FASB and Gasb Accounting Compare and Contrast

¶ … FASB and GASB Accounting

Compare and contrast FASB and GASB accounting. Explain the objectives of the two standards boards and how they are similar and different. Describe how the modified accrual basis of accounting differs from full accrual accounting

The FASB and GASB share similar objectives by focusing on improving transparency and reporting standards. This is important, because both are used as way of providing the most accurate information to the general public. To fully understand how this occurs requires looking at the two approaches and comparing them with one another. Once this takes place, is when there will be an examination of the modified accrual basis methodology vs. The full accrual approach. This is when we can offer specific insights about how these standards are similar and different.

A Comparison of FASB and GASB Standards

The Financial Accounting Standards Board (FASB) was founded in 1973. Its purpose was to create a universal set of standards for American businesses to follow when reporting their earnings. A few of the most notable include: accounting for nonprofit mergers / acquisitions, financial guarantee insurance contracts and hedging. This is important, because it is showing how this basic approach is attempting to improve transparency based on using conservative accounting principles (i.e. taking write downs against earnings and carrying forward less income). ("Facts about FASB," 2012) ("Financial Standards Accounting Board," 2011)

The Governmental Accounting Standards Board (GASB) is an offshoot of the FASB. This is because the Financial Accounting Foundation (FAF) established both organizations. The difference is that the FASB is responsible for applying these standards to businesses. While the GASB is relating these principals to how state and local governments are operating. The basic methodology that is utilized is Generally Accepted Accounting Principles (GAAP). This is a standard that is currently utilized by the FASB. Moreover, the standards that is determined for GAAP is defined by the FASB. They have been working in conjunction with GASB since 1984. (Fischer, 2008, pp. 765 -- 781)

As a result, the GASB will use similar approaches as the FASB. The only difference is that these standards are applied to state and local governments under GASB guidelines. While the FASB will use similar kinds of principals in how businesses are accounting for their balance sheet. Furthermore, the FASB will dominate the GASB, by giving the organization standards that can be applied to this system of accounting. (Fischer, 2008, pp. 765 -- 781)

Explain the objectives of the two standards boards and how they are similar and different.

Like what was stated previously the way that the two standards are similar is that they both practice GAAP-based principals. What makes each one different is that they are accounting for select aspects of the balance sheet using an alternate formula. For example, under FASB standards a basic model has been established surrounding: depreciation, contributions, investments, and the financial reporting. Under these guidelines, all businesses are required to take a certain amount of write offs on their balance sheet for these activities. ("GASB and FASB," 2011)

This is different from GASB principals, which is focused on giving governments the same kind of tools in reporting financial information. This is because many state / local governments are receiving various forms of income and are accounting for expenses differently. To simplify these procedures certain areas are not a prerequisite (i.e. depreciation). Instead, there are other tactics that are utilized these include: grants and non-exchange transactions. This is important, because it is showing how the two guidelines are following GAAP-based standards. Inside the balance sheet is when differences will occur with certain activities allowable under GASB provisions. Whereas, the FASB could forbid certain actions or they may not acknowledge them. This is based on two different objectives from both entities. ("GASB and FASB," 2011)

Describe how the modified accrual basis of accounting differs from full accrual accounting.

Modified accrual basis accounting is recognizing revenues before they become measurable. Moreover, this procedure is used by governments to account for their activities and provide the proper amount of assistance to specific departments. As a result, there are differences in terminology. For example, excess and deficiency are utilized under this approach instead of net income or expenditures. ("Modified Accrual Accounting," 2012)