All uses of data are based on
accurate, timely, and relevant information. Financial reporting is
the communication of information regarding a governmental unit's accounting
activities. Financial reporting encompasses a broad range of reporting
activities including, but not limited to, presentation of the government's
annual financial statements, grant applications and related reports,
financial information submitted to state and federal regulatory and
granting agencies, budget to actual comparison reports, management
reporting, and other financial reports for internal and external use.
The variety of these financial reports is evidence of the wide demand
for financial information from both internal and external users. As
a result, the financial reporting systems and activities of governments
must be capable of producing financial information in a variety of
formats and levels of detail. Although
the financial reporting activities of governmental entities, including
schools, must fulfill a range of user needs, this chapter outlines
the financial reporting requirements under Generally Accepted Accounting
Principles (GAAP). Therefore, this chapter deals primarily with
the preparation and presentation of the governmental annual financial
statements and related GASB reporting standards. As discussed in
the previous chapter, GASB Statement 34 has significantly modified
the basic reporting requirements for governmental entities. The
new reporting model requires the following financial statements
and related information:
- Management's Discussion & Analysis (MD&A) as
Required Supplementary Information (RSI)
- Basic Financial Statements:
- Governmentwide Financial Statements
- Fund Financial Statements
- Notes to Financial Statements
- Required Supplementary Information Other Than
MD&A
The basic financial statements and the required supplementary information
constitute the minimum requirements for external financial statements.
GASB Statement 34 requires new types of financial reporting in response
to the various needs of financial statement users. The financial statement
components and targeted users are shown in table 2.
| Table
2. Financial Statement Components and User Groups |
| Financial
Statement Components |
Primary User Group |
| Required Supplementary Information (including
MD&A) |
Citizenry, Legislators and Oversight Bodies,
Financial Community |
| Governmentwide Financial Statements |
Citizenry and Legislators |
| Fund Financial Statements |
Oversight Bodies, Legislators and Financial
Community |
The following sub-section outlines the major
financial statement elements and identifies the major requirements
for presenting a government's annual financial statements.
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