F inancial R eporting BY L ocal G overnment A nd T he D isproportionate R equirements O f AAS 27

This paper discusses the economic characteristics, and related financial reporting issues, of goods and services provided by local government. These goods are grouped into three categories: public, private, and mixed public/private goods and services. Modified cash‐based reports are found to be proper for government units that provide public and mixed goods, and accrual‐based accounting is appropriate for units that provide private goods. When the provision of mixed goods and services by local government is not mandatory, the disclosure of the market value of the assets employed in producing these goods or services is also warranted.