This article, "GASB sets guidelines on notes to financial statements," originally appeared on AccountingToday.com.
Summary provided by MaterialAccounting.com: This article highlights the new GASB framework for disclosure requirements for state and local governments.
The Governmental Accounting Standards Board released a concepts statement Thursday to provide a conceptual framework for its work on note disclosure requirements for state and local governments.
GASB has been researching and reexamining its existing note disclosure requirements, and the new document is part of that.
The concepts included in the guidance give GASB some criteria it can use to consistently evaluate the future requirements for footnotes to financial statements in the standard-setting process. They also may help stakeholders, such as government accountants, understand the fundamental concepts underlying note disclosure requirements that will be contained in future GASB pronouncements.
Concepts Statement No. 7, “Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements: Notes to Financial Statements,” spells out specific concepts, including:
- The purpose of notes to financial statements;
- The intended users of note disclosures;
- The types of information that should be disclosed in notes;
- The kinds of information that are inappropriate for note disclosures; and,
- The amount of importance that information disclosed in notes to financial statements should have.
A key concept in the guidance is “essentiality.” The document says notes to financial statements are essential to making economic, social, or political decisions or assessing accountability. The concepts statement also identifies the characteristics of essential information: The information has or is expected to have a meaningful effect on users’ analyses for making decisions or assessing accountability; and a breadth or depth of users utilize or are expected to utilize the information in their analyses for making decisions or assessing accountability.
According to the statement, information disclosed in notes to financial statements should correspond to the reporting units presented in the financial statements.
GASB issued an exposure draft on this topic back in early 2020 and later issued a revised draft in July 2021 to take into account the feedback it received on the previous draft and ask for further comments on the proposed revisions.