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On July 7, the Governmental Accounting Standards Board (GASB) issued Concepts Statement (CS) No. 7, Communication Methods in General Purpose External Financial Reports that Contain Basic Financial Statements: Notes to Financial Statements.

CS 7 culminates a multi-year project in which the board and staff studied the essence of communication concepts that inform what notes to the financial statements ought to convey. The concepts contained in the document are primarily intended to provide GASB with criteria to evaluate future requirements for notes to financial statements in the standards-setting process. However, CS 7 can be used by auditors and financial statement preparers at public institutions when applying the hierarchy of GAAP in circumstances for which there is no authoritative note disclosure guidance.

The CS stresses the notion of essentiality as the most significant element for guiding required disclosures. This concept is defined to mean that notes to the financial statements should be essential to making economic, social, or political decisions or assessing accountability. The new statement elaborates on two foundational characteristics of essential information:

  1. Essential information has or is expected to have a meaningful effect on users’ analyses for making decisions or assessing accountability.
  2. Essential information is utilized or expected to be utilized by a breadth or depth of financial statement users in their analyses for making decisions or assessing accountability.

The CS also defines the following criteria for disclosures in notes to the financial statements:

  • The types of information disclosed in the notes
  • The types of information that are not appropriate in the notes
  • The degree of importance that information disclosed in the notes should possess

Because CS 7 was not unanimously approved by all board members, there is a dissent analysis in the basis for conclusions. GASB will use CS 7 to guide deliberations of projects currently in process.


Sue Menditto

Senior Director, Accounting Policy


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