What is the Governmental Accounting Standards Board (GASB)?
The Governmental Accounting Standards Board (GASB) is a private entity that develops accounting reporting standards, known as generally accepted accounting principles (GAAP), for state and local governments in the United States.
Key Takeaways
- The GASB is a private, non-governmental organization that sets accounting reporting standards for state and local governments.
- The board is responsible for creating the GAAP guidelines.
- Its mission is to ensure clear, consistent, transparent, and comparable financial reporting.
- The GASB leverages various intelligence sources when formulating its policies.
Inspiring Clarity through the Governmental Accounting Standards Board (GASB)
Founded in 1984, the Governmental Accounting Standards Board (GASB) is an independent body with a mission to enhance financial transparency and consistency for state and local governments. The Federal Accounting Standards Board (FASB) performs a similar role at the federal level. Information provided by the GASB aids taxpayers, municipal bondholders, legislators, and oversight entities in shaping public policy and making investment decisions.
The Role and Functions of the GASB
The GASB employs an open, independent process that encourages input from a broad range of stakeholders. A notable example is its 2022 Invitation to Comment, which invited public feedback on financial statement disclosures, addressing potential vulnerabilities and risks for state and local governments.
Oversight and Funding
The seven-member board of the GASB includes a full-time chair and a part-time vice-chair, appointed by the Financial Accounting Foundation (FAF) Board of Trustees for renewable five-year terms, up to a maximum of ten years. The members, experts in governmental accounting and finance, hold a commitment to public interest in financial transparency and reporting.
The GASB’s functions are overseen by the FAF and FASB, both of which manage its funding. Primarily funded by accounting support fees from brokers and dealers trading in municipal bonds, this mechanism was established by Section 978 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The Mission of GASB
The collective mission shared by the GASB, FASB, and FAF is to establish and improve financial accounting and reporting standards. Their goal is to provide investors and stakeholders with reliable, useful information and educate them on how to effectively adopt these standards.
Inclusive Decision-Making with Consultative Groups
The GASB organizes consultative groups and task forces to incorporate diverse perspectives into their standard-setting process. These groups perform essential research and provide critical analysis, ensuring the GASB makes well-rounded decisions that serve the needs of taxpayers, the finance community, and businesses.
The Impact of Generally Accepted Accounting Principles (GAAP)
GAAP ensures that the information provided to consumers and investors by public companies is trustworthy. Adherence to GAAP facilitates a reliable environment, encouraging consumers and investors to engage financially with confidence. Public companies are required to follow ten fundamental principles in alignment with GAAP standards.
Who Makes Up the GASB?
Joel Black and Jeffrey J. Previdi currently lead the GASB as chair and vice-chair, respectively. Black represents public accounting while Previdi reflects the perspectives of financial statements users. Each board member brings unique expertise and experience to contribute to the GASB’s mission.
Understanding Municipal Bonds
Municipal bonds are debt securities issued by governments to fund daily operations or large scale projects like infrastructure and schools. Investors receive interest payments over the bond’s duration and their principal back at maturity. While many governments adhere to GAAP for financial reporting, some may use alternative accounting methods.
The Bottom Line
The Governmental Accounting Standards Board (GASB) ensures that state and local governments maintain high standards for financial transparency and accountability through the implementation of GAAP. This fosters confidence among investors, consumers, and policymakers in the integrity of financial reports.
Correction - May 4, 2024: The previous article incorrectly referred to the GASB as the Government Accounting Standards Board. The correct name is the Governmental Accounting Standards Board.
Related Terms: Federal Accounting Standards Board, Financial Accounting Foundation, municipal bonds, public policy, fiscal policy.
References
- Governmental Accounting Standards Board. “About the GASB”.
- Congress.gov. “H.R.4173 - Dodd-Frank Wall Street Reform and Consumer Protection Act”.
- Financial Accounting Foundation. “News Release 06-01-12.”
- Thomson Reuters. “Understanding GAAP Rules”.
