FOUNDATIONS OF GOVERNMENTAL ACCOUNTING

This chapter provides a background on the development and purpose of governmental accounting standards. The topics in the chapter follow: entities covered by governmental accounting principles; overview of the history of governmental accounting standards setting; objectives of governmental accounting and financial reporting; communication methods; elements of financial statements; and hierarchy of governmental accounting standards. Understanding how governmental accounting standards were developed appears difficult at first because it seems that so many different entities and organizations were involved in the standards-setting process. Working from the current process through history is the easiest way to understand the interrelationships of the various entities involved. Currently, governmental accounting standards are established by the Governmental Accounting Standards Board (GASB). The GASB is a “sister” organization to the Financial Accounting Standards Board (FASB). The FASB establishes accounting standards for private-sector entities, including both commercial entities and not-for-profit organizations.