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Unformatted text preview: 20 Tennessee CPA Journal | JUNE 2009 Statement of Governmental Accounting Standards No. 54, Fund Balance Reporting and Governmental Fund Type Defi nitions, will signifi cantly change the reporting of fund balance in the balance sheets of governmental type funds. GASB 54 is effective for fi nancial statements for periods beginning after June 15, 2010 with early implementation encouraged. Therefore, governmental accountants and CPAs will need to quickly become familiar with the new fund balance reporting model. This article will provide an overview of the fund balance reporting that will be required by the new standard. First, a brief description of fund balance reporting prior to GASB 54 will be presented. This will be followed by an outline of the new requirements of GASB 54 and an example to illustrate the reporting of fund balance. Fund Balance Reporting Prior to GASB 54 The governmental funds are composed of fi ve types of funds: 1) the General Fund, 2) Special Revenue Funds, 3) Capital Project Funds, 4) Debt Service Funds and 5) Permanent Funds. The basic balance sheet accounting model for governmental funds is: Assets = Liabilities + Fund Balance. Statement of Governmental Accounting Standards No. 34, Basic Financial Statements - and Managements Discussion and Analysis - for state and local governments, required that the governmental funds report fund balance in two categories: 1) Reserved Fund Balance and 2) Unreserved Fund Balance. The Reserved Fund Balance reports dollar amounts that have been appropriated and for which resources have already been committed, such as inventories on hand, prepaid expenditures and encumbrances. The Unreserved Fund Balance is the residual amount that is still available for further expenditure. Occasionally, governmental entities will also segregate the Unreserved Fund Balance into two subsections: 1) designated and 2) undesignated. The designated portion of unreserved fund balance was used to communicate to the reader of the fi nancial statements that certain projects had been identifi ed that might require future spending, such as possible expansion of the current water and sewer system. Over time, inconsistencies were observed in the reporting of fund balance by state and local governmental entities. In addition, some users perceived a lack of transparency in the way fund balance was reported. They were concerned with the restrictions that had been placed on the use of current government resources. Frequently, it was not apparent at what decision-making level the restrictions had been imposed and by what authority. Therefore, the GASB added to its agenda the fund balance reporting project. After issuing the 2006 invitation to comment and the ensuing 2008 exposure draft, the GASB voted to adopt Statement No. 54 in 2009....
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This note was uploaded on 03/28/2012 for the course ACIS 4124 taught by Professor Dr.easterwood during the Spring '12 term at Virginia Tech.
- Spring '12