On March 11, 2009 the Governmental Accounting Standards Board (GASB) issued GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Statement 54 is intended to provide financial report users information about fund balance by making available more structured fund balance classifications, and by clarifying the definitions of existing governmental fund types.
Fund balance is strongly considered the most widely and frequently used information in state and local government financial reports. Statement 54 was developed by the GASB to address the range of practice and the resulting lack of consistency that exists today in fund balance reporting. To address these concerns, the new standards establish a hierarchy of fund balance classifications based primarily on the degree to which a government is bound to observe spending constraints imposed upon how resources may be used.
Statement 54 separates fund balance amounts that are considered nonspendable, such as fund balance associated with inventories and prepaid items from other amounts that are classified based on the relative strength of the constraints that control the purposes for which specific amounts can be spent. Beginning with the highest level of constraints, fund balance amounts will be reported in the following classifications:
- Restricted - amounts constrained by external parties, constitutional provision, or enabling legislation - GASB purposely made this similar to the definition of restricted net assets in the government wide financial statements
- Committed - amounts constrained by a government using its highest level of decision-making authority
- Assigned - amounts a government intends to use for a particular purpose
- Unassigned - amounts that are not constrained at all will be reported in the general fund
The new standard further defines individual governmental fund types. It interprets certain terms within the definition of special revenue fund types, while further clarifying the debt service and capital projects fund type definitions. The final standard also specifies how economic stabilization or “rainy-day” amounts should be reported.
The new statement is effective for financial statements for periods beginning after June 15, 2010. Governments that wish to implement earlier than that date are encouraged to do so.
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