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SYNOPSIS: Both the FASB and the GASB cite meeting user needs as a primary objective of financial reporting. This paper examines whether the same needs of the financial community can be met for private and public institutions given the divergent directions currently being taken by the FASB and the GASB regarding financial reporting standards for colleges and universities. Specifically, the study examines the extent to which the new FASB and the proposed GASB financial reporting models for colleges and universities provide information that is comparable across private vs. public institutions. Comparability is examined in terms of availability of information and recognition and measurement issues across models.
Our research method consists of using ratios, developed and used by the financial community to analyze the financial reports of private colleges and universities, to determine the extent of comparability between the new FASB financial reporting model for private institutions and the proposed GASB model for public institutions. The results show that the differences between the proposed GASB model and the new FASB model would make financial comparisons between the two types of institutions difficult. Based on these results, recommendations intended to enhance the comparability of private and public college and university financial statements are provided.
Data Availability: Available upon request.
INTRODUCTION
The financial community (i.e., bond rating agencies, bond insurers, investment bankers, underwriters and investors) is a significant user of both private and public college and university financial statements. This group of analysts has expressed the need for comparable information for private and public colleges and universities in order to achieve meaningful financial analyses across these institutions (Engstrom 1988, 52). Until recently, the accounting and financial reporting for colleges and universities was generally comparable since most private and public institutions of higher education used the reporting format set forth in the AICPA (1973) Audits of Colleges and Universities. However, there is concern that comparability will be lost due to the implementation of the new FASB financial reporting model required for private colleges and universities and the potential implementation of the proposed GASB financial reporting model for public colleges and universities. The new FASB model does away with the requirement for fund reporting and substitutes a net asset format using the accrual basis of accounting. The proposed GASB...