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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Introduction

Governmental Accounting Standards Board

The Governmental Accounting Standards Board (GASB) is the independent standard-setting body responsible for establishing generally accepted accounting principles (GAAP) for state and local governments in the United States. GASB is a component of the Financial Accounting Foundation (FAF), a private-sector, nonprofit organization that oversees the activities of GASB and the Financial Accounting Standards Board (FASB).

Note: GASB is not a governmental entity and does not possess enforcement authority. Funding for GASB is provided through an accounting support fee assessed on municipal securities brokers and dealers under authority granted by the Dodd-Frank Wall Street Reform and Consumer Protection Act and administered through the Financial Industry Regulatory Authority (FINRA) under oversight of the U.S. Securities and Exchange Commission (SEC).

GASB standards establish GAAP for state and local governments. Although GASB does not enforce compliance, many states require adherence to GASB standards through statute or administrative authority. In Texas, state agencies preparing annual financial reports are required to follow GASB standards pursuant to Texas Government Code, Section 321.013(b) and Texas Government Code, Section 403.013(c).

GASB statements and interpretations are the highest level of authority under GASB’s GAAP hierarchy as established by GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. GAAP-compliant accounting for GASB is divided into two categories:

  • Category A — all GASB statements and interpretations
  • Category B — all technical bulletins, implementation guides and other literature of the American Institute of Certified Public Accountants (AICPA) that are cleared by GASB

Category A is the most authoritative in the established hierarchy. Most applicable transactions for an agency’s AFR fall into Category A. If an accounting transaction is not specified by a pronouncement in Category A, the agency must consider whether the accounting treatment is specified by a source in Category B.

If the accounting treatment is not specified within either category and there are no accounting principles for similar transactions within a source of authoritative GAAP, the agency may then consider nonauthoritative accounting literature. Some sources of nonauthoritative accounting literature include:

  • GASB concepts statements
  • Financial Accounting Standards Board pronouncements and other literature
  • Federal Accounting Standards Advisory Board
  • International Public Sector Accounting Standards Board
  • International Accounting Standards Board
  • AICPA literature not cleared by GASB

For a list of the current GASB pronouncements and guidance documents, click on Current GASB Pronouncements or GASB Implementation Guides found in the left navigation. For a list of current statements that have been issued but are not effective until future fiscal years, click on Upcoming GASB Statements.