When to implement GASB No. 34?

When a government is to implement GASB No. 34 would seem to be a straightforward issue; but, believe it or not, a few government officials and their auditors are still confused about it.

Making this determination is a two-step process. First, the government needs to calculate its total revenues (governmental fund total revenues + enterprise fund operating revenues + enterprise fund nonoperating revenues) for the first fiscal year ending after June 15, 1999. You are probably thinking that is about 5 years ago. Why should that fiscal year matter now? The answer is because that was the cutoff date established by the GASB in Statement No. 34. Once this amount is determined, you may proceed to the second step.

Second, using the total revenue number calculated in the first step, select the appropriate fiscal year:

* $100 million or more: Fiscal years beginning after June 15, 2001

* $10 million to less than $100 million: Fiscal years beginning after June 15, 2002

* Less than $10 million: Fiscal years beginning after June 15, 2003

Although the implementation revenue calculation should be fairly straightforward, the auditor should keep in mind that not all things may be as they seem. The calculation is based on the presumption that the revenues are GAAP based revenues.

So what is so difficult? It is not, unless you are auditing a government that has been issuing OCBOA financial statements. Such governments will have to determine their implementation phase based on what GAAP based revenues would have been. As the auditor you should perform procedures on revenue amounts to determine if they are in accordance with GAAP. However, you may want to temper your review with a practical approach; that is, eliminate the unusual and nonrecurring events and remember that the difference between GAAP basis revenues and a cash or modified cash basis may not be significant on a year-to-year basis.

The ranges that GASB No. 34 provides for this determination are wide so that the government's calculation and the auditor's review may not require an exact calculation. For example, if the government's rough calculation reflects revenues of $65 million, what would it take to move to $100 million? The only point of concern is when the entity is close to the next level, e.g., $9 million or $99 million. If you are already over $100 million, then you already know the answer.

Setting aside all this fancy language, the auditor will want to review the calculation early in the planning process--probably the first thing.

Adapted from "GASB No. 34 Auditing: The Home of the Brave,"--a CPE self-study course. Format: Text, 120-min VHS Tape/Manual. No. 731332, Member Price $119.00.

G. Robert Smith, Jr., Ph.D., CPA, CGFM, Middle Tennessee State University; and Paul Zucconi, CPA, MBA