Question

In 1999, GASB introduced a new financial reporting model for state and local governments. As a result, there were significant changes made in the format and content of government financial reports. Briefly describe at least two changes. Why were these changes initiated? What imitations to transparency still remain under the new reporting model?

Answer 1

Answer:

Two of these changes are the requirement for inclusion of the management's discussion and analysis (MD&A) and government-wide financial statements.
The MD&A tells management's insights on the government's financial performance for the year and thus allows the users of the financial statements to communicate, in a way, with the people running the government. Requiring that government-wide financial statements be included provides users a bird's eye view of the government's financial performance. The objective of this project is to make improvements to the financial reporting model, including Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments, and other reporting model-related pronouncements (Statements No. 35, Basic Financial Statement and Management’s Discussion and Analysis for Public Colleges and Universities, No. 37, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments: Omnibus, No. 41, Budgetary Comparison Schedules Perspective Differences, and No. 46, Net Assets Restricted by Enabling Legislation, and Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements). The objective of these improvements would be to enhance the effectiveness of the model in providing information that is essential for decision-making and enhance the ability to assess a government’s accounting and address certain application issues, based upon the results of the pre-agenda research on the financial reporting model.