DRAFT - FOR DISCUSSION PURPOSES ONLY.
DATE: March
24, 2000
TO:
All Special Districts
FROM: Auditor-Controller
SUBJECT: Implementation of a new accounting standard
for governments
The Government Accounting Standards Board (GASB) has recently adopted
a new accounting standard which will change the way governments prepare
their annual financial statements and report the results of their financial
activity. The purpose of the standard is to provide more understandable
and useful financial reports to a wider range of users. The purpose of
this memo is to notify you of important dates related to this change and
to briefly describe the changes which might affect your district.
The following will briefly describe some of the major changes this new
accounting standard will bring, along with the dates which we are required
to implement the changes:
The new standard requires governments (districts) with annual revenues
of 10 million or less to report the costs related to the construction of
infrastructure (roads, water lines, dams, etc.) beginning 7/1/2003. These
assets will be recorded on the balance sheet. In past years, the districts
have not been required to report what it costs to construct roads, water
lines, dams, etc.
-
The new standard will require governments to depreciate fixed assets and
infrastructure beginning 7/1/2003. In past years we have only been required
to depreciate assets owned by enterprise funds (Water Districts) or internal
service funds. Most other districts were not required to depreciate their
fixed assets.
-
The new standard will require governments to retroactively report the historical
cost of existing general infrastructure assets (roads, water lines, dams
and etc) beginning 7/1/2007. We will be required to determine and report
the historical cost of major general infrastructure assets that were acquired
from 7/1/1983 to 6/30/2003. In past years the districts were not required
to report these assets on the balance sheet.
-
In past years we have only been required to report receivables which will
be collected in the first 90 days of the new fiscal year. The new standard
will require governments to report all receivables at year end, regardless
of when the money will actually be received.
-
The new financial reporting model requires districts to present certain
financial statements as well as management's discussion and analysis (MD&A)
in the annual audit. It will give an objective and easily readable analysis
of the district's financial activities based on currently known facts,
decisions or conditions. It will present analyses of the district's activities,
compare current year results with those of the prior year, and discusses
the positive and negative aspects of that comparison.
This new accounting standard will require the district's to make additional
changes to their annual financial statements. Additionally, some of the
required changes will affect the way the district budgets for certain types
of transactions beginning with the preparation of the FY 2003/2004 budget.
The Auditor's Office will be working closely with the districts over the
next year to determine the full impact of the new requirements. We will
continue to communicate how those changes will affect your district as
more information becomes available.
If you have any questions or concern, please call Mark Walsh, Assistant
Auditor-Controller at 3288 or Greg McGuirk, Audit Manager at 3272.