![]() CalSTRS first implemented this standard in our Annual Comprehensive Financial Report for the fiscal year ended June 30, 2018. It became effective for financial statements for fiscal years beginning after June 15, 2016. GASB 74 replaced GASB 43, Financial Reporting for Post-Employment Benefit Plans Other Than Pension Plans, as amended, and GASB 57, OPEB Measurements by Agent Employers and Agent Multiple- Employer Plan. ![]() 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes financial reporting standards for state and local governmental other postemployment benefit (OPEB) plans – defined benefit OPEB plans and defined contribution OPEB plans that are administered through trusts or equivalent arrangements. This measurement focus is only used in governmental accounting.GASB Statement No. Similarly, these balance sheets will not contain any long-term liabilities, since they do not require the use of current financial resources for their settlement. ![]() Stated differently, the balance sheets of governmental funds do not include long-term assets or any assets that will not be converted into cash in order to settle current liabilities. The focus of governmental funds is on current financial resources, which means assets that can be converted into cash and liabilities that will be paid for with that cash. This means that a governmental fund liability and expenditure is accrued in the period in which the fund incurs the liability. Most expenditures should be reported when a related liability is incurred. The key measurement focus in a government fund’s financial statements is on expenditures, which are decreases in the net financial resources of a fund. The Focus of Governmental Financial Reporting The “measurable” concept allows a government to not know the exact amount of revenue in order to accrue it. The “available” concept means that the revenue and other fund resources are collectible within the current period or sufficiently soon thereafter to be available to pay for the current period’s liabilities. This means that these items are not only available to finance the expenditures of the period, but are also measurable. Under the modified basis of accounting, revenue and governmental fund resources (such as the proceeds from a debt issuance) are recognized when they become susceptible to accrual. ![]() The sum total of these adjustments is referred to as the modified accrual basis. The accrual basis of accounting is adjusted when dealing with governmental funds. To clarify the difference between these concepts, the basis of accounting governs when transactions will be recorded, while the measurement focus governs what transactions will be recorded. Some types of funds use a different basis of accounting and measurement focus. By segregating resources into multiple funds, a government can more closely monitor resource usage, thereby minimizing the risk of overspending or of spending in areas not authorized by a government budget. Funds are used by governments because they need to maintain very tight control over their resources, and funds are designed to monitor resource inflows and outflows, with particular attention to the remaining amount of funds available. Fund AccountingĪ fund is an accounting entity with a self-balancing set of accounts that is used to record financial resources and liabilities, as well as operating activities, and which is segregated in order to carry on certain activities or attain targeted objectives. ![]() The GASB is tasked with the development of accounting and financial reporting standards for state and local governments, while the Financial Accounting Standards Board (FASB) has the same responsibility, but for all other entities not related to governmental activities. The primary organization that is responsible for creating and updating these standards is the Governmental Accounting Standards Board (GASB). Given the unique needs of governments, a different set of accounting standards have been developed for these organizations. The Governmental Accounting Standards Board This approach to accounting is used by all types of government entities, including federal, state, county, municipal, and special-purpose entities. Governmental accounting maintains tight control over resources, while also compartmentalizing activities into different funds in order to clarify how resources are being directed at various programs. ![]()
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