Fund Accounting Under GASB Vs Under GAAP

Despite the fact that both the Financial Accounting Standards Board (FASB) and Governmental Accounting Standards Board (GASB) operate in a similar manner, they have certain accounting and reporting differences. The major purpose of the FASB is to assist investors and creditors make informed decisions on the financial health of a company. FASB establishes standards and guidelines that non-governmental organizations and companies should adhere to when making their financial reports. On the other hand, the major aim of the GASB is to improve accountability. GASB sets the financial reporting and accounting standards for local and state governmental bodies. Since government agencies operate in a different manner from profit-making organizations, their financial and accounting reporting standards are also different.

FASB and GASB also differ in their recognition of restricted cash contributions. FASB recognizes cash contributions as being temporary or permanently restricted. On the other hand, GASB necessitate governmental agencies to ensure that recognize restricted cash contributions as deferred revenue of the use of the resources if restricted for the future. As such, the recognition affects the liabilities, revenue, and deferred assets of the governmental agency.

There are also significant differences between FASB and GASB with respect to endowment pledges. According to the FASB, endowment pledges should be treated as permanently restricted net assets. On the other hand, GASB forbids the recognition of endowment pledges since it is impossible to satisfy the primary restriction of the endowment pledges prior to the receipt of the funds. The difference in the recognition of the endowment pledges according to FASB and GASB affects the net assets and gift revenues of governmental agencies and non-governmental organizations and companies (Gibson, 2012).

According to the GASB, a governmental agency must report the net investment and realized gains or losses as a single amount. On the other hand, FASB allows companies to report the net investment and realized gains or losses separately. According to the GASB, investment income may be the operating revenue is the source of the funds is from a student loan program (Weil, Schipper & Francis, 2012).

FASB and GASB also treat Pell grants differently. FASB treat Pell Grants as balance sheet pass through only entries. On the other hand, GASB treats the Pell grants as activity statement transactions. Use of GASB makes governmental agencies, such as universities, to have higher grant revenue, lower net tuition. It also leads to significant alterations in the liabilities and net assets of the public institutions (Gibson, 2012).

There are also several differences in how GASB and FASB treat funds held in trust by others. According to FASB, funds held in trust by others should be treated as an asset. On the other hand, GASB does not have provisions that would facilitate the recording and recognition of funds held in trust by others. However, public institutions may report assets held by foundations that are affiliated foundations under GASB 14 and GASB 15 (Weil, Schipper & Francis, 2012).

FASB and GASB have different provisions on the reporting of use of restricted funds. According to FASB, a company should reduce its restricted assets – even if it uses its unrestricted assets – if both the restricted and unrestricted assets are available for use in settling a certain expense. This is referred to as ‘first dollar release.’ On the other hand, GASB acknowledges that institutions may use different approaches to release their restricted funds. Therefore, it requires governmental agencies to ensure that they provide a disclosure explanation of how funds were released from restricted (Weil, Schipper & Francis, 2012).


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