The Handbook of Municipal Bonds

CHAPTER 45

New Issues in Municipal Accounting

David R. Bean Director of Research and Technical Activities Governmental Accounting Standards Board

 

Dean Michael Mead Research Manager Governmental Accounting Standards Board

 

 

 

A key factor in any buy/hold/sell recommendation of a municipal security is the government’s ability to repay the debt at issue. A primary source of data that an analyst can use in arriving at that conclusion is the government’s financial statements. Whether included in the preliminary offering statement or as a standalone document, a wealth of information is contained in those statements. Knowing what information is included in governmental financial statements and where to quickly find that information is essential to effective analysis.

The Governmental Accounting Standards Board (GASB), which sets generally accepted accounting principles (GAAP) for state and local governments, was formed in 1984 to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports.⁶⁸⁸

Meeting the essential needs of financial statement users is a primary goal of the standard-setting process. In the government environment, the financial community is a primary user of financial statements; however, it is not the only user. The GASB has identified three types of financial ...