GASB 63

Definition

GASB 63, or Statement No. 63 by the Governmental Accounting Standards Board, is a guideline that establishes how governmental entities should report deferred outflows of resources and deferred inflows of resources in their financial statements. This statement aims to enhance the clarity of financial reporting and improve the understanding of financial position by providing a better representation of both the economic resources available to an entity and its obligations.

5 Must Know Facts For Your Next Test

1. GASB 63 helps distinguish between assets, liabilities, and the new categories of deferred outflows and inflows, which are crucial for understanding financial performance.
2. The implementation of GASB 63 is essential for enhancing transparency in financial reporting for governmental entities, helping stakeholders understand the timing and impact of various transactions.
3. Under GASB 63, deferred outflows and inflows are reported separately from assets and liabilities on government-wide financial statements, improving clarity in the financial position.
4. This statement emphasizes that deferred outflows and inflows are not liabilities or assets but rather represent changes in net position that are expected to occur in future periods.
5. GASB 63 applies to all state and local governments and affects the way pension-related amounts are reported, significantly impacting the overall accounting and financial reporting landscape.

Review Questions

• How does GASB 63 enhance the understanding of financial statements for governmental entities?
  • GASB 63 enhances the understanding of financial statements by introducing deferred outflows and inflows of resources, which provide more detail about the timing of financial impacts. These new categories help users discern not only current financial positions but also future economic benefits or obligations. This greater transparency ensures that stakeholders have a clearer picture of how past actions will affect future resources and expenditures.
• Discuss the implications of recognizing deferred outflows and inflows in government-wide financial statements as per GASB 63.
  • Recognizing deferred outflows and inflows in government-wide financial statements changes how governmental entities present their finances. It allows for a more comprehensive view by clearly segregating these elements from traditional assets and liabilities. This shift has implications for budgetary decision-making and performance evaluation since it influences perceptions of fiscal health and accountability among stakeholders.
• Evaluate the overall impact of GASB 63 on state and local governments' financial reporting practices and stakeholder communication.
  • GASB 63 has fundamentally transformed state and local governments' financial reporting practices by mandating clearer presentation of deferred outflows and inflows. This impacts how governments communicate with stakeholders, enhancing their ability to convey complex financial information in a more accessible manner. By improving clarity and transparency, GASB 63 supports better decision-making for investors, policymakers, and citizens regarding fiscal management and resource allocation.

Related terms

Deferred Outflows of Resources: A consumption of net assets that is applicable to a future reporting period, which will be recognized as an expense in a future period.

Deferred Inflows of Resources: An acquisition of net assets that is applicable to a future reporting period, which will be recognized as revenue in a future period.

Net Position: The residual amount when total liabilities are subtracted from total assets, representing the net worth of the governmental entity.