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Financial Management

GAAP vs GASB: Which Standards Apply to Governments, Public Colleges and Nonprofits

Sherman Hsieh
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GAAP vs GASB: Which Standards Apply to Governments, Public Colleges and Nonprofits

Last updated: October 17, 2026 · Independent guide · We do not sell rankings or coverage.

GAAP vs GASB is a slightly misleading comparison, because GASB standards are GAAP for governments. The real split is between two standard setters: the Governmental Accounting Standards Board (GASB) writes GAAP for governments, including public colleges and school districts, and the Financial Accounting Standards Board (FASB) writes GAAP for companies and private not-for-profits, including private colleges. Both boards are overseen by the Financial Accounting Foundation (GASB, July 2020; FASB, April 2025). Move between a city, a public university and a private nonprofit, and the same transaction produces different entries and equity labels.

The rule and the journal entries

The deciding question is whether your entity is a government. Under the definition FASB and GASB agreed, “public corporations and bodies corporate and politic are governmental organizations.” Other organizations are governmental if officers are popularly elected or government officials appoint a controlling majority of the board, if a government can dissolve them and take the net assets, or if they can levy taxes. An organization that can issue tax-exempt debt directly is presumed governmental unless it has no other governmental trait and rebuts the presumption with compelling evidence (SC Comptroller General, July 1996).

The table compares a school district general fund (GASB, modified accrual), a public college reporting as a business-type activity (GASB, full accrual) and a private college (FASB).

Account Debit Credit Note
GASB general fund: Expenditures, capital outlay Purchase price Cash Capitalized only in government-wide statements
GASB public college or FASB private college: Equipment Purchase price Cash Full accrual; depreciate over useful life
FASB: Cash Gift amount Contribution revenue, with donor restrictions Purpose-restricted gift
FASB: Net assets with donor restrictions Amount spent Net assets without donor restrictions Release when the purpose is met
GASB public college: Cash Gift amount Gift revenue (nonoperating) No release entry; unspent amount is restricted net position
GASB employer: Pension expense and deferred outflows Per actuarial report Net pension liability and deferred inflows Proportionate share in cost-sharing plans

Governmental funds use modified accrual, while government-wide statements capitalize and depreciate assets (UT CTAS, April 25, 2025; Humboldt COE, no date shown). The FASB release entry moves activity from “with donor restriction” to “without donor restriction” when the restriction is satisfied (CliftonLarsonAllen, August 17, 2026). Our restricted funds accounting guide covers those entries in detail.

Worked example: the same year at a public and a private college

Illustration only. These figures are constructed to show the mechanics. Two colleges with June 30 year-ends each buy, on July 1, $600,000 of lab equipment for cash with a six-year useful life and no salvage value. Each also receives a $200,000 cash gift restricted to a visiting lecture series and spends $50,000 of it during the year. One is public (GASB business-type activity); the other is private (FASB ASC 958).

  1. Equipment. Both debit Equipment and credit Cash for $600,000. Depreciation is $600,000 ÷ 6 = $100,000, leaving $500,000.
  2. Gift at the private college. Debit Cash $200,000 and credit Contribution revenue, with donor restrictions, $200,000. Spending $50,000 is an expense plus a $50,000 release to without donor restrictions.
  3. Gift at the public college. Under GASB 33, purpose restrictions do not affect when a voluntary nonexchange transaction is recognized, so the full $200,000 is revenue on receipt and the unspent balance is reported as restricted (James Moore CPAs, July 23, 2025). It credits Gift revenue $200,000, expenses the $50,000 spent, and makes no reclassification entry.
  4. Classification. The University System of Georgia defines nonoperating revenues as those derived from non-exchange transactions (USG, February 25, 2016), and William & Mary reports gifts and state appropriations as nonoperating revenue (William & Mary, unaudited FY2025 statements).

Both colleges end the year $50,000 better off ($200,000 revenue less $150,000 expense), but the equity sections differ.

Equity line (change for the year) Public college (GASB) Private college (FASB) Why
Net investment in capital assets +$500,000 Not a separate class GASB 63 component; equipment bought with cash, no debt
Restricted (expendable) / With donor restrictions +$150,000 +$150,000 No release entry under GASB
Unrestricted / Without donor restrictions −$600,000 −$100,000 GASB moves the equipment to its own component
Total change +$50,000 +$50,000 Same economics

The standards behind the differences

Who follows which

GASB sets standards for about 90,000 U.S. state and local governments, recognized as authoritative by state boards of accountancy and the AICPA (GASB, July 2020). FASB sets standards for “public and private companies and not-for-profit organizations” (FASB, April 2025). In practice, cities, school districts and public colleges follow GASB, while private universities, charities and churches follow FASB.

Not every government uses GAAP: a GASB study found GAAP use at all states, 74% of audited counties and 71% of audited municipalities (Accounting Today, March 24, 2025).

The boundary runs through some campuses. William & Mary presents nine affiliated organizations, eight of them foundations, as component units that follow nonprofit accounting literature and are reclassified “to GASB format” (William & Mary, unaudited FY2025 statements).

Fund reporting vs entity reporting

GASB Statement 34 requires two layers. Government-wide statements use full accrual for governmental activities, business-type activities and component units. Fund statements cover governmental, proprietary and fiduciary funds, with major funds in their own columns and a reconciliation to the government-wide totals (Journal of Accountancy, January 1, 2000). That is why encumbrance accounting is routine in governments, where fund balance and budget control matter.

FASB reports the nonprofit as one entity. ASU 2016-14 requires two classes of net assets, an analysis of expenses by both nature and function, and liquidity disclosures (FASB, August 2016). A nonprofit can run funds internally, but its external statements are not organized by fund.

Net position vs net assets

GASB uses “net position,” the residual of all other elements on the statement, split into net investment in capital assets, restricted and unrestricted (California State Controller, no date shown). FASB uses “net assets” with and without donor restrictions, explained in our guide to the statement of financial position for nonprofits. At June 30, 2025, public William & Mary reported $1.22 billion of net position, $1.02 billion of it net investment in capital assets, while private DePaul University reported $1.46 billion without and $157 million with donor restrictions (DePaul, no date shown).

Pensions

GASB 68, issued June 2012 and effective for fiscal years beginning after June 15, 2014, requires government employers to report a net pension liability. Cost-sharing employers, such as school districts and public colleges that participate in statewide plans, report a proportionate share of the collective liability. Governmental funds recognize the liability only to the extent it is normally expected to be liquidated with expendable available financial resources (GASB, June 2012). William & Mary reported a net pension liability of $97,426,487 at June 30, 2025, for Virginia Retirement System plans it treats like cost-sharing plans (William & Mary, unaudited FY2025 statements).

A private college with its own defined benefit plan follows ASC 715 (originally Statement 158), which records the plan’s underfunded status as a liability and took effect for nonprofits for fiscal years ending after June 15, 2007 (Journal of Accountancy, December 1, 2006).

Leases and capital assets

GASB 87 uses a single model that treats leases as financings of the right to use an asset. The lessee records a lease liability and an intangible right-to-use asset, and the lessor records a lease receivable and a deferred inflow (Ohio Auditor of State, September 19, 2022). FASB ASC 842 also puts leases over 12 months on the balance sheet, but it classifies them as finance or operating, and operating leases carry a single straight-line lease cost (FASB, June 2020). Our GASB 87 lease accounting guide walks through a school district example.

For capital assets, GASB 34 lets a government skip depreciation on eligible infrastructure if it maintains an asset management system and keeps assets at a disclosed condition level, with assessments every three years (Journal of Accountancy). FASB has no equivalent. For gifts of long-lived assets, ASU 2016-14 applies a placed-in-service approach unless the donor says otherwise (FASB).

Common mistakes when you switch sectors

  • Carrying the release entry into GASB. Under GASB, restricted net position is a classification of the ending balance, so no release entry is booked.
  • Deferring purpose-restricted gifts under GASB. Only eligibility requirements, including time requirements, delay recognition.
  • Depreciating in a governmental fund. Fund statements show capital outlay expenditures. Depreciation belongs in the government-wide conversion.
  • Forgetting deferred outflows and inflows. GASB pension, OPEB and lessor entries create these elements; FASB nonprofits have no counterpart.

How to report it

A government presents MD&A, government-wide statements, fund statements with the reconciliation, notes and required supplementary information. A public college presents a statement of net position, a statement of revenues, expenses and changes in net position, and cash flows. A private college presents a statement of financial position, a statement of activities, cash flows and the expense analysis by nature and function.

How ERP and accounting systems handle GASB and FASB

Tyler Technologies Enterprise ERP. Tyler sells fund accounting to governments and an ACFR Statement Builder it describes as “embedded with the Government Accounting Standards Board (GASB) rules” (Tyler Technologies, no date shown). It is built for governments, not private nonprofits.

Workday Financial Management. Workday’s higher education datasheet covers fund accounting, grants and converting capital projects into assets, and says it supports changing GASB and GAAP standards (Workday, February 2024). It does not distinguish public from private institutions, so ask to see your required statements.

Sage Intacct. Intacct can run traditional fund accounting with self-balancing entities and inter-entity mapping, or net asset accounting with a restriction dimension (CliftonLarsonAllen, August 17, 2026; CLA advises organizations on Sage Intacct implementations).

Blackbaud Financial Edge NXT. Blackbaud positions it as a fund accounting subledger for grants, endowments and scholarships alongside a campus ERP (Blackbaud, March 17, 2026). The page does not name GASB or FASB, so confirm statement formats with the vendor.

How we researched this

We read GASB and FASB primary documents, state guidance from California, Georgia, Ohio and Tennessee, FY2025 statements from William & Mary and DePaul University, and vendor pages. The top-ranking pages, from software sellers Caseware and Accruent, skip pensions, public vs private colleges and the definition of a government. We checked every source on October 17, 2026.

Related guides

Frequently asked questions

Do public universities follow GASB or FASB?

Public universities and community colleges follow GASB, and many report as business-type activities, as William & Mary and Georgia’s public institutions do. Their affiliated foundations can be private nonprofits following FASB, reclassified when presented as component units.

Do nonprofits follow GASB?

Private nonprofits follow FASB, mainly ASC 958. A nonprofit follows GASB only if it meets the definition of a government, for example because government officials appoint a controlling majority of its board.

What is the difference between net position and net assets?

Net position is the GASB term, split into net investment in capital assets, restricted and unrestricted. Net assets is the FASB nonprofit term, split into with and without donor restrictions. GASB also reports deferred outflows and inflows as separate elements.

Can one accounting system handle both GASB and FASB?

Many can, because the difference lies in dimensions and statement formats. You need fund or restriction tracking, government-wide conversion entries if you are a government, and templates for your required statements.

Sources

Sherman Hsieh

CEO & Editor-in-Chief, Business-Software.com
Independent analysis of enterprise software — ERP, CRM and more
Sherman Hsieh is the founder, CEO, and editor-in-chief of Business-Software.com. He leads the site's independent, buyer-focused coverage of ERP, CRM, and other business systems, including vendor-neutral comparisons, pricing analysis, and implementation guidance. Before founding Business-Software.com, Sherman was an executive at Siebel ...

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