What are Tax Abatements and What Must State and Local Governments Disclose in Financial Reporting?

<p>Those of a certain age probably remember Steve Martin’s The Jerk, where Martin played the hapless character Navin R. Johnson. Of the countless memorable lines in the movie, one that always stands out is his excitement when the postman drops off the new phone books. “The new phone books are here! The new phone books are here!” he exclaims as he rushes out of the house to collect his prize. It is doubtful, unfortunately, that the annual issuance of state and local governmental financial statements would have elicited the same level of excitement for Navin. However, for the avid users of these financial statements, the release of new financial reporting standards may be equally exciting. This post explores new financial reporting requirements for local governments related to economic development incentives.</p> <p>Generally accepted accounting principles (GAAP), as promulgated by the Governmental Accounting Standards Board (GASB), establish the ever-evolving accounting and financial reporting requirements for state and local governmental entities. In North Carolina, the General Statutes require local governments to follow GAAP, thus once a year these entities are required to prepare independently audited basic financial statements. The basic financial statements include a comprehensive set of note disclosures that provide details about the reporting government such as their accounting policies and procedures, deposit and investment collateralization arrangements, outstanding debt, pensions and other retirement benefits, and any other types of information related to the organization that would inform the users of the financial statements in their decision-making. New disclosures are identified on an on-going basis as deemed [...]</p>