Definition and Elements of Financial Reporting

Summary of chapter I of Financial Reporting in Government
By Dr. John Sacco , George Mason University
Revised Thursday, September 25, 1997

Financial reports in government are very complex, but focus on the big picture of government financial performance rather than the day-to-day details. Although government issues many financial reports, the main financial report in government is the CAFR . The CAFR is issued annually. A person reading this report could find information on how dollars ear marked for recreation parks or streets were raised and spent, but could not easily analyze the performance of the government as a whole. The financial statements , which are always placed in the CAFR, help to show the financial success, health, and compliance, but the focus is on details called funds or entities . Authority for establishing the standards or rules for these statements now rests with GASB . In addition to establishing the standards, GASB has also embarked on developing a conceptual framework . The conceptual framework sets the broad objectives for financial reporting. From these broad objectives, the specific standards are suppose to be derived. On the surface, financial reports look technical and scientific, but the reports are equally shaped by politics and values. Financial statements give both good and bad news, and interested parties often battle over how much good or bad news will appear. Since citizen do not have direct economic stakes in government, as do stockholders, governmental financial reports do not get put through as much critical review as do financial reports of large businesses.

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