Accounting Standards

GASB issues RED to improve notes to financial statements

It comes as a part of the body’s response to its research results when examining note disclosure requirements

The Governmental Accounting Standards Board (GASB) has issued a proposed concepts statement intended to guide the board when establishing note disclosure requirements for both state and local governments.

It comes as a part of the body’s response to its research results when examining note disclosure requirements.

The concepts are intended to provide the GASB with criteria to evaluate notes to financial statements in the standards-setting process, as well as supporting stakeholders in understanding the concepts behind “future GASB pronouncements”.

Included in the revised exposure draft (RED) are concepts such as the purpose of notes to financial statements, the intended users of note disclosures, and the types of information both to be disclosed in notes and not appropriate for note disclosures.

The RED would establish that notes to financial statements are “essential to making economic, social, or political decisions or assessing accountability”.

Other characteristics that indicate the information is essential include its use in analyses to make decisions or assess accountability if made available, its “meaningful” effect on analyses to make decisions or assess accountability, and the “breadth or depth” of users that would utilize the information.

The GASB first released its exposure draft (ED) on the theme in 2020, before releasing the RED following feedback from stakeholders.

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