GASB has added two elements to the original five financial statement elements. GASB Statement No. 65 Items Previously Reported as Assets and Liabilities, issue guidance on using the new elements. The two new elements are Deferred Outflows of Resources and Deferred Inflow of Resources. GASB’s seven financial statement elements are defined as follows:
Assets- resources with present service capacity that the government presently controls;
Liabilities-present obligations to sacrifice resources that the government has little or no discretion to avoid;
Deferred Outflows of Resources-consumption of net assets by the government that is applicable to a future reporting period;
Deferred Inflows of Resources-acquisition of net assets by the government that is applicable to a future reporting period;
Net Position-the residual of all other elements presented in a statement of financial position;
Inflows of Resources-acquisition of net assets by the government that is applicable to the reporting period;
Outflows of Resources-consumption of net assets by the government that is applicable to the reporting period.
GASB 65 also directs the use of the term “deferred” to be used exclusively with Deferred Outflows of Resources or Deferred Inflows of Resources. The two new elements will include items that, until now, have been reported as assets or liabilities and will be reclassified into the new elements. GASB 65 also identifies items currently being reported as assets or liabilities that should be reported as Outflows of Resources or Inflows of Resources.
So, what needs to be done to implement GASB 65? Government staff needs to review the government-wide and proprietary statements and 1) reclassify assets and liabilities that now belong in Deferred Outflows and Deferred Inflows and 2) remove those assets and liabilities that should no longer be reported on the Statement of Net Assets. GASB 65 is effective for periods beginning after December 15, 2012 but earlier implementation is encouraged. The cumulative effect of implementing this statement should be reported as a restatement of beginning net assets.
By Marilyn Mays, CPA