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GASB issues guidance on the use of not-for-profit accounting.

The Governmental Accounting Standards Board has issued guidance on the use of not-for-profit accounting principles by state and local governments. Some government entities use not-for-profit standards and others follow new Financial Accounting Standards Board standards. GASB Statement no. 29, The Use of Not-for-profit Accounting and Financial Reporting Principles by Governmental Entities (see page 110), allows certain governments to use not-for-profit accounting principles but not the new not-for-profit standards issued by the FASB.

George A. Scott, partner of Deloitte & Touche in Fort Worth, Texas, told the journal that it appeared government entities might have a choice between FASB Statements no. 116, Accounting for Contributions Received and Contributions Made, and no. 117, Financial Statements of Not-for-profit Organizations. "That door has been shut by GASB Statement no. 29," said Scott.

Where lies the confusion?

GASB Statement no. 29 says questions about the applicability of FASB Statement nos. 116 and 117 arose when some entities, especially those incorporated under section 501 of the Internal Revenue Code, identified their status as governmental and recently began asking the GASB for guidance. Also, some entities that are identified as governments follow not-for-profit principles because their activities fall within the scope of American Institute of CPAs Statement of Position 78-10, Accounting Principles and Reporting Practices for Certain Nonprofit Organizations, or the AICPA industry audit guide Audits of Voluntary Health and Welfare Organizations.

Scott said adding to the confusion was GASB Statement no. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, which allows certain government organizations to apply FASB statements. GASB Statement no. 20, effective since November 30, 1989, is still in force. "The intent of GASB Statement no. 20 was to address business-type accounting, that is, proprietary activities that could theoretically operate under for-profit criteria," said Scott. "GASB Statement no. 29 says not-for-profits that are governments accounting and reporting for proprietary funds cannot use FASB Statements nos. 116 and 117.

"Another problem are those governments accounting for themselves as not-for-profits that will not read GASB Statement no. 29 because they do not consider themselves governments," he continued. Scott, who serves as chair of the AICPA government accounting and auditing committee, said one recommendation the Institute made during the comment period was that the GASB clearly define a government entity for financial reporting purposes. "This issue needs to be addressed under the umbrella of the Financial Accounting Foundation."

Statement no. 29 generally is effective for periods beginning after December 15, 1994. Copies are available for $9.50 each from the GASB order department by calling (203) 847-0700, ext. 555 (product code GS29).
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Title Annotation:Governmental Accounting Standards Board
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Nov 1, 1995
Previous Article:FASB issues ED on consolidations.
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