GASB — Economic Condition Reporting: Financial Projections

January 3, 2012

On November 29, 2011, the Governmental Accounting Standards Board (GASB) issued a Preliminary Views document titled “Economic Condition Reporting: Financial Projections”. It is important to note that a Preliminary Views document is not an Exposure Draft, but instead is a step towards an Exposure Draft. A Preliminary Views document is issued by GASB when the GASB Board believes it is important to solicit views from the public during the early stages of a technical project. The objectives of this project are the following:

  • Compare the information currently available to users of financial statements compared to the information needed by users to assess the ongoing economic condition of a governmental organization.
  • Assess whether additional guidance needs to be established for reporting information that users of financial statements cannot currently obtain and how that information should be reported.
  • If necessary, establish guidance for information about a governmental organization’s economic condition, specifically financial projections and related narrative discussion, as part of a government organization’s basic financial statements.

The Preliminary Views document communicates the Boards views on what it believes are the most critical issues related to reporting of financial projections and related narrative discussions to properly assist users in assessing a governmental organization’s economic condition. The current financial reporting focuses much of its attention on how a governmental organization performed financially in the past and relies heavily on historical information. The views contained in the Preliminary Views document take a more forward thinking approach.

The GASB Board’s Preliminary Views contain five components of information that it believes are crucial to assist financial statement users in assessing a governmental organization’s fiscal sustainability and include the following:

  • Projections of the total cash inflows and major individual cash inflows with explanations of the known causes of fluctuations.
  • Projections of the total cash outflows and major individual cash outflows with explanations of the known causes of fluctuations.
  • Projections of the total financial obligations and major individual financial obligations, including bonds, pensions, other postemployment benefits, and long-term contracts with explanations of the known cause of fluctuations.
  • Projections of annual debt service payments, both principal and interest.
  • A narrative discussion of any major intergovernmental service interdependencies that may exist and the nature of those service interdependencies.

The GASB Board believes the above components of fiscal sustainability should be reported as required supplementary information (RSI). Additionally, the GASB Board believes that cash inflows and cash outflows should be projected on the cash basis of accounting, and financial obligations should be projected on the accrual basis of accounting.
Illustrative examples of the five components of fiscal sustainability and how they would be reflected in a governmental organization’s financial statements are included in the Preliminary Views document.

Who Will Be Affected?

All governmental organizations that follow generally accepted accounting principles would be required to report the components of fiscal sustainability information. However, for those governments that do not follow GAAP, such as New Jersey municipalities and counties, the only provisions of the Preliminary Views document that would apply would be dependent on changes promulgated by the New Jersey Division of Local Government Services through the issuance of a local finance notice.


Comments from the public are due back by March 16, 2012. A copy of the Preliminary Views document can be found on the GASB website at

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