Governmental Accounting Standards Board (GASB)

How It Works

GASB was established in 1984 under the aegis of the Financial Accounting Foundation (FAF), with a seven-member board funded partly by the SEC since 2010 following Dodd-Frank reforms. It establishes the standards that determine how state and local governments report financial information. GASB authority is recognized by the American Institute of Certified Public Accountants (AICPA) through Rule 203, making GASB pronouncements effectively binding on all GAAP-compliant governmental audits. Key historical GASB standards include GASB 34 (1999, "Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments"), which introduced government-wide financial statements and required infrastructure capitalization. GASB 45 (2004) required disclosure of Other Post-Employment Benefits (OPEB, primarily retiree healthcare) liabilities. GASB 54 (2009) restructured fund balance reporting into five categories. GASB 67 and 68 (2012, effective 2014-2015) moved pension reporting onto the balance sheet, recognizing hundreds of billions in previously-disclosed-only liabilities and dramatically reshaping municipal balance sheets: many cities saw net position drop by billions overnight. GASB 75 (2015, effective 2018) did the same for OPEB, exposing trillions in retiree healthcare liabilities nationwide. GASB 87 (2017, effective 2022) required capitalizing operating leases, similar to FASB's ASC 842 for the private sector. GASB 96 (2020, effective 2023) covered subscription-based IT arrangements. GASB 101 (2022) addressed compensated absences. These standards significantly affect how a city's financial health appears on paper: the shift to GASB 67/68 in 2015 caused Chicago, Illinois, New Jersey, Kentucky, and other governments to report dramatically larger liabilities, triggering rating downgrades and reform pressure. GASB standards shape the data underlying every factor of the CitySpend Fiscal Health Score.

Related Terms

• Generally Accepted Accounting Principles (GAAP), The standardized accounting rules that governments follow when preparing financial statements, as promulgated by the Governmental Accounting Standards Board (GASB).
• Comprehensive Annual Financial Report (CAFR/ACFR), A city's official annual financial report, audited by independent accountants, containing detailed financial statements, statistical data, and management discussion.
• Unfunded Liability, The difference between a pension plan's projected liabilities (what it owes to current and future retirees) and its current assets. Also called the unfunded actuarial accrued liability (UAAL).