Fasb - Gasb Comparison

FASB/GASB Comparison

For-profit business is driven by profit earnings. Financial statements provide information in relation to that performance. For-profit businesses will prepare reports based on the Financial Accounting Standards Board (FASB). Not-for-profit businesses are not driven by the same motivations and are hold to the Governmental Accounting Standards Board (GASB). Three distinctions set GASB organizations apart. 1) Receipt of significant recourses that are not expecting proportionate repayment or economic benefits. 2) Operations other than to provide goods or services at a profit equivalent. 3) Absence of defined ownership that can be sold, transferred, or redeemed (Wilson and Kattelus, 2002). This paper will briefly discuss some of the objectives, differences, and similarities of FASB and GASB. It will also discuss governmental regulations in the application of standards and reporting requirements.

FASB/GASB Objectives

Organizations that comply with FASB are concerned with market and stock performance. The objective of a for-profit entity is to increase profit. FASB financial reports will focus in that direction. Financial statements will drive to net income, shareholders equity, and maximizing profit.

"Accountability is the cornerstone of all financial reporting in government" (Wilson and Kattelus, 2002). This is measured by interperiod equity, budgetary and fiscal compliance, and service efforts and accomplishments (Granof and Warlow, 2003). Interperiod equity states that current year revenues must be sufficient for current year services. Governments are accountable to citizens. They must justify raising resources that will be used for provision of their services. Not-for-profit entities do not have luxury of many financial practices the FASB allows.

FASB/GASB Differences

A large difference in compliance to FASB or GASB is the way that financial statements area prepared. FASB entities will provide typical income statements, balance sheets, retained earnings statements and cash flow statements. These will be very vertical in organization. FASB requires reporting on capitalized assets, depreciation, and equity positions of an entity. However, GASB statement will be much more horizontal. GASB requires an entity's different activities be broken out into funds. Funds are established for capital projects, debt service, fiduciary holding and many other activities. The GASB balance sheet will not have the depth of assets and liabilities