Fasb And Gasb Comparison Essay
FASB/GASB Comparison
For-profit business is driven by profit earnings. Financial statements provide information in relation to that performance. For-profit businesses will prepare reports based on the Financial Accounting Standards Board (FASB). Not-for-profit businesses are not driven by the same motivations and are hold to the Governmental Accounting Standards Board (GASB). Three distinctions set GASB organizations apart. 1) Receipt of significant recourses that are not expecting proportionate repayment or economic benefits. 2) Operations other than to provide goods or services at a profit equivalent. 3) Absence of defined ownership that can be sold, transferred, or redeemed (Wilson and Kattelus, 2002). This paper will briefly discuss some of the objectives, differences, and similarities of FASB and GASB. It will also discuss governmental regulations in the application of standards and reporting requirements. …show more content…
FASB/GASB Objectives
Organizations that comply with FASB are concerned with market and stock performance.
The objective of a for-profit entity is to increase profit. FASB financial reports will focus in that direction. Financial statements will drive to net income, shareholders equity, and maximizing profit.
"Accountability is the cornerstone of all financial reporting in government" (Wilson and Kattelus, 2002). This is measured by interperiod equity, budgetary and fiscal compliance, and service efforts and accomplishments (Granof and Warlow, 2003). Interperiod equity states that current year revenues must be sufficient for current year services. Governments are accountable to citizens. They must justify raising resources that will be used for provision of their services. Not-for-profit entities do not have luxury of many financial practices the FASB allows.
FASB/GASB
Differences
A large difference in compliance to FASB or GASB is the way that financial statements area prepared. FASB entities will provide typical income statements, balance sheets, retained earnings statements and cash flow statements. These will be very vertical in organization. FASB requires reporting on capitalized assets, depreciation, and equity positions of an entity. However, GASB statement will be much more horizontal. GASB requires an entity's different activities be broken out into funds. Funds are established for capital projects, debt service, fiduciary holding and many other activities. The GASB balance sheet will not have the depth of assets and liabilities like FASB. The GASB balance sheet will have a width of projects and services that are itemized by revenue and expenditures.
FASB/GASB Similarities
Both reporting methods have been sanctioned and report to the American Institute of Certified Public Accountants (AICPA). FASB and GASB can both be used almost in one entity. An example of this is a private university. A private university does not exist to generate profit and is entitled to not-for-profit status by the IRS. However, a book store under that university does not provide a service of supplying books to students. That store is established to generate profits that will later be used by the school in efforts to supply educational opportunities. However, this book store will adhere to FASB requirements in preparation and communication of its financial statements. The book store will have financial records and report to an enterprise fund as part of the larger university that will ultimately comply with GASB.
Conclusion
Government regulations are constantly changing and updating. Business has seen large reform with the implementation of Sarbanes Oxley. GASB also sees revision to it statements. As an example Statement 34 and 35 has been recently updated to require usage of bar code asset tags to manage public infrastructure assets (Bruneman, 2007). This update was not possible until advancing technology was easily accessible. Even though entities that adhere to FASB are not required to comply with GASB, and visa-versa, American business will continue to see constant advancements and changes in these side by side regulatory organizations.
For-profit business is driven by profit earnings. Financial statements provide information in relation to that performance. For-profit businesses will prepare reports based on the Financial Accounting Standards Board (FASB). Not-for-profit businesses are not driven by the same motivations and are hold to the Governmental Accounting Standards Board (GASB). Three distinctions set GASB organizations apart. 1) Receipt of significant recourses that are not expecting proportionate repayment or economic benefits. 2) Operations other than to provide goods or services at a profit equivalent. 3) Absence of defined ownership that can be sold, transferred, or redeemed (Wilson and Kattelus, 2002). This paper will briefly discuss some of the objectives, differences, and similarities of FASB and GASB. It will also discuss governmental regulations in the application of standards and reporting requirements. …show more content…
FASB/GASB Objectives
Organizations that comply with FASB are concerned with market and stock performance.
The objective of a for-profit entity is to increase profit. FASB financial reports will focus in that direction. Financial statements will drive to net income, shareholders equity, and maximizing profit.
"Accountability is the cornerstone of all financial reporting in government" (Wilson and Kattelus, 2002). This is measured by interperiod equity, budgetary and fiscal compliance, and service efforts and accomplishments (Granof and Warlow, 2003). Interperiod equity states that current year revenues must be sufficient for current year services. Governments are accountable to citizens. They must justify raising resources that will be used for provision of their services. Not-for-profit entities do not have luxury of many financial practices the FASB allows.
FASB/GASB
Differences
A large difference in compliance to FASB or GASB is the way that financial statements area prepared. FASB entities will provide typical income statements, balance sheets, retained earnings statements and cash flow statements. These will be very vertical in organization. FASB requires reporting on capitalized assets, depreciation, and equity positions of an entity. However, GASB statement will be much more horizontal. GASB requires an entity's different activities be broken out into funds. Funds are established for capital projects, debt service, fiduciary holding and many other activities. The GASB balance sheet will not have the depth of assets and liabilities like FASB. The GASB balance sheet will have a width of projects and services that are itemized by revenue and expenditures.
FASB/GASB Similarities
Both reporting methods have been sanctioned and report to the American Institute of Certified Public Accountants (AICPA). FASB and GASB can both be used almost in one entity. An example of this is a private university. A private university does not exist to generate profit and is entitled to not-for-profit status by the IRS. However, a book store under that university does not provide a service of supplying books to students. That store is established to generate profits that will later be used by the school in efforts to supply educational opportunities. However, this book store will adhere to FASB requirements in preparation and communication of its financial statements. The book store will have financial records and report to an enterprise fund as part of the larger university that will ultimately comply with GASB.
Conclusion
Government regulations are constantly changing and updating. Business has seen large reform with the implementation of Sarbanes Oxley. GASB also sees revision to it statements. As an example Statement 34 and 35 has been recently updated to require usage of bar code asset tags to manage public infrastructure assets (Bruneman, 2007). This update was not possible until advancing technology was easily accessible. Even though entities that adhere to FASB are not required to comply with GASB, and visa-versa, American business will continue to see constant advancements and changes in these side by side regulatory organizations.