The government-wide statements are based on the interperiod equity concept. Statement 34 recognizes that this is the preferable concept for measuring an organization’s performance. It uses accrual accounting.
The fund statements report on eleven funds; each is a self-balancing set of accounts. The amounts reported are based on measurement principles currently used by governments; these principles differ from accrual accounting in important ways. They focus on accountability in the short term and are inconsistent with the interperiod equity concept.
The fund-accounting system is unnecessary; almost all the information it provides is also available in the government-wide system. The fund statements have numbers for items that differ from the numbers for the same items in the government-wide statements, including different "bottom lines"; this is confusing. They require a separate complete set of accounting records; this is inefficient. The fifty paragraphs describing the fund system should be deleted.
Statement 34 also requires much more detail than is appropriate in general-purpose financial statements. It requires twenty items of "management discussion and analysis" whereas most other accounting standards do not specify these details. It requires detailed information about accountability, information that management needs to assure that it is operating within legal and other requirements. Reporting such detail is unnecessary because auditors are required to disclose departures.
The government-wide system does have one important defect. It doesn't recognize that contributed capital transactions should not enter into the measure of performance based on interperiod equity. This can be corrected by separating operating items from nonoperating items.
Emeriti
21 pages
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