Abstract
The primary goals of financial reporting for U.S. state and local governments are to provide useful information for assessing governments' fiscal performance over the short term (fiscal accountability) and the operational effectiveness of governmental activities from a longer-term perspective (operational accountability). To achieve these dual objectives, the Governmental Accounting Standards Board (GASB) requires governments to prepare two sets of financial statements: one using full-accrual-basis accounting and the other employing modified-accrual-basis accounting. Amid controversies regarding the complexity of information resulting from maintaining dual reporting models, the GASB argues that providing both sets of statements enhances the overall informativeness of governmental reports. This study discusses the conceptual basis of the GASB's perspective on the role of financial reporting in fulfilling accountability. Furthermore, it proposes hypotheses and research designs to test whether both reporting models provide relevant information for users to evaluate fiscal and operational accountability, as the GASB conjectures. This research offers valuable insights for accounting standard-setters, practitioners, and users by highlighting the differential and incremental relevance of GAAP-based governmental financial information derived from dual reporting models in evaluating governmental accountability.