Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 14 – Adjustments to Beginning Net position, Fund Balances or Fund Net Position
Change in Accounting Estimate

Accounting estimates are defined as amounts subject to measurement uncertainty that are recognized or disclosed in the basic financial statements. There are two parts to calculating an accounting estimate:

• Input – A change in an accounting estimate that only applies to changes in inputs. These inputs may include a change in circumstances, new information or more experience.

  Example: A capital asset is depreciated over 35 years using straight-line method. After receiving new information that wasn’t originally available. The useful life is changed to 25 years. This is a change in accounting estimate.

• Methodology – A change in methodology is considered a change in accounting principle. This change in measurement methodology may include a valuation technique, that is used to determine that estimate must be justified based on preferability (understandability, reliability, relevance, timeliness, consistency and comparability).

  Example: The same capital asset’s depreciation is changed from straight-line method to double-declining balance method would be a change in accounting principle.

Reporting

Per GASB 100, agencies must report changes in accounting estimates prospectively by recognizing the change in the reporting period in which the change occurs. This important distinction is consistent with current GASB 62 guidance.

Disclosure

Agencies must disclose the following in the notes to the financial statements for each significant change in accounting estimate:

• The nature of the change in accounting estimate, including the financial statement line items affected.
• A Note disclosure (only if the change is significant).