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Copyright 2018 Governmental Accounting Standards Board

    This content collection contains all the original pronouncements that currently constitute the body of state and local governmental accounting and financial reporting standards and guidelines. Specifically, the content collection incorporates these pronouncements:

•    Governmental Accounting Standards Board (GASB) Statements, Interpretations, Concepts Statements, Technical Bulletins, and Implementation Guides issued through December 31, 2018

•    National Council on Governmental Accounting (NCGA) Statements and Interpretations currently in force and NCGA Concepts Statement 1

•    American Institute of Certified Public Accountants (AICPA) 1974 Industry Audit Guide and related Statements of Position continued in force when the GASB began operations

•    GASB Suggested Guidelines for Voluntary Reporting issued through December 31, 2018.

    Unless otherwise noted, original pronouncements in this infobase are presented in their entirety, with the exception of appendices containing codification instructions, which have been omitted. Pronouncements may include one or more nonauthoritative sections. Authoritative guidance is presented in the main body of each pronouncement. Glossaries also are considered to be authoritative. All other appendices (for example, bases for conclusions and illustrations) and summaries are nonauthoritative. In addition, the entire Suggested Guidelines for Voluntary Reporting, SEA Performance Information, is nonauthoritative.

    A status page at the beginning of each pronouncement identifies subsequent changes (amendments and supersessions) to the pronouncement as well as the source of those changes. The status page also identifies (a) other pronouncements affected by that pronouncement, (b) interpretive pronouncements clarifying that pronouncement, (c) the effective date, and (d) the principal sections of the GASB Codification of Governmental Accounting and Financial Reporting Standards in which the pronouncement is incorporated.

    Within each pronouncement, a shading technique is used to identify amended or superseded standards. All terms, sentences, and paragraphs that have been deleted or superseded by subsequent pronouncements are shaded. Sentences or paragraphs that have been amended by the addition of terms, sentences, or new footnotes are marked with a vertical solid bar ( | ) in the left margin alongside the amended material. When standards are amended or superseded, relevant nonauthoritative appendices are also modified to reflect those changes.

    Appendix A

    The Topical Index

Copyright 2018 Governmental Accounting Standards Board

GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, identifies GASB Statements and Interpretations as sources of accounting and financial reporting guidance in Category A of the hierarchy of generally accepted accounting principles (GAAP) for state and local governments. As presented in those documents, standards of governmental accounting and financial reporting, interpretations, and glossary definitions are approved by the GASB and are authoritative as Category A guidance.

Statement 76 also identifies GASB Technical Bulletins, GASB Implementation Guides, and literature of the American Institute of Certified Public Accountants cleared by the GASB as sources of accounting and financial reporting guidance in Category B of the hierarchy of GAAP for state and local governments. As presented in those documents, questions and responses, questions and answers, and glossary definitions are cleared for issuance by the GASB and are authoritative as Category B guidance.

This document is a codification of all authoritative GAAP for state and local governments issued and effective through December 31, 2018. When presented in this document, authoritative material retains the authoritative status of its source. Illustrative materials and other appendices presented in this document are nonauthoritative.

The provisions of this Codification need not be applied to immaterial items.

USING THE CODIFICATION

    This Codification is an integration of currently effective accounting and reporting standards for state and local governments. Material in this Codification is drawn from Governmental Accounting Standards Board (GASB) Statements, Interpretations, Technical Bulletins, Implementation Guidance, and Concepts Statements; Statements and Interpretations of the National Council on Governmental Accounting (NCGA); and the American Institute of Certified Public Accountants (AICPA) Industry Audit Guide, Audits of State and Local Governmental Units (1974), and other literature of the AICPA cleared by the GASB. Accounting principles contained in those NCGA documents and in the 1974 AICPA Industry Audit Guide have been affirmed by the GASB in GASB Statement No. 1, Authoritative Status of NCGA Statements and AICPA Industry Audit Guide, issued in July 1984, and constitute generally accepted accounting principles for state and local governments. Standards of the Financial Accounting Standards Board (FASB) and its predecessors are not included in this Codification, except to the extent references are made to specific applicable pronouncements. (See the Introduction

    The specific effects of Statements No. 87, Leases, and No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, are not effective as of December 31, 2018. Therefore, the effects of those requirements have not been shown in this volume but are presented in Appendix A of this Codification.

    Users of this Codification who wish to make reference to authoritative pronouncements may cite the specific paragraph references of this Codification, for example, GASB Cod. Sec. 2300.103 (Section 2300, paragraph .103), instead of the specific GASB, NCGA, or AICPA pronouncement (in this instance GASB Statement 38, paragraph 5). No changes have been made in the text of the affirmed NCGA and AICPA pronouncements (except as amended by subsequent GASB pronouncements) other than rearrangement for inclusion within the reference system of this text; rearrangement of paragraphs within sections; addition of headings, cross-references, and transition sentences; and correction of typographical and grammatical errors. Accordingly, this Codification is considered authoritative based on the provisions of GASB Statement 1

This Codification is organized into four parts:

    Parts I–III follow a textbook-type format and present topics of general interest in accounting and financial reporting. The organization of Parts I and II is based on the 12 basic principles of accounting and financial reporting established by NCGA Statement 1. Part III presents topics specific to measurement. Each section of those parts is identified numerically (for example, 2400 for "Budgetary Reporting").

    Parts IV and V follow an encyclopedia-type format and present topics of interest on specific balance sheet and operating statement items and specialized units and activities. Part IV addresses issues encountered in accounting and reporting by the governmental entity, and Part V addresses issues of stand-alone accounting and reporting by special-purpose governments, for example, by pension plans. Each section on specific balance sheet and operating statement items is identified by an alpha-numeric code (for example, L20 for "Leases"), with numbers selected to allow space for future additions. Section references for special-purpose governments are denoted by an alpha-alpha-numeric reference, an upper- and lowercase letter with a number (for example, Ut5 for "Utilities").

    Paragraphs within each section are numbered consecutively, according to the following numeric format:

    Terms defined in the Definitions portion are in boldface type the first time they appear in a section.

    Source references are provided to indicate the original pronouncements from which material is derived. They are listed at the beginning of each section and also appear in brackets at the end of paragraphs and footnotes. The following abbreviations are used:

    Paragraphs .901–.999 of certain sections contain material originally presented for illustrative purposes only in the appendices of various NCGA Statements and Interpretations. Their designation as nonauthoritative is consistent with the original pronouncements. Those paragraphs also contain the text of GASB Statement, Interpretation, Technical Bulletin and Implementation Guide appendices that include illustrative disclosures or additional explanatory information.

    Additions to or changes in cross-references and additions of headings do not alter the substance of the original pronouncements and are not noted. Certain paragraphs of the original pronouncements have been deleted because they have been superseded or represent background or introductory sections. In no case have deletions affected the substance of the pronouncement. Appendix E

    NCGA Statement 1, paragraph 134

"The Council encourages continual efforts to assure that accounting and related interim information properly serve management control needs." Changed to: "Continual efforts should be made to assure that accounting and related interim information properly serve management control needs."

    NCGA Statement 1, paragraph 14

"Audits of State and Local Governmental Units (ASLGU), the Industry Audit Guide prepared by the American Institute of Certified Public Accountants (AICPA), focuses primarily on audits of GAAP-based financial statements." Changed to: "Audits of State and Local Governmental Units, the 1974 Industry Audit Guide prepared by the American Institute of Certified Public Accountants (AICPA), focuses primarily on audits of GAAP-based financial statements. [That guide was revised and reissued in 2002.]"

    The effective dates of all NCGA, AICPA, and GASB documents included in this Codification are summarized in Appendix D

    GASB Concepts Statements provide the framework within which the GASB develops standards of financial reporting for governmental entities. However, they do not establish standards of governmental accounting and financial reporting. For this reason, GASB Concepts Statements are not codified but are included in Appendix B

    NCGA Concepts Statement 1, Objectives of Accounting and Financial Reporting for Governmental Units, is included in Appendix C

    The governmental environment differs markedly from that of business enterprises, however, and the information needs to be met by governmental accounting systems and reports differ accordingly. Thus, a set of basic principles applicable to governmental accounting and reporting has been developed for and used by governmental units. These principles are specific fundamental tenets which, on the basis of reason, demonstrated performance, and general acceptance by public administrators, accountants, auditors, and others concerned with public financial operations, are generally recognized as essential to effective management control and financial reporting. [NCGAS 1, p. 1]

    These basic principles are stated and explained in this Codification.

    The GASB was established as an arm of the Financial Accounting Foundation in April 1984 to promulgate standards of financial accounting and reporting with respect to activities and transactions of state and local governmental entities. The GASB is the successor organization to the National Council on Governmental Accounting (NCGA). [GASBS 1, ¶2]

    The January 1984 [GASB structural] agreement . . . , signed by the organizations concerned with the establishment of the GASB, provides that the NCGA Statements [and Interpretations] and the AICPA State and Local Government Industry Audit Guide [and Statements of Position] shall be recognized by the GASB as being in force until modified by the GASB. [This was accomplished in GASB Statement No. 1

    Concerning the jurisdictional division between the GASB and the FASB, the GASB Structural Agreement provides that the GASB will establish accounting and financial reporting standards for activities and transactions of state and local governmental entities and the FASB will establish standards for activities and transactions of all other [nongovernmental] entities. The hierarchy of generally accepted accounting principles

    The certificate of incorporation, by-laws, [and GASB rules of procedure] of the Financial Accounting Foundation set forth certain due process procedures for the issuance, by the GASB, of Statements of Governmental Accounting Standards[, Interpretations of such Statements, and other communications]. The by-laws provide further that such procedures do not apply to any such GASB Statement or Statements specifying that any or all, or any portions, of the Statements or Interpretations issued by the NCGA and the State and Local Government Industry Audit Guide issued by the AICPA are considered by the GASB as continuing in force. [GASBS 1, ¶4]

    Accounting and financial reporting for state and local governments has been guided by the principles set forth in NCGA Statement 1

    NCGA Statement 1 constituted a restatement of the principles of Governmental Accounting, Auditing, and Financial Reporting (GAAFR) a 1968 pronouncement of the NCGA's predecessor, the National Committee on Governmental Accounting. An important objective of NCGA Statement 1 was the incorporation of pertinent aspects of Audits of State and Local Governmental Units (ASLGU), the 1974 Industry Audit Guide of the AICPA, as amended by applicable SOPs. NCGA Statement 1 also superseded NCGA Interpretation 1, GAAFR, and the AICPA Audit Guide. [GASBS 1, ¶6]

    GASB Statement 1 states that all NCGA Statements and Interpretations heretofore issued and in effect at July 1984 are considered as being encompassed within the conventions, rules, and procedures referred to as "generally accepted accounting principles" and are continued in force until altered, amended, supplemented, revoked, or superseded by subsequent GASB pronouncements. [GASBS 1, ¶8]

    To the extent that the heretofore issued [1974] ASLGU, in effect at July 1984, contains accounting and financial reporting guidance, such guidance is considered as being encompassed within the conventions, rules, and procedures referred to as "generally accepted accounting principles," and is continued in force until altered, amended, supplemented, revoked, or superseded by subsequent GASB pronouncements. [GASBS 1, ¶10, as amended by GASBS 34]

    The affirmation by the GASB of those pronouncements of the NCGA and the AICPA that currently constitute "generally accepted accounting principles" for state and local governmental entities should not be construed as representing concurrence by the GASB with each of those pronouncements. [GASBS 1, ¶11]

    Other literature of the AICPA that has been cleared by the GASB is classified as Category B in the hierarchy of generally accepted accounting principles, as presented in Section 1000.

    This Codification includes all GASB Statements, Interpretations, Technical Bulletins, and Implementation Guides issued through December 31, 2018. It also includes existing NCGA and AICPA pronouncements, as continued in force by GASB Statement 1, and literature of the AICPA cleared by the GASB.

    There have been no changes in the text of the affirmed NCGA and AICPA pronouncements (except as amended by subsequent GASB pronouncements) other than rearrangement for inclusion within the reference system of this text; the addition of headings, cross-references, and transition sentences; and correction of typographical and grammatical errors. Additions to the text are noted in brackets [ ]. (See "Using the Codification

    The hierarchy of GAAP governs what constitutes GAAP for all state and local governmental entities. It lists the order of priority of pronouncements that a governmental entity should look to for accounting and financial reporting guidance.

    In its November 30, 1989 Jurisdiction Determination, the FAF Trustees stated that the jurisdictional division between the GASB and the FASB shall continue to be as set forth in the 1984 GASB Structural Agreement, but that the hierarchy should be changed. The objective of the hierarchy, as stated in the Jurisdiction Determination, is for each Board to have primary responsibility for setting standards for the reporting entities in its jurisdiction; pronouncements of the other Board should not be mandatory unless designated as such by the primary Board.

    The creation of the GASB has had an effect on the accounting and financial reporting standards applicable to separately issued statements of governmental colleges and universities, governmental healthcare providers, public authorities, public utilities, public benefit corporations, and governmental entities. In addition, the actions taken in November 1989 by the FAF Trustees, the hierarchy presented in Section 1000

a.    Governmental business-type activities (which include such functions as hospitals, utilities, toll roads and bridges, airports, and so forth) may be performed either as part of the legally constituted general purpose government or as separate legally constituted organizations. As noted in several references in GARS, all GASB pronouncements (including all NCGA Statements and Interpretations currently in effect) except where specifically excluded are applicable to governmental business-type activities, regardless of their legal structure. (See Section P80

b.    Statement 62

c.    Statement 34

d.    Statement 35

    In May 1986, the Council of the American Institute of CPAs (AICPA) voted in favor of a resolution giving the GASB AICPA Ethics Rule 203 support for its standards. AICPA Rule 203, "Accounting Principles," provides that an AICPA member shall not express an opinion that financial statements are presented in conformity with generally accepted accounting principles if such statements contain any departure from an accounting principle promulgated by the body designated by Council to establish such principles, which has a material effect on the statements taken as a whole, unless the member can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading. In such cases, the report must describe the departure; the approximate effects thereof, if practicable; and the reasons why compliance with the principle would result in a misleading statement. By passing its resolution, the AICPA Council designated the GASB as the "body to establish financial accounting principles for state and local governmental entities pursuant to Rule 203. . . ."