Government and Non Profit Accounting Essay
Government and Non Profit AccountingThis paper analyzes the relationship between the Government Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB). It explains the objectives of the two boards: – in which ways they are similar, and in which ways they are different. It also describes the role of government regulation in the application of accounting standards and reporting requirements, including a description of a situation in a governmental accounting environment in which FASB standards would applyThe Government Accounting Standards Board (GASB) was created in 1984 to establish generally accepted accounting principles (GAAP) for state and local government entities.
The GASB is one of two boards that establish GAAP. The other is the Financial Accounting Standards Board (FASB). (Reference for business.com 2006)Of course, the similarity is that both establish GAAP, and the differences are that while the GASB has jurisdiction over financial reporting by governmental entities, the FASB establishes rules for private sector accounting. Both boards are independent, nongovernmental bodies whose members are appointed by the trustees of the Financial Accounting Foundation (FAF). Two key issues have arisen concerning the relationship between the GASB and FASB – those of special entities (a special entity is one that could be privately or publicly owned, meaning that it is possible for two similar entities, such as a government school and a private school, for example, to be governed by two different sets of GAAP (reference for business.com 2006)Naturally government has an important role to play in the application of accounting standards and reporting requirements for of course they are publicly accountable. Accounting and financial reporting standards are essential for public accountability and for an efficient and effective functioning of democratic system of government.
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Thus, federal accounting standards and financial reporting play a major role in fulfilling the government’s duty to be publicly accountable and can be used to assess (1) the government’s accountability and its efficiency and effectiveness, and (2) the economic, political, and social consequences of the allocation and various uses of federal resources (Federal Accounting Standards Advisory Board 2006). Hypothetically, let’s look at a situation where FASB can be used by the government to enable it to better achieve its objectives. An example where government could use FASB is within national and international trade law and foreign relations.We now recognize that international issues are so intertwined with domestic issues that there is no way to clearly separate the two. Foreign standards that differ from U.S. standards present analytic obstacles for U.S.
investors and concerns for U.S. companies. Thus, the FASB’s obligation to its domestic constituents demands that it attempt to narrow the range of difference between U.
S. and foreign standards. Addressing those problems is as much a part of the FASB’s domestic agenda as it is of international concern. (Liesenring, 1998).
A specific example might be the new trend of outsourcing call centers to countries such as India, where, if not carefully handled, accounting practices could become confused. We can see that clarity is required on this issue and that the government can use FASB to achieve this.The globalization of capital markets is an irreversible process, and there are many potential benefits to be gained from mutually recognized and respected international accounting standards. Common standards cut the costs of doing business across borders by reducing the need for supplementary information. They make information more comparable, thereby enhancing evaluation and analysis by users of financial statements and reducing user costs.
Users become more confident of the information they are provided, and presumably this reduced uncertainty promotes an efficient allocation of resources and reduced capital costs. (Liesenring, 1998)In conclusion, we can see what the relationship between GASB and FASB is by what is written above. The objectives, similarities and differences of the two boards are represented here and have been explained, and the importance of government regulation in the application of accounting standards has been detailed by use of an example.ReferencesFederal Accounting Standards Advisory Board (2006) retrieved 11 Sept 2006 from the website http://www.fasab.gov/Liesenring, James, (1998) “FASB Perspectives on the Development of International Accounting Standards”, retrieved 11 Sept 2006 from the website http://newman.baruch.cuny.edu/DIGITAL/saxe/saxe_1998/leisenring_98.htmReference for Busines.com, (2006) retrieved 11 Sept 2006 from the website http://www.referenceforbusiness.com/encyclopedia/Gov-Inc/Governmental-Accounting-Standards-Board-GASB.html