What is GASB and Statement 34?
In June 1999, the Government Accounting Standards Board (GASB) issued Statement 34, the most significant change in the history of governmental financial reporting. It requires governments to report the value of their capital assets (including depreciation), infrastructure assets and historical treasures in a complete, accurate and detailed manner.
What is GASB 34's objective?
The objective of the new Statement is that anyone with an interest in public finance - citizens, the media, bond raters, creditors, legislators, and others will have additional, easier-to-understand information in a business-like format about any government in the United States.
Why is GASB 34 compliance important?
GASB is part of the Financial Accounting Foundation, which establishes the Generally Accepted Accounting Principles (GAAP). Adherence to GAAP standards is required so that a government can obtain a clean audit. Failure to comply with GASB 34 can result in an "unclean" or qualified audit.
A qualified audit can limit a government's ability to raise money for capital improvements through bonds by either prohibiting their issuance or requiring a higher interest on those bonds. State funding, for which a government might otherwise qualify, may be withheld because of an unclean audit.
What information is required to comply with GASB 34?
Under GASB 34, capital assets related to infrastructure must be inventoried and valued. With capital assets inventoried and valued, the next step is tracking and reporting capital values and expense information in financial statements using either the Depreciation or Modified methods. Either reporting method requires a dynamic, up-to-date inventory of all eligible assets.
You will also need an asset management system and procedures in place to perform condition assessments every three years. For either the Historical Cost/Depreciation or Modified Approach, you will be required to establish a starting basis (Historical Cost) as of the implementation date for your entity and have an current inventory database. This applies to both prospective and retroactive reporting.
When must GASB 34 be implemented?
As part of the new Statement 34, cities are required to report historical cost and depreciation for capital assets and infrastructure assets under different timetables.
Prospective Reporting requires that all your infrastructure assets acquired on or after the effective date of GASB 34 (June 15, 1999) be reported on by the following dates:
- Phase 1 - Large governments with revenues greater than $100 million will take effect in the fiscal year beginning after June 15, 2001.
- Phase 2 - Medium-sized governments with revenues greater than $10 million, but less than $100 million will take effect in the fiscal years beginning after June 15, 2002.
- Phase 3 - Smaller-sized governments with revenues less than $10 million will take effect in the fiscal year beginning after June 15, 2003.
Retroactive Reporting requires that all your infrastructure assets acquired on or after the effective date of June 30, 1980 (or earlier if possible) be reported on by the following dates:
- Phase 1 - will take effect in the fiscal year beginning after June 15, 2005.
- Phase 2 - will take effect in the fiscal year beginning after June 15, 2006
- Phase 3 - will require prospective reporting at the implementation date of the Statement.