Understanding and Implementing GASB 54
GASB (Government Accounting Standards Board) Statement No. 54 changes the way governments report fund balances. The new rules are effective for periods beginning after June 15, 2010, so you should have already started reviewing your policies and procedures related to the reporting of restricted, committed and assigned fund balances.
If you haven't already, you should also be determining whether or not your special revenue funds meet the modified definitions outlined in the new standards.
GASB 54 redefines the classifications of fund balances and provides a hierarchy for the reporting of fund balances based on the restrictions placed on the use of resources reported in the governmental funds.
Hierarchy of Fund Balance
The hierarchy of five possible classifications of fund balance is:
What You Need to Know
Governments will now have to disclose their policies and procedures related to how restricted, committed and assigned amounts are spent. This includes disclosure of the highest level of decision-making authority, and the body or official authorized to restrict and commit fund balances. This process is used to determine proper fund balance classification and the formal action required to modify or rescind a commitment.
Questions that should be addressed by most governments include:
Redefining Special Revenue Fund
GASB 54 also clarifies the definition of a special revenue fund as one that is "used to account and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects." You will need to review your special revenue funds to ensure they comply with this revised definition.
Many governments have special revenue funds that do not report proceeds from a specific revenue source that are restricted or committed for expenditure for a specified purpose. If this describes your organization, you will have to roll your special revenue funds into the general fund, which will greatly impact your budgeting process.
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The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by Clifton Gunderson LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Clifton Gunderson LLP or other tax professional prior to taking any action based upon this information. Clifton Gunderson LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.