ISSUE: It will be interesting to see what the effect of the move to IFSR will be on public sector accounting (federal, state, and municipal entities) that currently follow FASAB (Federal Accounting Standards Advisory Board) and GASB (Governmental Accounting Standards Board) pronouncements. The private (business) sector’s Financial Accounting Standards Board (FASB) is in the process of reviewing the impact of a transition to IFSR. As there are public sector accounting standards throughout the world, there does not seem to be much press about how the public sector accounting is preparing for this transition.
ORIGINS: Just as the North American Free Trade Agreement (NAFTA), emulating European trade agreements making it easier to engage in commerce between transnational borders, lead to the modification of the United States’ “Standard Industrial Classification ” (SIC) codes to the “North American Industry Classification System” (NAICS) that enabled ‘comparability’ in assessing the financial results of firms in North America, so will the accounting systems. The reason is simple — as firms trade, invest, borrow, employ, and transfer capital and assets and debt between borders (electronically), the private sector wants to make sure that the GAAP (Generally Accepted Accounting Principles) among the forms is the same.
QUESTIONS:
Q1. Why have we not seen governmental accounting standards begin some kind of transition toward the IFSR for public sector accounting?
Q2. Will such a transition impact trade and be used in foreign aid and foreign assistance legislation when transferring resources between countries? What are the impacts on national, state and muncipal governments?
Q3. As the U.S. federal government does not have an audited financial statement but each state and municipal government does, and as state and local government in the U.S. get bond ratings, how will Moody’s, Fitch, and Standard and Poor’s address the new IFSR?
Q4. Is the GASB and public finance professional organizations in the U.S. going to prepare the transition to the IFSR if the FASB moves to “world GAAP” standards?
Something to think about.
Posted by ahrainey
