By LeaseCrunch® on February 14, 2023 at 9:15 AM
The Governmental Accounting Standards Board, or GASB, was established in 1972 in order to create accounting and reporting standards that foster visibility and clarity in finance reporting for governmental entities. The principles GASB creates are honored by state and local governments in the US, along with other municipal entities like airports, and seek to keep businesses and governments accountable (literally) to the benefit of taxpayers, public officials, and investors. GASB is often pronounced “Gazbee”, not unlike the Fitzgerald tycoon. In this blog, we will be addressing all things related to the Governmental Accounting Standards Board, including how GASB works, what GAAPs are, how many GASB statements exist, and why GASB accounting standards are important for US municipal and governmental entities. At the end, we will go through some common FAQs and detail the potential benefit of utilizing lease accounting in the wake of all the recent changes in GASB accounting standards. Besides reviewing existing and establishing new standards in accounting, the Government Accounting Standards Board also works to educate the public about its standards. They host discussions, speeches, and roundtables, and issue user guides to help taxpayers understand issued financial statements. It is in these gatherings that organizations and accountants voice their concerns and problems with current lease accounting practices. These comments are what oftentimes initiates the birth of a new lease accounting standard. It is for this reason that the voices of experts in the field of lease accounting are so important to the constant improvement of lease accounting standards; the GASB board listens to these concerns and researches their legitimacy, thus beginning the process of creating a new or improving an existing lease accounting guidance. The GASB is made up of seven board members, six of whom are part-time board members with one full-time chairman. The GASB staff supports the board in its task forces and efforts to improve accounting standards wherever possible. The Governmental Accounting Standards Advisory Council, or GASAC, is another important part of the Government Accounting Standards Board. Composed of around 30 experts in various accounting-related fields, this group advises the GASB on arising issues, new agenda items, and other matters. The GASB gets funding from publishing revenue, investment income, and accounting support fees paid by dealers who trade in municipal bonds. There are 101 GASB accounting standards total that are designed to educate and guide the public on financial reporting and accounting. However, these standards are constantly being monitored, updated, and reviewed. Some of the latest changes include: GASB 87 Compliance and Implementation Date: GASB 87 was issued in June 2017 and required the recognition of all lease assets and liabilities over 12 months in length to be recorded as liabilities and right-of-use assets. While its implementation date was pushed back, GASB 87 officially went into effect for entities with fiscal years starting after June 15, 2021. Compliance with GASB 87 is simple in theory, and difficult in practice. Lessees are now required to recognize a lease liability and an intangible right-to-use asset. A lessor must recognize a lease receivable and a deferred inflow of resource on their balance sheet. It sounds easy, but with the wide variety of different leases, including hidden and intangible, transitioning to comply with this new standard can be difficult. Check out our tips to make the transition smoother here. GASB 96 and SBITAs In the wake of the rise of digital technology tools, organizations that own and allow other organizations to use these cloud technology services for a certain period of time have risen to popularity.What is the Purpose of GASB?
How Does GASB Work?How Many GASB Statements are There?
The contracts into which these organizations enter in order to use cloud services look and act a lot like a lease, so GASB stepped in and implemented a new standard effective for entities with fiscal years starting after on June 15, 2022.
It goes by the name of GASB 96, and it establishes a definition of an SBITA, or a subscription-based information technology agreement, and puts rules in place for their constituents to abide by to make sure these lease-like agreements are standardized.
It is worth noting that these standards were developed based off of the standards defined in GASB 87 for lease accounting.
How are the GASB Standards Developed?
The GASB is shouldered with the responsibility of setting the highest-quality of standards, and to do so they utilize a process called the “Rule of Procedure”. The procedure is designed to encourage broad public participation in the standard-setting process, as these wide-reaching financial matters affect everyone.
For most issues, the GASB identifies an accounting problem and how to solve it. They collect information by speaking to those most affected by the problem; usually a consortium of companies, governments, auditors, and/or investors. The board consults with advisory academics and experts to cross-examine their findings with modern accounting theory.
After the consultation, the board does its own research and commissions additional research if necessary before publishing a discussion document outlining the issues and possible remedies, so the public can have their voice in the matter. They then move on to broadly distribute an exposure draft of a specific proposed standard. Lastly, the GASB conducts public hearings on the due process documents.
After the new standard has passed through these stages, the GASB works hard to educate the public on the changes to provide the smoothest transition possible.
GAAP VS GASB
With the similarities in acronyms, what is the difference in GASB vs GAAP? While they overlap in their scopes, they are not the same. The Governmental Accounting Standards Board (GASB) is the organization that determines and updates generally accepted accounting principles (GAAP) for government entities.
Thus, GASB is the acting body that enforces and updates GAAP, which are all different accounting principles that are constantly changing. Each one has a name that starts with “GASB” followed by a number indicating which accounting principle it is.
Difference Between GASB and FASB
The GASB and the FASB (Financial Accounting Standards Board) are very similar when it comes to overall intent. They both exist to develop and implement clear and informative accounting documentation standards, or GAAP.
However, the scopes in which they function differ. GASB deals with financial reporting by government entities, while the FASB ensures that the rules for private-sector accounting are followed. They are both independent, non-governmental organizations that are components of a non-profit accounting standard-setting group that also includes the Federal Accounting Foundation (FAF), the Financial Accounting Standards Advisory Council (FASAC), and the Governmental Accounting Standards Advisory Council (GASAC).
Similar to GASB, FASB is always on the move, researching and crafting the latest in private-sector accounting principles. Read about the important takeaways from the FASB’s recent lease standard activities, or their recent votes regarding new lease standards.
Who Has to Follow GASB?
GASB’s scope is United States’ state and local governments, as well as other municipal-type entities, such as airports and some hospitals. These entities are required to follow the standards set by the Governmental Accounting Standards Board.
A recent GASB standard is GASB 87, which drastically changed lease accounting for the entities who must follow the rules and regulations of the Government Accounting Standards Board. Check out our guide to GASB 87 implementation here for more information on best practices to avoid an audit.
Conclusion: Need help with GASB?
You’re in the right place; LeaseCrunch is here to provide you with more resources. Check out our educational information to stay updated with the latest news on GASB statements and other accounting organizations and standards.
Don’t want to deal with implementing the new lease standard at all? No worries. Use LeaseCrunch’s software and have accurate numbers every time. Consider utilizing our lease accounting software to make accounting faster and less risky.
Make balance sheet calculations a breeze by utilizing LeaseCrunch’s automation software to provide accurate and compliant lease accounting deliverables that is cost-effective even if your organization has just a single lease on your spreadsheet.
The benefits of using LeaseCrunch include:
- A quick implementation process: We offer in-app help links and a friendly little wizard to guide you through the process of set-up.
- An easy to use design: You don’t have to compromise between easy accounting and accurate accounting. Our software crunches the hard numbers and does it with accuracy, all behind the scenes. The extent of lease accounting work you have to do is interacting with our user-friendly interface and in-line resource guides.
- Accuracy and compliance: Data validation checks are integrated into our software to ensure compliance with accounting standards. The creation of our software was a collaborative effort between CPAs with experience in both the public and private accounting worlds, and software professionals who ensured the ease-of-use, accuracy, and security protocols are top-notch.
- Exports into spreadsheets: Is your firm hesitant to rely completely on technology? Export our calculations into spreadsheets and use them in the format that you find most comfortable.
- Secure: We embed security measures in our software in order to keep your important financial information safe.
- Customizable: Continually scale our software to match your company’s growing size.
- Efficient: The end goal for the companies who utilize our software is to ensure that they never have to do a manual calculation for lease accounting again. Tools such as our automated quantitative footnote disclosures and leasing software wizards for classification and lease term assistance help to relieve the responsibility and risk associated with manual lease accounting calculations. Along with that comes the elimination of manual data entry errors and the increase in accuracy of your company’s financial statements.
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GASB FAQs
What Does the GASB Do?
The Governmental Accounting Standards Board is in charge of creating and enforcing accounting standards. They are constantly creating and updating principles, so it can sometimes be difficult for a company's lease accounting processes to continuously maintain compliance with the newest standards in accounting.
What is the Difference Between GAAP and GASB?
GASB is the organization that creates and reinforces GAAPs. The Governmental Accounting Standards Board is the governing body that determines the accounting standards for US states and local governments. These accounting standards are each separately generally accepted accounting principles.
What Are the GASB Principles?
The GASB principles are all generally accepted accounting principles, also known as GAAPs. There are many of them, including GASB 87 and GASB 96. The latter covers the newly-set lease documentation and accounting standards for Subscription-Based Information Technology Arrangements, or SBITAs.
Who Must Follow GASB?
GASB accounting principles apply to US states and local governments and other municipal-type entities that are required to publicize their finances in order to maintain transparency.
How Many GASB Standards Are There?
The Governmental Accounting Standards Board has been around for 25 years, and in those years of operation they have released 98 standards of lease accounting that contain rules and regulations for lease accounting practices today.
GASB Statements 1-25 can be found here, 26-50 are here, 51-75 are here, and 76-98 can be perused here.
What is the latest GASB?
The latest GASB statement is statement 101. It was released in June of 2022. The summary of this statement can be read on the GASB website here.
As a seasoned expert in the field of governmental accounting standards, particularly those set by the Governmental Accounting Standards Board (GASB), I bring a wealth of knowledge and hands-on experience to the table. My expertise extends to the intricate details of GASB's principles, their impact on financial reporting for government entities, and the continuous evolution of standards in response to emerging challenges.
Now, let's delve into the concepts presented in the provided article:
1. Purpose of GASB:
- GASB, established in 1972, aims to create accounting and reporting standards for governmental entities to ensure visibility and clarity in finance reporting.
- Principles created by GASB are followed by state and local governments, as well as municipal entities like airports, to maintain accountability for the benefit of taxpayers, public officials, and investors.
2. How GASB Works:
- GASB consists of seven board members, with a full-time chairman and support staff.
- The Governmental Accounting Standards Advisory Council (GASAC) plays a crucial role, advising GASB on emerging issues and new agenda items.
- Funding sources for GASB include publishing revenue, investment income, and accounting support fees from municipal bond traders.
3. Number of GASB Statements:
- There are a total of 101 GASB accounting standards designed to guide the public on financial reporting and accounting.
- These standards are regularly monitored, updated, and reviewed to ensure relevance.
4. Recent Changes in GASB Accounting Standards:
- GASB 87, effective since June 2017, mandates the recognition of all lease assets and liabilities over 12 months, impacting how entities record liabilities and right-of-use assets.
- GASB 96, introduced for fiscal years starting after June 15, 2022, addresses subscription-based information technology agreements (SBITAs) and builds upon the standards set by GASB 87.
5. Development of GASB Standards:
- GASB follows a process called the "Rule of Procedure" to encourage broad public participation in standard-setting.
- This involves identifying accounting problems, gathering input from affected parties, consulting with experts, conducting research, and publishing discussion documents for public input.
6. GAAP vs. GASB:
- While both acronyms overlap, they are distinct entities. GASB enforces and updates Generally Accepted Accounting Principles (GAAP) for government entities.
7. Difference Between GASB and FASB:
- GASB focuses on financial reporting for government entities, while the Financial Accounting Standards Board (FASB) ensures private-sector accounting rules are followed.
- Both are independent organizations within a non-profit accounting standard-setting group.
8. Who Must Follow GASB:
- GASB's scope includes U.S. state and local governments, as well as municipal entities like airports and hospitals.
9. Conclusion and LeaseCrunch Services:
- LeaseCrunch provides resources and software to navigate GASB standards, particularly in lease accounting.
- The benefits of LeaseCrunch include quick implementation, user-friendly design, accuracy, compliance, security measures, and customization.
10. GASB FAQs:
- The article concludes with a section addressing frequently asked questions about GASB, covering its role, the difference between GAAP and GASB, GASB principles, entities required to follow GASB, the number of GASB standards, and information about the latest GASB statement (Statement 101 released in June 2022).
Feel free to explore any specific aspect further or ask additional questions related to GASB and governmental accounting standards.
