GASB No. 34's Governmental Financial Reporting Model: Evidence on Its Information Relevance

2007 ◽  
Vol 82 (1) ◽  
pp. 205-240 ◽  
Author(s):  
Elizabeth Plummer ◽  
Paul D. Hutchison ◽  
Terry K. Patton
Keyword(s):  
School Districts ◽  
Financial Reporting ◽  
Default Risk ◽  
Balance Sheet ◽  
Cash Flows ◽  
Working Capital ◽  
Information Relevance ◽  
Net Assets ◽  
Accrual Basis ◽  
The Government

This study uses a sample of 530 Texas school districts to investigate the information relevance of governmental financial statements published under Governmental Accounting Standards Board Statement No. 34 (GASB No. 34). Specifically, we examine whether the new government-wide statements provide information relevant for assessing a government's default risk, and if this information is incremental to that provided by the governmental funds statements. GASB No. 34 requires governments to publish governmental funds statements prepared on a modified accrual basis, and government-wide statements prepared on an accrual basis. We find that GASB No. 34's Statement of Net Assets (similar to a corporation's balance sheet) provides information relevant for assessing default risk, and this information is incremental to that provided by the governmental funds statements. However, GASB No. 34's Statement of Activities (similar to a corporation's income statement) does not provide information relevant for assessing default risk. The accrual “earnings” measure is not more informative than the modified-accrual “earnings” measure. A government's modified accrual earnings measure can be thought of as a type of measure of changes in working capital. Therefore, our results are consistent with research on corporate entities that attributes the superiority of earnings over cash flows primarily to working capital accruals and not long-term accruals. For our sample of school districts, evidence suggests that total net assets from the government-wide Statement of Net Assets, along with a measure of modified-accrual “earnings” from the governmental funds statement, provide the best information for explaining default risk.

scholarly journals Impact of COVID-19 pandemic on assessment of companies activity within international standards of financial reporting

2021 ◽  
Vol 11/3 (-) ◽  
pp. 32-36
Author(s):  
Raisa TSYHAN ◽  
Oksana ONYSHCHENKO ◽  
Denys SOLODKOV
Keyword(s):  
Financial Reporting ◽  
Default Risk ◽  
Traditional Approach ◽  
Cash Flows ◽  
International Standards ◽  
Global Pandemic ◽  
Net Profit ◽  
Net Assets ◽  
Credit Losses ◽  
A Company

Introduction. During crises like the current one, induced by a global pandemic of the COVID-19, the most relevant aspects for the majority of businesses are a continuity of their operating, assessment for impairment and assessment of expected credit losses. These factors impact accounting and financial reporting which, in turn, impact decision-making. A business survival in such conditions is highly dependent on how efficiently managers assess these aspects. The purpose of the paper is to determine particular actions management should undertake in order to prevent business bankruptcy as a result of the pandemic and the pandemic-related restrictions. Results. It terms of assessment of continuity of business operating, the main issue is the fact that the budgets approved in 2019 for the year 2020 turned to be irrelevant in the context of expected prices, sales volumes, total net profit, working capital and the effects of exchange difference, whereas the key solution is an estimation of a company’s liquidity to be able to cover liabilities within the deadlines. In terms of assessment for impairment, there two indicators of the impairment: external changes with significant impact on a company or its environment and a situation when a book value of net assets exceeds company’s market capitalization whereas a solution is to determine amount of expected compensation either with a traditional approach or with an approach based on expected cash flows. In terms of credit losses assessment, among the factors that should be accounted there are, for instance, additional economic scenarios that address high uncertainty, an impact on particular groups of clients, industries or regions and actions taken by governments and central banks whereas among the targets of the assessment there are, for instance, an ability to include changes of a default risk into evaluation of default probability in time. Conclusions. COVID-19 pandemic and the risks related to it caused a significant impact on accounting and financial reporting, regardless of a company’s industry, size and region where it is located which is expressed in the dynamic of the Global SEMs bankruptcy index and PMI.

Relevance of GASB No. 34 to Financial Reporting by Municipal Governments

2012 ◽  
Vol 27 (2) ◽  
pp. 175-204 ◽  
Author(s):  
Annette K. Pridgen ◽  
W. Mark Wilder
Keyword(s):  
Financial Reporting ◽  
Default Risk ◽  
Data Availability ◽  
Financial Indicators ◽  
Municipal Governments ◽  
Indicator Variable ◽  
Governmental Accounting ◽  
Fund Balances ◽  
Net Assets ◽  
The Government

SYNOPSIS The Governmental Accounting Standards Board issued Statement No. 34, creating a new accrual-based financial reporting model. This study examines whether information from this model is associated with the default risk (a proxy for fiscal distress) of municipal governments and whether this information is incremental to that provided by the fund-based, modified-accrual reporting model. Ordered logistic regressions are used to analyze financial data from 2005 for a sample of 409 municipalities that participated in the Government Finance Officers Association award program. This study extends the work of Plummer et al. (2007) to municipal governments. In addition to the financial position indicator variable (total net assets/total revenues) examined by Plummer et al. (2007), this study provides evidence of the relevance of three other financial indicators (change in net assets/total net assets; total liabilities/total assets; and current assets/current liabilities). We also find that these accrual-based indicators provide information incremental to the fund-based model and that one fund-based measure (total fund balances/total fund revenues) also provides information incremental to the accrual indicator. These results are consistent with perceptions of regulators and others who expect accrual accounting to be a better measure of the economic costs of running a government than the traditional fund-based model. Data Availability: Contact the authors.

PENERAPAN PSAP NOMOR 07 TENTANG AKUNTANSI ASET TETAP PADA KANTOR KEPOLISIAN RESOR KOTA LUBUKLINGGAU

2021 ◽  
Vol 4 (3) ◽  
pp. 961
Author(s):  
Norman Hadi ◽  
Sriyani Sriyani
Keyword(s):  
Financial Reporting ◽  
Financial Management ◽  
Balance Sheet ◽  
Economic Benefits ◽  
Point Of View ◽  
Police Station ◽  
Straight Line ◽  
Fixed Assets ◽  
The Government

The reform of state financial management in 2003 was aimed at realizing transparent and accountable government financial reporting. Reform of state financial management is the first step in improving the quality of state finances. In the government environment, fixed assets play an important role in government operations and also benefit the community. The problem studied is how the suitability of accounting for fixed assets at the Lubuklinggau Police with PSAP number 07 concerning Accounting for Fixed Assets from the point of view of recognition, measurement, presentation, and disclosure of Fixed Assets in Financial Statements. The research method used is a qualitative method, the method of data collection is carried out by means of observation and interviews with parties related to accounting at the Lubuklinggau Police Station. The results of this study are the Lubuklinggau Police Station has implemented Fixed Asset Accounting in accordance with PSAP 07, namely Assets are recognized when future economic benefits have been obtained and their value can be measured reliably, Fixed Assets are measured at cost, depreciation is carried out using a straight line and presented in Balance sheet according to PSAP 07.

PENERAPAN APLIKASI SAIBA UNTUK PENYUSUNAN LAPORAN KEUANGAN

2016 ◽  
Vol 14 (1) ◽  
pp. 65
Author(s):  
Arieffin Dian Permana
Keyword(s):  
Information Technology ◽  
Financial Reporting ◽  
Good Governance ◽  
Financial Statement ◽  
Advantages And Disadvantages ◽  
Government Accounting ◽  
Reporting Process ◽  
Accrual Basis ◽  
The Government ◽  
Cash Basis

ABSTRACT Information technology (IT) have a great impact to all over environmental society, especially for bussines and accounting. Nowdays, information technology is already used in government sectors. Society are prosecute government sektors works efficiently and effectively to give a excellent public services, because the objectives of government sectors is to produce better pulic services. One of government sectors responsibility for society is to produce financial statement. Financial statement represent the performance of government sectors. Financial statement is arranged according to goverment standards and laws. Implementation of good governance in government sectors, makes a great revolution on government accounting basis. Prior the implementation of good governance, accounting basis for government sectors is a cash basis. Now the standards requires accrual basis to be used in addition to report financial statement. This differences makes a adjustments are needed on the government financial reporting process. Then, government launch SAIBA (Sistem Akuntansi Instansi Berbasis Accrual) to accommodate this conditions.  The writer main focussed is to describe the characteristic, advantages, and disadvantages of application but not how to this applications works. Keywords : Information Technology, Good Governance, SAIBA, Financial Statement, Cash Basis, Accrual Basis.

Firm characteristics associated with concurrent disclosure of GAAP-compliant financial statements with earnings announcements

2018 ◽  
Vol 26 (3) ◽  
pp. 365-381 ◽  
Author(s):  
Thomas D’Angelo ◽  
Samir El-Gazzar ◽  
Rudolph A. Jacob
Keyword(s):  
Financial Reporting ◽  
Voluntary Disclosure ◽  
Earnings Announcements ◽  
Balance Sheet ◽  
Control Sample ◽  
Financial Statements ◽  
Cash Flows ◽  
Content Type ◽  
Quarterly Earnings ◽  
Earnings Releases

Purpose This paper aims to examine the characteristics of firms that voluntary disclose generally accepted accounting principals (GAAP)-compliant statements of income, statement of cash flows (SCF) and balance sheet (BS) concurrently with quarterly earnings releases. Cardinal motivation of the paper stems from the increasing demand over the past decade by professional analysts and the Securities and Exchange Commission for concurrent disclosure of GAAP-compliant financial statements with earnings’ announcements. Design/methodology/approach Using hand-collected archival data, a random sample was identified as disclosing GAAP-compliant SCF and BS with their quarterly earnings releases compared to a control sample identified as non-GAAP-compliant disclosing firms during the 36-month period of 2009-2011, and several hypotheses are tested to determine managements’ incentives to disclose GAAP-compliant versus non-GAAP financials with their earnings releases. Findings The results in this paper suggest that debt financing, corporate governance, operating performance, earnings volatility, industry membership (such as technology and more research and development-intensive) and complexity of operations (number of segments) are significant characteristics of firms electing to concurrently disclose GAAP-compliant SCF and BS with earnings releases. Practical implications The findings discussed in this paper are of special interest to financial reporting policymakers, financial analysts, firm managers and stakeholders and academics. Originality/value The voluntary disclosure literature on quarterly earnings releases is extended by differentiating between GAAP-compliant and non-GAAP-compliant voluntary disclosers. The specific findings of this study may provide valuable input to policymakers as they study prevailing voluntary disclosure rules and practices.

scholarly journals Case Study in a Malaysian Public Agency on an Asset Management-Moving Towards the Accrual Basis of Accounting

2019 ◽  
Vol 8 (3) ◽  
pp. 149
Author(s):  
Sharifah Sabrina Syed Ali ◽  
Sharon Cheuk Choy Sheung ◽  
Mohd Waliuddin Mohd Razali
Keyword(s):  
Financial Reporting ◽  
Asset Management ◽  
Accounting System ◽  
Public Agency ◽  
Government Effectiveness ◽  
Preliminary Study ◽  
Accrual Basis ◽  
The Government ◽  
Asset Management System

As part of the strategic reform of Malaysian public services under the Government Transformation Program (GTP), accrual accounting is expected to be fully adopted in public sector financial reporting commencing on 1 January 2015, in order to ensure alignment with the global accounting standards. Consequently, in order to access the government effectiveness of moving towards the accrual basis of accounting, this study is to examine the asset management system in a Malaysian public agency; to evaluate the extent of compliance with MPSAS 17, Property, Plant and Equipment (PPE), IPSAS 26, Impairment of Cash-Generating Assets and IPSAS 21, Impairment of Non-Cash Generating Assets. Using qualitative approach, a preliminary study was conducted via interviews and through obtaining documents. The findings include the following: MPSAS17 has not been strictly adhered to and software is used to monitor the assets; however, the disposal of assets is a manual process and is not automated. The study also discussed any weaknesses pertaining to the said asset accounting system, and suggested recommendations for improvement thereon.

Horse Vet, LLC: Transaction Analysis and Statement of Cash Flows Preparation (Option 1)

2017 ◽  
pp. 1-12
Author(s):  
Mark E. Haskins
Keyword(s):  
Financial Reporting ◽  
Balance Sheet ◽  
Financial Statements ◽  
Cash Flows ◽  
Financial Statement ◽  
Balance Sheets ◽  
Income Statement ◽  
Transaction Analysis ◽  
Business Events ◽  
Statement Of Cash Flows

This case pertains to the foundational underpinnings of the accounting process and the statement of cash flows. In Part I, students are presented with 23 business events that they must evaluate for recording in the financial records. Part II requires students to prepare a 2012 statement of cash flows using the information presented in the company's 2011 and 2012 year-end balance sheets along with its 2012 income statement. In Part III, students must rely on a 2011 balance sheet and a 2011 statement of cash flows to work backward to derive the 2010 year-end balance sheet. There are two versions of this case: Option 1 and Option 2. The Option 2 case is a bit more challenging than the Option 1 case. Instructors should use Option 2 if they feel students are well grounded in their understanding of financial statement relationships and the customary financial reporting of a typical set of business events. Both cases reinforce students' learning related to the accounting process and the connectivity between the financial statements. Please note that only one version of the case should be used due to the existence of some overlap between the two.

THE DEVELOPMENT OF THE TOTALS COLUMN ON THE COMBINED BALANCE SHEET FOR STATE AND LOCAL GOVERNMENTS IN THE UNITED STATES DURING THE 20th CENTURY

2016 ◽  
Vol 43 (1) ◽  
pp. 33-57 ◽  
Author(s):  
Randall L. Kinnersley
Keyword(s):  
United States ◽  
20Th Century ◽  
Financial Reporting ◽  
Local Governments ◽  
Balance Sheet ◽  
Accounting Standards ◽  
The United States ◽  
Net Assets ◽  
State And Local ◽  
Historical Developments

This study examines the historical development during the 20th century of the totals column reported on the financial statement that reported assets, liabilities, and equity for all funds of state and local governments (SLGs) within the United States. This research documents the evolution of accounting standards that addressed the totals column. SLG accounting professionals and standards-setters debated whether it was appropriate for SLGs to report a combined totals column throughout the century. The totals column was optional or forbidden in some reporting standards. Other SLG standards permitted a totals column, but always with reservation. A consolidated totals column was never acceptable until Governmental Accounting Standards Board (GASB) Statement 34. Statement 34, issued in 1999, required SLGs to report all primary government funds in a single consolidated totals column on a new Statement of Net Assets. The Statement of Net Assets was the first time users were able to assess the financial position of the SLG primary government in a single consolidated column. This study provides the historical developments that led to this major revision in SLG financial reporting.

Analyzing Two Investments—An Instructional Case to Introduce Basic Financial Accounting Concepts

2018 ◽  
Vol 33 (4) ◽  
pp. 47-56
Author(s):  
Wendy J. Bailey ◽  
Janet A. Samuels
Keyword(s):  
Financial Reporting ◽  
Business Students ◽  
Balance Sheet ◽  
Cash Flows ◽  
Legal Aspects ◽  
Financial Accounting ◽  
Net Income ◽  
Income Statement ◽  
Orientation Session ◽  
Statement Of Cash Flows

ABSTRACT This case introduces basic financial accounting concepts to graduate business students in an accounting orientation session (i.e., “boot camp”). Students assume they have invested in two cupcake businesses in Paris and they now want to determine which business performed best. Instructors can use this case, which provides students an opportunity to compare two businesses, to achieve several learning objectives including those related to accrual accounting (i.e., when to record transactions), the legal aspects of business (i.e., company structure, stock ownership, international accounting), and the use of estimates in financial reporting (i.e., depreciation, bad debts). This case also introduces students to the three basic financial statements (i.e., balance sheet, income statement, statement of cash flows), and the evaluation of financial results (i.e., net income versus cash flow, ratios). We have found that this simple, straightforward case helps students feel more confident when working with basic financial accounting concepts.

scholarly journals An evaluation of the usefulness of cash flow ratios to predict financial distress

2007 ◽  
Vol 7 (1) ◽  
Author(s):  
L. Jooste
Keyword(s):  
Cash Flow ◽  
Financial Reporting ◽  
Financial Distress ◽  
Balance Sheet ◽  
Cash Flows ◽  
Mean Values ◽  
Additional Information ◽  
Financial Failure ◽  
Flow Information ◽  
Cash Flow Statement

Purpose: With the introduction of the cash flow statement it became an integral part of financial reporting. A need arose to develop ratios for the effective evaluation of cash flow information. This article investigates cash flow ratios suggested by various researchers and suggests a list of ratios with the potential to predict financial failure. Design: The cash flow ratios suggested by researchers, from as early as 1966, are investigated and eight cash flow ratios selected for inclusion in an analysis to predict financial failure. Ten failed entities are selected for a cash flow evaluation by means of the selected ratios for five years prior to failure. For a comparison, non-failed entities in similar sectors are selected and also evaluated by means of the cash flow ratios. The mean values of each ratio, for each year prior to failure, were then calculated and the means of the failed entities were compared to the non-failed entities. Findings: The comparison revealed that cash flow ratios have predictive value with the cash flow to total debt identified as the best indicator of failure. It was also determined that, although failed entities have lower cash flows than non-failed entities, they also had smaller reserves of liquid assets. Furthermore, they have less capacity to meet debt obligations and they tend to incur more debt. The ratios of the failed entities were unstable and fluctuated from one year to the next. Finally, bankruptcy could be predicted three years prior to financial failure. Implications: Income statement and balance sheet ratios are not enough to measure liquidity. An entity can have positive liquidity ratios and increasing profits, yet have serious cash flow problems. Ratios developed from the cash flow statement should supplement traditional accrual-based ratios to provide additional information on the financial strengths and weaknesses of an entity .

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