Accounting Principles to Expressly Explain the Similarities

Accounting Principles

To expressly explain the similarities and differences that exist between the GASB and FASB accounting standards it is imperative that we first examine the philosophical approaches that the boards have taken (Marsh & Fischer, 2011). These are found in the board's concept statements. The boards use the concept statements to develop accounting standards. The FASB conceptual framework focuses on provision of best information that influences decisions made by creditors, investors, and entities interested in commercial and not-for-profit activities. The GASB's framework, on the contrary, focuses on accountability and opposed to aiding in decision making processes (Marsh & Fischer, 2011).

Areas of potential differences between GASB and FASB lie in recognition, measurement, display, and disclosure. Recognition differences arise on whether an item should or should not appear in a financial statement. In as much as SFAS No. 116(1993a) addressed contributed services, the GASBS No. 33(1998) failed to (Marsh & Fischer, 2011). This is an outstanding example when it comes to contributed services. Measurement differences pertain to inclusion of items in financial statements. It is basically looks at the criteria for inclusion and amount to be included. The FASB and GASB both require recognition of pension liabilities. They, nevertheless, have different standards for measuring the amount to be recognized. The GASB requires a classified balance sheet that separates assets and liabilities into current and noncurrent where as the FASB requires that assets and liabilities be listed in order of liquidity. The FASB, however, gives room for separation of assets and liabilities into current and noncurrent based on ARB 43. The two boards have different requirements with respect to required disclosures (Marsh & Fischer, 2011).

The FASB's definition of who can establish restrictions is narrower than the GASB's. Under GASB, the donors, creditors, legislation, contracts, and constitutional provisions can impose restrictions as opposed to the FASB's case where only donors can restrict. The GASB's philosophy towards accountability that if a restriction is imposed they have to be clearly identified largely determines its definition of restriction (Marsh & Fischer, 2011). The GASB and FASB's definition of restriction has some effect on the categorization of net assets. Net assets reported as unrestricted under the FASB could be restricted expandable using GASB guidelines.

The use of restricted funds is another area that clearly brings out the differences that exist between FASB and GASB. The FASB mandates the first dollar release method where restrictions are released if unrestricted resources are used for a purpose for which restricted resources are available (Marsh & Fischer, 2011). This may not affect internal accounting and reporting. The GASB, with regards to converting previously restricted resources into unrestricted resources, endorsed the position but concluded that it should not be used in a governmental environment. The board requires the disclosure of the policy to be applied in situations when both restricted and unrestricted resources are available for the same purpose (Marsh & Fischer, 2011).