Exposure Draft, February 1981

Editor's Note: In February 1981 the Governmental Accounting Standards Board Organization Committee (GASBOC) recommended the establishment of a governmental accounting standards board. Its exposure draft will be the subject of intense examination in the coming months. Shortly after the draft was issued, the Financial Accounting Foundation, which is involved in accounting standards for private organizations, called for a single group to set standards for both public and private entities. Much more is involved than the jurisdictional issue of whether a single or a dual structure should be established for accounting standards. Once in operation, these standards will shape governmental accounting and reporting practices, much in the way that standards now dictate the accounting procedures of private firms. Many state and local governments will have to revamp their accounting structures in order to satisfy the new standards. At issue also is the question of whether standards should primarily satisfy the needs and interests of external users or those of the governmental unit. Should governments be accountable principally through the political process or through externally enforced rules? This question goes to the heart of American democracy. The way it is answered will not only influence financial management, but also the conduct and quality of government. In order to encourage informed debate, excerpts from berth the GASBOC exposure draft and the FAF statement are published here. In addition, a selected bibliography by James Chan should help readers work their way through the maze of accounting standards.