Question

To make sure you are up to date on the special guidelines the GASB has declared, your manager asked you to research GASB Statement No. 56. He also asked you to show him, side by side, how government accounting journal entries might differ from for-profit journal entries in these similar events.

• Write 500–750 words that addresses the following:
  • When was GASB Statement No. 56 initiated?
  • In your own words, what is the essence of the new ruling?
  • Why did the GASB probably deem it as being necessary?
  • How might GASB Statement No. 56 change the activities of any accountant performing governmental accounting?

Answer 1

A)

GASB ISSUES STATEMENT 56, CODIFICATION OF ACCOUNTING AND FINANCIAL REPORTING GUIDANCE CONTAINED IN THE AICPA STATEMENTS ON AUDITING STANDARDS

a. The Governmental Accounting Standards Board (GASB) issued Statement no.56 in March and it is effective from the issuance. The provisions of this statement need not be applied to immaterial items.

This Statement was issued by unanimous vote of the seven members of the Governmental Accounting Standards Board.

• Robert H. Attmore, Chairman
• Michael D. Belsky
• William W. Holder
• Jan I. Sylvis
• Marcia L.Taylor
• Richard C. Tracy
• James M. Williams

b. At the beginning of its deliberations leading to shis statement, the board evaluated two approaches. One approach considered was to adopt the accounting and reprting requirements essentially as they currently exist in the AICPA's auditing literature, mdifying the language as appropriate to receognize the characteristics of the Governmental Environment without affecting the substance of the provisions. The other approach considered was to re examine the individual issues.

The Board recognized that taking the first approach would not significantly affect practice because the accounting and financial reporting requirements would not change, only the source of guidance. The latter approach, invoolving significant deliberation,could have resulted in changes in practice depending on the extent to which the board would modify the Financial reporting requirements from the way they were stated in the auditing literature. The Board concluded that the transition from the auditing literature to the accounting and financial reporting standards should be as undisruptive as possible; therefore, the firts approach was taken.

This Statement addresses three issues, Related Party Transactions, Going Cncern Considerations and Subsequent Events. The Statement brought certain for profit accounting and reporting standards to Governmental Standards. GASB 56 incorprates accounting and financial reporting guidance previously only contained in The American Institute of Certified Public Accountants (AICPA) auditing literature into the GASB's accounting and financial reporting literature for State and Local Governments.

c. The requirements in this statement will improve Financial Reporting by contributing to the GASB's efforts t codify all sources of Generally Accepted Accounting Principles for state and local governments so that they derive from a single source. This effort is important from the perspective of bringing the authoritative accounting and financial reporting literature together in one place, with guidance modified as necessary to appropriately recognize the governmental environment and the needs of governmental financial statement users.

d. By having all the information in a singular souce, it will make the job of accountants and concerned people easier. Nw they won't have to spend extra time to simple tasks by going to two different sources. In fact, they will be able to utilize theirr time better by spending more time on analysis of the problems at hand and then applying the law and regulations with a lot more clarity and certainty. There will be no more confusions as to which laws/regulations apply so the state governements and local governments and which ones do not.