Agenda - Council - 05/12/1981 - Laserfiche WebLink

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DeloiUe ' skins+Seils USA 81-1g May 8,1981 Accounting & Reporting DH&S VIEWS ON STATE AND LOCAL GOVERNMENTAL ACCOUNTING STANDARDS This week, the Governmental Accounting Standards Board Organization Committee held a public hearing in Philadelphia on its proposal that a separate board be established to set standards for accounting and reporting by state and local governmental units (TWIR 2/20/81). We submitted our written comments to the Committee and made an oral presentation at the public hearing. Some excerpts from our comments: We agree with the Committee's view that changes in the current standard-setting process for state and local governmental units are necessary for the effective development of objective and timely financial accounting and reporting standards. We also agree with the Committee's conclusion that a sound standard-setting structure should be in- dependent and should be recognized by preparers and users of external financial reports as having the authority to set standards and the prestige to bring about general acceptance of the standards promulgated. In addition, the organization should have adequate resources (personnel and funds), the competence necessary to perform the required functions, and the appropriate procedures in place to allow for due process. ..A single organization, acceptable to all parties concerned, should be designated to assume responsi- bility for establishing and improving accounting standards for state and local governmental units. However, in our view, the Committee's proposed solution of a new Governmental Accounting Standards Board is not the preferable wa,/to proceed, and we do not support that approach. We believe that the most effective way to achieve the desired results-objective and timely financial accounting and reporting standards for state and local governmental units, established at a cost commensurate with the benefit-is for the FASB to set accounting and reporting standards for all entities, including business, governmental and other nonbusiness entities. Our principal reasons: The objectives of external financial reporting for state and local governmen- tal units are not sufficiently different from those for business and other nonbusiness entities to warrant a separate standard-setting structure. The FASB already has significant support from user groups of external finan- cial reports. Uncertainty exists concerning the ability of any new standard- setting body to gain such support. · The existence of competing standard-setting bodies would create serious juris- dictional conflicts.