accounting and financial reporting

Board is to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports. source: http://www. gasb. org/ FASB: The mission of the Financial Accounting Standards Board is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information. ource: http://www. fasb. org/ Similarities & Differences: Both boards share the following objectives: 1. To be objective in its decision making and to ensure, insofar as possible, the neutrality of information resulting from its standards. 2. To weigh carefully the views of its constituents in developing concepts and standards. 3. To promulgate standards only when the expected benefits exceed the perceived costs. 4. To bring about needed changes in ways that minimize disruption to the continuity of reporting practice. . To review the effects of past decisions and interpret, amend or replace standards in a timely fashion when such action is indicated. The main difference between the two is that the GASB is specific to individual state legislatures and the FASB is on a federal level, so their scope is much broader. Compare and contrast GASB and FASB. Explain objectives and how they are similar and different. Describe how the modified accrual basis of accounting differs from full accrual accounting.

The Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board were created to establish accounting and financial reporting standards for governmental and not-for-profit organizations. The GASB for governments and the FASB for not-for-profit organizations. Governmental and not-for-profit organization financial statements serve the purpose and needs of their users. These users include governing boards, investors and creditors, taxpayers and citizens, and organizational members, donors and grantors, regulatory and oversight agencies, and employees and other constituents.

Users of these statements should be able to assess an organization financial condition, compare an organization’s actual performance with the budget, determine compliance with appropriate laws, regulations and restrictions on the use of funds and evaluate efficiency and effectiveness. (Granof, 2007, pg. 13) The GASB places importance on accountability and feels that the government should be accountable to citizens. In achieving this goal the objectives of the GASB is that organizations are accountable to the citizens.

This accountability insists that financial reporting information that will reveal whether current-year revenues are enough to pay current-year expenses; demonstrate whether budgets were adhered to; and mission The objective for the GASB is to set standard in accounting and financial reporting for state and local governments. These standards are to provide useful information for the users of financial reports. In achieving this goal the objectives of the GASB is that organizations are accountable to the citizens.

This accountability insists that financial reporting information that will reveal whether current-year revenues are enough to pay current-year expenses; demonstrate whether budgets were adhered to; and assist users in assessing cost and accomplishments of the government organization. According to the GASB users should be able to determine the operating results of the entity for the year with the use of its financial reporting by providing information about sources and uses of financial resources, how the entity financed its activities and meet its cash requirements, and whether the organization financial position improved or eteriorated due to operations. Ensuring that financial reports allow users to determine what level and if the government entity will be able to meet its obligations by providing information on the financial condition and position, about its physical and nonfinancial resources and disclousrue of legal or contractual restrictions on resources and their risks. The FASB’s mandate is to set accounting and financial reporting for not-for-profit organizations.

The FASB determined that financial reporting should provide information that help users make decisions about the allocation of resources, assess services and the ability to continue to provide service, assess how managers discharge their stewardship responsibilities and their performance. In addition, the FASB requires that information is provided about economic resoreces, obligations and net resources of an organization, periodic performance of the organization, how cash and liquid assets are spent and its borrowing and repayment and explainations and interpretations to understand financial information.

Differences between GASB and FASB is that the GASB sets standards for state and local governments while the FASB set standards for the federal government. Another difference is that GASB feels that government organizations should adhere to budget compliancy while the FASB does not place specific emphais on budgets but on managers and their manangement .

The modified accrual basis is a form of accounting where expenditures are recognized on a accrual basis and cash basis. When using the modified accrual basis revenues are recognized in the period they become available and measureable. On the other hand the full accrual basis of accounting calls for the recognition of revenues and expenses when they are incurred no matter when the monetary transaction takes place.