Acc 460 - Gasb and Fasb Analysis Paper

GASB and FASB Analysis Paper

ACC/460 Government and Non-Profit Accounting

September 20, 2011

Paulette Mack

The Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) are independent organizations that are empowered to establish financial accounting and reporting standards. This paper will discuss the similarities and differences between these two organizations.

Governmental Accounting Standards Board (GASB)

Established in 1984 by the Financial Accounting Foundation (FAF), the Governmental Accounting Standards Board (GASB) is an independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments in order to provide useful information for users of financial reports, and guide and educate the public. The GASB has established modified accrual accounting standards in order to distinguish government accounting from business accounting.

Modified accrual basis of accounting is an accounting method that combines accrual-basis accounting with cash-basis accounting. Under the modified accrual accounting, revenues are recognized when they become available and expenditures are recognized when liabilities are incurred. Funds are divided into separate entities to ensure that money is being spent as intended. The standards established by the GASB are recognized by governments, the accounting industry, and the capital markets as the official source of generally accepted accounting principles (GAAP) for state and local governments (http://www.gasb.org).

Financial Accounting Standards Board (FASB)

The Financial Accounting Standards Board was established in 1973 by the FAF. The objective of the FASB is to establish and improve standards of financial accounting and reporting for nongovernmental entities in order to provide decision-useful information to investors and other users of financial reports. The FASB is able to accomplish this mission through board participation, objective consideration of stakeholder views, and oversight by the FAF's Board of Trustees (http://www.fasb.org).

Organizations that fall under the authority of the FASB typically utilize the full accrual basis of accounting. The full accrual basis recognizes transactions and events when they occur. Revenues are recognized when they come due during the year, regardless of whether cash is collected or not. Expenses include the amount of goods and services consumed during the year and should not be confused with actual expenditures.

The GASB and the FASB have established objectives that aim to provide accurate financial information