comprehensive government wide financial information required by GASB Statement 34. Statement 44 amends prior standards that were aimed more toward reporting for general purpose local governments. Statement 44 provides for clearer guidelines that can be used by any type of governmental entity (“GASB Issues Statement No. 44” p.9). The statistical section is the portion of the governmental entity’s comprehensive annual report that provides financial trends over the last 10 years about the entity’s respective financial performance, major revenue sources, economic and demographic indicators, debt obligations, and operating activities (“Help Implementing...