Accrual Accounting at the Public Level
What can be worse than a projected record federal budget deficit? The fact that the projection (1) does not include 80 billion dollars of money for the war; (2) "takes no account of the potential costs of a full-scale Federal bail-out of the mortgage giants Fannie Mae and Freddie Mac, who have been given a Federal guarantee in the housing bill that has just passed Congress"; and (3) is "flattered by including the surpluses that are currently being accumulated by the social security trust fund, but that will soon turn into deficits in the next decade" simply makes the situation more dire.
GAAP (Generally Accepted Accounting Principles) require public corporations to issue financial statements on the accrual basis, which matches revenues and costs with the services or goods delivered. The federal government is experiencing such a financial crunch when it includes cash flows from what will be a significant future liability. What if it reports its statements (how it spends its money, where they get it from, and its projections for the future) in the accrual basis, as the SEC requires corporations to do?
That would help paint a more realistic picture of our treasury's circumstances. Perhaps then people will see what a big problem our deficit really is, and take to heart the immediate need to deal with this future problem.
What do you think? The people of America now are buffeting their lives with money and resources stolen from their future. Is the past more important or is the future?
- Jinghao's blog
- Login or register to post comments
Comments
I've always been at issue
I've always been at issue with the government's inability to be honest with its people. This problem is definitely magnified in the financial world: As someone who lives in this country and has to pay taxes, I feel that I ought to know what my government is doing with that money, and I feel that I should have a choice as to where that money is spent.
More importantly, the government being a corporation, I think the government should be required to follow GAAP. They are no different than any other company, and even if they declare themselves as non-profit, we still ought to know what is going where, and what counts as what. I for one, would enjoy seeing what goes under "Extraneous expenses" on the Income Statement...