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The preceding article, "GASB Statement 54: Implementation Problems and Solutions," describes the key content of the Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and potential implementation problems and solutions. As a complement, this article covers several policies and procedures that governments may need to consider prior to implementing GASB 54. It also provides an example of a before and after fund balance section of a balance sheet.
GASB 54 is designed to improve the usefulness of fund balance information, but prior to implementation of the new standard, governments may need to adopt new policies related to:
* committing and assigning funds
* stabilization funds
* order of spending resources
* desired level of fund balances
* review of fund classification
The required implementation date is for periods beginning after June 15, 2010, so governments need to be in process of reviewing their policies.
POLICIES ON COMMITTING AND ASSIGNING FUNDS
Traditionally, governments have reported fund balance as either reserved or unreserved. The focus of this reporting practice is on the amount of resources that are available for future appropriation. Some amounts reported as reserved are not available for future appropriation - inventories and prepaid items are often included in this classification. These items will be reported as nonspendable fund balance under GASB 54.
Other amounts reported as reserved may represent resources that have either external restrictions or amounts that have been committed by the government for a specific purpose. These items will likely meet the criteria to be reported as either restricted fund balance or committed fund balance.
Many governments also include outstanding encumbrances as part of reserved fund balance. Under GASB 54, encumbering funds that are already restricted, committed or assigned does not further limit the use of the amounts reported in these classifications; therefore, governments don't need to separately report amounts that are encumbered.
The unreserved portion of fund balance is often broken into the amount that has been designated and the amount that is undesignated. The designated amount can represent resources set aside by a government for some future purpose or amounts that management has some tentative plans for. For the most part, the amounts previously reported as designated will now be reported as...