What does GASB Statement No. 54 regulate?

GASB Statement No. 54 primarily focuses on enhancing the usefulness of financial reporting for state and local governments by establishing clearer standards for governmental fund accounting. This statement specifically addresses how fund balances are classified in governmental financial statements, providing a framework for understanding the limitations and availability of those funds.

The correct response ties directly to how GASB 54 distinguishes between different types of fund balances—specifically, it defines classifications such as nonspendable, restricted, committed, assigned, and unassigned. By clarifying these classifications, the statement aims to increase transparency and help users of financial statements better understand the resources available for capital projects and other governmental activities.

This clear classification strengthens accountability and reporting, ensuring that stakeholders have access to relevant information about how funds are allocated and spent within governmental entities. Understanding GASB 54 is essential for anyone involved in municipal finance, as it directly impacts financial reporting and compliance in local governments.