Governments exploit GAAP fund accounting loopholes

August 27, 2021

By Sheila Weinberg, Accounting Today

While not perfect, generally accepted accounting principles are considered the gold standard of accounting rules. Corporations throughout the country use GAAP to prepare their financial statements. Government budgets, on the other hand, are prepared with “wild, wild west” accounting rules: different versions of cash basis accounting. That is why a few governments have enacted laws that require their budgets to be prepared using GAAP, instead of using the ambiguous cash basis other governments use.

New York City was nearly bankrupt in 1975 and had lost access to municipal bond markets. Lenders were not willing to buy the city’s bonds until the state adopted the Financial Emergency Act, which required the city to adopt budgets balanced according to GAAP.

Continue reading at Accounting Today

View all News