FASB Vs GASB

If a company is a governmental entity, the reporting method changes dramatically. The purpose of a government entity is to provide financial statements to taxpayers, citizens, elected representatives, bondholders, and financial community. Most of government entity revenues comes from taxpayers, donations, and public service. Compared to a for-profit company, the revenues is generated by sales, services, and investments. The GASB is responsible for setting standards for governmental entity and the FASB set the rules for for-profit companies. To be in compliance with GASB, the following rules need to be followed:
• Two sets of financial statements are required:
1. Funds financial statements: These statements show the current activities of revenue and …show more content…
• Eligible infrastructure assets are not depreciated, instead modified approach is used, which eliminates the need to depreciate and a government can choose to expense all maintenance cost each year in lieu of recording depreciation.
• A comprehensive annual financial report (CAFR) is presented yearly, which includes both type of financial statements, management’s discussion and analysis, and required supplementary information.
If you compare a for-profit company, only one set of financial statements are required for the shareholders, creditors, and investors. Also, stockholder equity is replace with fund balance, assets are depreciated, and debt issue cost is either capitalized or amortized.
The FASB is responsible for setting standards for private not-for-profit entities. To be in compliance with the FASB, the following financial statements need to be prepared:
• Statement of financial position: this statement reports the assets, liabilities, and net assets of the entity. The net asset or fund balance replaces owner’s equity.
• Statement of activities: reports revenues, expenses, and changes in net assets for that