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The GASB accounting treatment for capital project funds is based on the principles of the modified accrual accounting in contrast to the full accrual accounting rules that are followed in private enterprises. Thus, for capital project funds, accountants refer to standards that are normally used for any other type of the governmental fund (Freeman, Shoulders, Allison, & Smith, 2012). It is important to note that for capital project funds, any capital expenses are mostly presented as expenditures. From this perspective, the focus is on matching expenditures with the finances or resources that can cover those expenditures at the moment when the cash is paid. This detail is the significant one in order to differentiate the GASB accounting treatment for governmental funds and the principles of accrual accounting (Reck, Lowensohn, & Wilson, 2012, p. 182). Thus, the focus is on the correlation between expenditures and revenues when actual expenditures are noted, and revenues are received during the concrete period of time (Reck et al., 2012). The other main GASB accounting principles in this case are that debt issues and expenditures should be discussed and reported when the process of selling was completed as it is important that the expenditures are measurable and clearly matched with the gains or revenues (Freeman et al., 2012; Reck et al., 2012). The reason to use such specific approach and the GASB accounting treatment is that capital project funds are authorized immediately after planning and determining the expenses.
However, the projects are constantly developed and changed. When the project is in progress, the expenses and revenues can be unclear. Therefore, the costs of the uncompleted stage or the excepted revenues can be determined and predicted inaccurately. As a result, the stages of the project that are in progress are not reflected in the financial statements and reports typical of the capital projects fund accounting, and moreover, specific rules are followed to report the debts, deficits, as well as possible premiums and discounts (Granof & Khumawala, 2016; Freeman et al., 2012). Certain sections of financial statements are usually used for reporting debts, deficits, premiums, and discounts as they cannot be presented as costs or revenues in the main sections of the statement.
It is possible to note that the GASB accounting treatment is more advantageous and easy to understand by the readers of financial statements because the information regarding only available and measurable aspects of the capital project funds is presented in the financial statement. Moreover, this approach is relevant to present the accurate information regarding the completed project. Thus, in contrast to the accrual accounting standards, the GASB accounting treatment of capital project funds guarantees that the assets, which were not used during the project development stage, were transferred to the other funds in order to cover possible gaps (Reck et al., 2012). The readers of reports provided by the governmental organizations starting and completing projects can easily recognize how many costs were spent to achieve certain revenues whey they are observable and reported. In addition, it is possible to concentrate on certain stages of the project development because of the short-term accountability presented in such type of statement. Only actual statements of revenues and expenditures measurable for the concrete period of time can be presented in reports on the capital project funds formulated according to the principles of the GASB accounting treatment.
References
Freeman, R., Shoulders, C., Allison, G., & Smith, R. (2012). Governmental and nonprofit accounting. New York, NY: Prentice Hall.
Granof, M. H., & Khumawala, S. B. (2016). Government and not-for-profit accounting: Concepts and practices. New York, NY: Wiley.
Reck, J., Lowensohn, S., & Wilson, E. (2012). Accounting for governmental and nonprofit entities. New York, NY: McGraw-Hill Education.
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