What Is the Economic Resources Measurement Focus?

The economic resources measurement focus is an accounting method used by government entities to report their financial position by considering all assets and liabilities, both short-term and long-term. This approach provides a comprehensive view of a government’s financial health, similar to the reporting used by private-sector businesses. It measures all economic resources available to a government, contrasting with other approaches that only concentrate on current financial resources.

Core Principles of the Measurement Focus

This focus captures all of a government’s assets, including cash, investments, and long-term capital assets like buildings, police cars, infrastructure, and land. These assets are recorded at their historical cost and are subject to depreciation, which is an expense recognized over the asset’s useful life.

The measurement focus also requires recognizing all liabilities, both current and long-term. This includes short-term obligations like accounts payable and long-term debts such as general obligation bonds and future obligations for employee benefits like pensions. These liabilities are reported on financial statements even if they are not due for many years.

This focus uses the full accrual basis of accounting, where transactions are recognized when they occur, not when cash changes hands. Revenue is recorded when it is earned and measurable, and expenses are recorded when a liability is incurred. For example, salary expenses are recognized when employees perform work, even if payday is in the next accounting period.

Application in Governmental Financial Statements

The economic resources measurement focus is required for government-wide financial statements. The Governmental Accounting Standards Board (GASB) established this framework, which is refined by Statement No. 103, effective for fiscal years beginning after June 15, 2025. The two government-wide statements are the Statement of Net Position, which lists all assets and liabilities, and the Statement of Activities, which shows all revenues and the full cost of government services. This approach consolidates information from various government departments into a single report, providing a comprehensive perspective for analyzing the government’s overall financial standing and the long-term sustainability of its operations.

At the more detailed fund-level, this focus is applied selectively to proprietary and fiduciary funds. Proprietary funds, like a public water utility, operate in a business-like manner by charging fees for services. Fiduciary funds, such as pension trust funds, also use this focus because they manage long-term assets and obligations.

Impact on Financial Reporting and Analysis

Using this focus results in the reporting of a government’s net position. Net position is calculated as total assets plus deferred outflows of resources, minus total liabilities and deferred inflows of resources. This figure is presented in three components.

The first component is the net investment in capital assets, representing the value of capital assets less the outstanding debt used to acquire them. The second is restricted net position, which are resources with legally enforceable limitations on their use. The final component, unrestricted net position, is the residual amount available for general operations.

This reporting supports the assessment of a government’s operational accountability, which is how well it has managed resources to meet service objectives. By including the full cost of services, including depreciation and long-term pension costs, this focus provides a complete picture of financial performance. This allows for an evaluation of whether the government is operating sustainably.