Respond to the below discussion post. Your thoughts and opinions (Great post! I agree with xyz, because

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Respond to the below discussion post. Your thoughts and opinions (Great post! I agree with xyz, because etc)

Make it a paragraph - It's a discussion post, don't make it too long.

As we learned from Chapter 12, accounting for state and local governments has unique features, primarily relying on modified accrual basis accounting across various funds. The modified accrual basis is centered on current financial resources, which dictates when revenues and expenditures are recognized. Transactions are classified into governmental, proprietary, and fiduciary funds, each following specific accounting methods. Governmental funds, including the general fund and capital projects funds, use modified accrual accounting. Proprietary funds, such as enterprise funds, employ accrual accounting, while fiduciary funds, like pension trust funds, also use accrual-based accounting.

The article "Don't Mess with Accrual Accounting in Government" highlights the importance of proper accounting standards, particularly in the context of government finances. It emphasizes the critical need for transparency and accuracy in financial reporting, especially when it comes to government entities. The critique also draws attention to the issue of misleading accounting practices in government funds, where budgets appear balanced on paper while significant debt accumulates off the balance sheet. The article cites the example of Chicago, where the city claimed balanced budgets despite accruing substantial negative net positions. It also mentions the practice of underfunding pension and retirement obligations to manipulate short-term cash flow, which can have long-term consequences.

The Governmental Accounting Standards Board (GASB) had proposed changes that would have reinforced these unreliable fund statements, but they faced criticism from commenters, including former GASB member Martin Ives. Commenters argued that the proposed changes did not align with true accrual accounting principles, especially concerning long-term liabilities like pensions and post-employment benefits. The GASB has since decided to retain the term "modified accrual basis of accounting" and no longer stretches the definition of accrual accounting.

The article concludes by emphasizing the need for vigilance in monitoring government budget-balancing practices, especially in school districts and by citizens and taxpayers.

Citation:

Bergman, William. "Don't Mess with Accrual Accounting in Government." Don't Mess with Accrual Accounting in Government, 4 June 2022, www.picpa.org/articles/cpa-now-blog/cpa-now/2022/04/06/accrual-accounting-in-government.

https://www.picpa.org/articles/cpa-now-blog/cpa-now/2022/04/06/accrual-accounting-in-government