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Closing the gap with non-GAAP state and locals.

"As many as 3 in 4 state and local governments may be using non-GAAP financial statements. But the guidance for using OCBOA can be limited and confusing.."

A significant number of state and local governments maintain their internal accounting records and prepare their annual financial statements using a basis of accounting other than generally accepted accounting principles (GAAP). Most of these governments have adopted the use of an other comprehensive basis of accounting (0CBOA) as defined in professional auditing standards.

In contrast to the amount of guidance available for GAAP, there is little authoritative guidance available for preparing and reporting on OCBOA financial statements.

With the issuance and implementation of the state and local government financial reporting model, as defined in Statement No. 34 of the Governmental Accounting Standards Board (GASB), Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments, difficult questions have surfaced regarding the applicability of the financial reporting requirements to OCBOA financial statements.

Also, there are differing professional opinions as to the proper application of certain GAAP requirements to OCBOA financial statements, such as the manner of financial statement presentation and disclosure.

As a result of the limited authoritative OCBOA guidance, the issuance of GASB Statement No. 34, and differing professional opinions, accounting practitioners and auditors continue to struggle with the proper application of OCBOA principles and auditor reporting on OCBOA financial statements.

Accounting and auditing professionals need guidelines for resolving the difficult questions of OCBOA application and practical guidance on the preparation of and reporting on 0CBOA financial statements specifically for state and local governments.

In measuring the true financial health and success of a state or local governmental entity, there is no replacement for generally accepted accounting principles (GAAP). Because the use of 0CBOA financial statements is prevalent in state and local governments, the profession needs to close the gap between the use of an OCBOA and the unavailability of reference materials and guidance.

Michael A. Crawford, CPA, is chairman and co-owner of Crawford & Associates, P.C., CPAs in Oklahoma City, Okla., where he oversees a practice that specializes in providing auditing, accounting and consulting services to state and local governments. This is adapted from the AICPA Practice Aid, "Applying OCBOA in State and Local Governmental Financial Statements".
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Title Annotation:generally accepted accounting principles
Author:Crawford, Michael A.
Publication:Journal of Accountancy
Date:Dec 1, 2003
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