Defining the 7 Elements of Governmental Financial Statements

The Governmental Accounting Standards Board (GASB) has proposed its fourth Concepts Statement Elements of Financial Statement, defining the seven elements of governmental financial statements. When considered collectively, Concepts Statements form the GASB’s conceptual framework which provides a foundation to guide the Board’s development of accounting and financial reporting standards.


“Today’s proposed concepts Statement reflects our ongoing commitment to develop a more robust conceptual framework that can better guide the Board in its decision making, promote high-quality accounting standards, and make the process for developing those standards more consistent,” Robert H. Attmore, chairman of the GASB, explained in a prepared statement. “Moreover, an improved framework will also aid financial statement preparers and auditors as they evaluate transactions for which there are no existing standards.”

In order to develop a conceptual framework appropriate for the government environment, the Board needs to define even the most basic building blocks of financial reporting. A central feature of each of the proposed definitions of elements is a resource, which is an item with a present capacity to provide service. Accordingly, the proposal defines the elements of statements of financial position as:

  • Assets – Resources the entity presently controls
  • Liabilities – Present obligations to sacrifice resources or future resources that the entity has little or no discretion to avoid
  • A deferred outflow of resources – A consumption of net resources by the entity that is applicable to a future reporting period
  • A deferred inflow of resources – An acquisition of net resources by the entity that is applicable to a future reporting period.
  • Net Assets – The residual of all other elements presented in a statement of financial position.

The proposal also defines elements of resource flows statements as:

  • Outflow of resources – A consumption of net resources by the entity that is applicable to the reporting period
  • Inflow of resources – An acquisition of net resources by the entity that is applicable to the reporting period.

The GASB is currently seeking constituent comment on the proposed Concepts Statements, Elements of Financial Statements. The deadline for submitting comments is November 17, 2006. The GASB will also be conducting a public hearing in association with this project at its regular meeting on November 30, 2006, beginning at 1 p.m. in Norwalk, Conn. The public may participate in person or over the telephone. The Concept Statement is available for download on the GASB web site at

The Board expects to soon begin work on a fifth Concept Statement focusing on recognition and measurement attributes.

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