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Concepts Statements

Concepts Statement No. 3 Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements Issued: April 2005. Concepts Statements. Not used to prescribe the financial reporting requirements that apply to a particular item or event.

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Concepts Statements

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  1. Concepts Statement No. 3Communication Methods in General Purpose External Financial Reports That Contain Basic Financial StatementsIssued: April 2005

  2. Concepts Statements • Not used to prescribe the financial reporting requirements that apply to a particular item or event. • Provides GASB with the conceptual foundation to consider the merits of alternative approaches to financial reporting. • Assist preparers and users in better understanding fundamental concepts underlying financial reporting.

  3. Objective • The objective of this Statement is to provide conceptual guidance regarding the placement of information within general purpose external financial reports that contain the basic financial statements, notes to basic financial statements, and supporting information related to basic financial statements.

  4. Overview • The statement defines and provides criteria for communication methods used in general purpose external financial reports. • Recognition in basic financial statements • Disclosure in notes to basic financial statements • Presentation as required supplementary information (RSI) • Presentation as supplementary information.

  5. General Purpose External Financial Reporting

  6. Hierarchical Approach • Report in financial statements if it meets definition and criteria for recognition, otherwise • Disclose in Notes to F/S if it meets definition & criteria for notes, otherwise • Present as RSI if it meets definition & criteria for RSI, otherwise • May choose to present as SI if it meets definition & criteria

  7. Notes to Financial Statements • Notes to financial statements are integral to financial statements and are essential to a user’s understanding of financial position or inflows and outflows of resources. Notes provide: • Descriptions of the accounting and finance-related policies underlying amounts recognized in financial statements • More detail about or explanations of amounts recognized in financial statements • Additional information about financial position or inflows and outflows of resources that does not meet the criteria for recognition.

  8. Notes to Financial Statements • Notes have a “clear” and “demonstrable” relationship to information in the F/S and are “essential” (“indispensable”) to understanding by user with “reasonable understanding” of govt. and public financing activities and fundamentals of govt. financial reporting and “willingness to study” info. with “reasonable diligence.”

  9. Supporting Information • Supporting information places basic financial statements and notes to basic financial statements in an appropriate operational, economic, or historical context. This information either is required by GASB pronouncements to be presented with the basic financial statements and notes to basic financial statements, is required to be presented by laws or regulations, or is presented at the election of the preparer.

  10. Required Supplementary Information (RSI) • RSI is supporting information that the GASB has concluded is essential for “placing basic financial statements and notes to basic financial statements in an appropriate operational, economic, or historical context.” RSI is required to accompany the basic financial statements and notes to basic financial statements in a government’s general purpose external financial report.

  11. Supporting Information • RSI has clear and demonstrable relationship to info. In the basic financial statements or notes

  12. Supplementary Information (SI) • SI is supporting information that is useful for placing basic financial statements and notes to basic financial statements in an appropriate operational, economic, or historical context. SI is presented with the basic financial statements, notes to basic financial statements, and RSI in a government’s general purpose external financial report. Although the GASB does not require SI to be presented, preparers of governmental financial reports who elect to present SI (or are otherwise required by law or regulations to present SI) with their basic financial statements, notes to basic financial statements, and RSI should follow any applicable GASB-issued or cleared guidance regarding the format and content of that information.

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