Which GASB statement changed how fund balance is reported?

GASB 54 is the correct response as it significantly altered the way fund balance is reported in governmental financial statements. Prior to the implementation of GASB 54, fund balances were classified into relatively broad categories, which often led to confusion and misinterpretation of what resources were available for spending.

Under GASB 54, fund balances are categorized into five distinct classifications: nonspendable, restricted, committed, assigned, and unassigned. This enhances the clarity and transparency of financial reporting by clearly defining the constraints on fund balances, allowing users of financial statements to better understand how resources can and cannot be used. For instance, 'restricted' balances are those constrained by external parties or legislation, while 'committed' balances are those constrained by formal actions of the governing body.

This restructuring promotes a more effective reporting framework that aligns better with the purposes for which the funds have been set aside, facilitating improved financial management and planning within government entities. By establishing these clear classifications, GASB 54 has improved the comparability and consistency of financial statements across different governmental entities.