Background on GASB 34 ...

State and local governments are in the process of implementing the biggest financial reporting change ever in the history of governmental financial reporting.  GASB 34 requires governments to produce new government-wide information using many of the same accounting methods used by business organizations. Large governments were required to implement GASB 34 in 2002.  Depending on size, smaller governments have between one and two additional years to implement these changes. 

GASB 34 requires two new financial reports: the statement of net assets and the statement of activities.  These new financial reports contain information that can be useful in measuring performance of government activities for three main reasons.  First, financial information will be aggregated for the government entity and not just reported by funds.  Currently, activities of governments (such as public safety) can be reported in several separate funds.  Second, financial information will be reported under the accrual method of accounting.  This method uses a business-type approach to measuring the cost of government. And finally, the statements report the net cost (revenue) of functions of governments.  The net cost (revenue) information provides an indication of the burden placed on taxpayers for providing the different services of government. 

The statement of net assets reports assets, liabilities and net assets for the whole government using the flow of economic resource measurement focus.  The statement of activities reports both the total expense of functions and also computes the net expense of each function to the taxpayers.  This information is much more reflective of the cost of the functions of government, because it is not based on fund structure and uses the flow of economic resource measurement focus and the accrual basis of accounting.  

The new information contained in the government-wide statements should permit much more meaningful comparisons among local governments. The financial information will also be useful in developing service efforts and accomplishment measures. Citizens groups, policymakers and government officials can use the financial information to make better comparisons of performance among governments.