Basic Financial Statements
Effective: Phased implementation FY2002–FY2004
GASB 34 is the foundational standard that established the modern dual-perspective reporting model for state and local governments. It introduced government-wide financial statements on a full accrual basis alongside traditional fund-level statements, creating the comprehensive annual financial report (CAFR — now ACFR) structure used today.
Key Provisions
- Government-wide financial statements (full accrual)
- Fund financial statements (modified accrual for governmental funds)
- Management's Discussion and Analysis as RSI
- Infrastructure asset capitalization and reporting
- Modified approach for infrastructure preservation
- Net position classification (invested in capital, restricted, unrestricted)
- Reconciliation between government-wide and fund perspectives
- Major fund reporting based on quantitative criteria
Dual-Perspective Model
GASB 34 established two distinct perspectives in governmental financial reporting: (1) government-wide financial statements that report all governmental and business-type activities on a full accrual basis, providing an overall financial picture similar to corporate reporting; and (2) fund financial statements that report individual funds using the measurement focus and basis of accounting appropriate to each fund type — modified accrual for governmental funds and full accrual for proprietary and fiduciary funds.
Government-Wide Statements
The two government-wide statements are the Statement of Net Position and the Statement of Activities. The Statement of Net Position presents assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position for governmental activities and business-type activities. The Statement of Activities presents revenues, expenses, and the change in net position using a net expense format (being replaced by GASB 103).
Management's Discussion and Analysis
GASB 34 introduced MD&A as required supplementary information preceding the basic financial statements. MD&A provides an analytical narrative overview of financial activities, including comparison of current year to prior year, analysis of government-wide and fund-level results, discussion of capital assets and debt activity, and currently known facts or conditions that may have a significant effect on future financial position.
Infrastructure Reporting
A significant innovation of GASB 34 was the requirement to report capital assets, including infrastructure (roads, bridges, tunnels, drainage systems). Governments could choose between traditional depreciation or the modified approach, where infrastructure assets maintained at a condition level established by the government are not depreciated. Instead, preservation costs are expensed as incurred.
Net Position Categories
GASB 34 (as amended by GASB 63) established three categories of net position: net investment in capital assets (capital assets less accumulated depreciation and related debt), restricted (externally imposed constraints from creditors, grantors, or law), and unrestricted (all other). The unrestricted component has been a source of considerable analysis and occasional misunderstanding, particularly when it turns negative due to pension and OPEB liability recognition.