x Objectives of Financial Reporting as Defined by GASB

x Objectives of Financial Reporting as Defined by GASB - 3...

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3 Objectives of Financial Reporting and Their Problems in Governmental Accounting Yasuhiro YAMADA * (Associate Professor, Faculty of Economics, Shiga University) 1. Introduction It is widely known that the recent deterioration in the fiscal condition of local governments has triggered an attempt to raise awareness among residents of the severity of the situation through the introduction of corporate-style accounting and the release of financial statements such as balance sheets. And in addition to balance sheets, local governments have also started releasing administrative cost calculation statements, which are equivalent to corporate income statements. There therefore seems to have been a rapid expansion in financial disclosures by local governments. At the same time, starting with the announcement in March 2003 of “Public Accounting Conceptual Framework,” a theoretical foundation for financial reporting by local governments and other public sector organizations is gradually being laid down. The United States, however, is well ahead of Japan in this area. The third edition of Statements of Financial Accounting Concepts (hereinafter referred to as Concepts Statements) and the 42 nd edition of Statements of Financial Accounting Standards (hereinafter referred to as Standards Statements) for states and local governments have been already issued. It therefore goes without saying that a study of these concepts and standards will prove useful for conducting a theoretical examination of local-government accounting in Japan. Although Concepts Statements address numerous issues, in this paper I will focus on the objectives of financial reporting. The reason for this approach is that financial reporting objectives are the key determinant of the nature of a financial reporting system. This is obvious because financial reporting objectives have a significant impact on the content of financial reports. In conducting my analysis, I will highlight the unique characteristics of Japanese public financial reporting by comparing them with those of the United States as defined in Concepts Statements referred to earlier. I hope that my analysis in this paper will enliven the debate on local-government financial reporting, and perhaps make a small contribution to improving such reporting. 2. Objectives of Financial Reporting as Defined in GASB [1987] In this section, I will survey the objectives and characteristics of financial reporting using GASB [1987] as a guide. GASB [1987] defines three “objectives of external financial reporting by state and * Born in 1971. Left Kyoto University Graduate School of Economics with credits in a doctoral course in 2001. Attained a doctorate in economics from Kyoto University in 2004. Full-time member of the Faculty of Economics at Shiga University since 2001, initially as an assistant professor, and since 2003, as an associate professor. Served as a member of the City of Hikone’s industry department’s committee for selecting candidates to manage city facilities in 2005. Memberships include the Accounting Research Association of Japan, the Japan
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This note was uploaded on 04/28/2010 for the course ECON ACCT3011 taught by Professor Isabelgordon during the Summer '09 term at University of St Andrews.

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x Objectives of Financial Reporting as Defined by GASB - 3...

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