GASB Statement 54: Do Governments Need to Adopt New Policies?

This article describes the key content of the Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and potential implementation problems and solutions. As a complement, this article covers several policies and procedures that governments may need to consider prior to implementing GASB 54. It also provides an example of a before and after fund balance section of a balance sheet. GASB 54 is designed to improve the usefulness of fund balance information, but prior to implementation of the new standard, governments may need to adopt new policies related to: 1. committing and assigning funds, 2. stabilization funds, 3. order of spending resources, 4. desired level of fund balances, and 5. review of fund classification. GASB 54 establishes a hierarchy of five fund balance classifications. These classifications depict the relative strength of the spending constraints placed on the purposes for which resources can be used.