Suggested Bias for International Governments to Apply

An Effective Governmental Financial Reporting Model : (GASB vs. GFSM)

Tamer A. Elnashar
Part-time faculty
School of Continuing Education
The American University in Cairo

Abstract This paper presents my view on a suggested bias for international governments to apply an effective governmental
financial reporting model based on the GASB recommendations to improve the governmental financial reporting model. I set
the data for this view in a manner that statistically shows how future research can investigate my view empirically in the
practice field of governmental accounting and reporting taking into account my view of the suggested bias. I use two statistical
models to present my view and set two hypotheses to be examined by future research, one model is based on a gage linearity
and bias, and the other is based on a multiple linear discriminant model to present how the gage and the discriminant analysis
can be used to express the suggested bias. My suggested results show that the suggested bias should be, on average, at least
169.3% above the international governments’ choices to the reference average of the GFSM or other regulations, and the
suggested bias using the multiple linear discriminant analysis model should be for the international governments to report and
apply the effective GASB recommendations of fiscal effect accounts and ratios FAR, debt’s structure accounts and ratios
DSAR, footnotes for financial statement accounts FFSA, Government Accountability Office independent auditors’ report
GOVACCO, and improvement of budgetary comparison and variances IBCV. Future empirical research can investigate my
suggested bias in practice, where international governmental regulatory bodies will benefit from such future empirical research
results to evaluate the international governmental performance to be shown in a high-quality financial reporting model that
potentially will affect the growth of the international economy and sustainability.

Keywords: statistical bias, international governments, governmental financial reports, GASB, GFSM

I. INTRODUCTION

In this paper, I present my view regarding the importance of governmental financial reports as

a significant source of financial and non-financial governmental information necessary for international

governments’ decision-makers to attract those interested in investments and businesses with such

international governments. For international governments, to prepare and use effective governmental

financial reporting models, they should rely on international governmental reporting standards and

international governmental accounting standards.

In the essence of investments, investors interested in countries reporting their financial and

non-financial information find it difficult to obtain unified governmental financial reports, which leads

to the international issue of lack of comparability, inconsistency, lack of transparency and

accountability, lack of sustainability, unclear future vision for growth, lack of relevance and reliability

of the governmental accounting information. Where most of countries' governments can follow their

own rules and regulations to disclose their financial and non-financial information, can follow the

guides of the International Monetary Fund IMF by applying the government finance statistics (IMF

GFSM 2019), or can follow the governmental accounting standards issued and improved by the

governmental accounting standards board in the USA ( GASB 2020).

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 IMF (2014) issued the most recent Government Finance Statistics Manual 2014 (GFSM 2014)

for the primary purpose of providing a comprehensive conceptual and reporting framework suitable for

analyzing and evaluating fiscal policy, especially the performance of the general government sector and

the broader public sector of any economy. In addition, (GFSM 2014) helps provide the economic and

statistical reporting principles for compiling the statistics, describes guidelines for presenting fiscal

statistics within an analytic framework that includes appropriate balancing items, and is harmonized

with other macroeconomic statistical guidelines.

On the other hand, the GASB (2020) proposed the statement of the Governmental Accounting

Standards Board financial reporting model improvements and issued the exposure draft of such

proposed statement by the board for public comment. The objective of this proposed statement is to

improve key components of the financial reporting model, to improve the effectiveness of the financial

reporting model in providing information that is essential for decision-making, assessing a

government’s accountability, as well as addressing certain application issues.

Moreover, the GASB is responsible for establishing and improving standards of governmental

accounting and financial reporting to provide useful information to users of financial reports, educating

stakeholders (including issuers, auditors, and users of those financial reports) on how to most effectively

understand and implement those standards.

Thus far, the scope and applicability of this statement of GASB financial reporting model

improvements establish or modify existing government accounting and financial reporting requirements

related to reporting management’s discussion and analysis, reporting unusual or infrequent items,

presentation of governmental fund financial statements, application of the short-term financial resources

measurement focus and accrual basis of accounting in governmental funds, presentation of the

proprietary fund statement of revenues, expenses, and changes in fund net position, information about

major component units in basic financial statements, budgetary comparison information, and financial

trends information.

As a consequence, countries and their governments are encountering two governmental

reporting models, one international and the other for the USA, nevertheless, both are using the generally

accepted accounting principles GAAP that become nowadays very close to the international financial

2
reporting standards IFRS and the international public sector accounting standards IPSAS drawn

primarily from the IFRS. Moreover, some countries may have their own rules and regulations to present

their governmental financial reporting model. Therefore, the choice of each country for which

governmental financial reporting model to use is subjected to either bias or analytical review, to choose

the more appropriate and effective reporting model that best meets their operating environment and

governmental requirements, assuming no corruption behind countries using their own rules and

regulations for their governmental financial reporting model.

My previous paper (Elnashar(a) 2018) regarding governmental financial reporting models,

motivates a suggested bias for international governments to apply an effective governmental financial

reporting model, where all international governments use no particular unified model. There is

separation among international governments for which model to use, particularly for the top countries

with high economic indications. In addition, my previous study (Elnashar(b) 2022) regarding the impact

of the changes in governmental accountability on the change in total governmental revenues, relying on

analyzing and studying the governmental financial reports, also motivates a suggested bias for

international governments to apply an effective governmental financial reporting model. Where I find

changes in accounting information shown in the high-quality governmental financial reports (as

indicators of governmental accountability) are positively associated with the change in total

governmental revenues.

Most of the governmental accounting textbooks and courses taught to learners are prepared

based on the standards set by the Governmental Accounting Standards Board GASB and the generally

accepted accounting principles GAAP. Therefore, I consider this as another motive for the suggested

bias for international governments to apply an effective governmental financial reporting model,

particularly that model of reporting using the GASB’s standards and guidelines (e.g., Freeman et al.

2021; Granof et al. 2021; Copley 2024). Moreover, most of my search on the website shows results for

governmental accounting based on the GASB as another motive as well.

In this paper, I present insights for future research in the area of governmental financial

reporting and for practitioners in international governments, by providing the suggested bias for

international governments to use an effective governmental financial reporting model, which is the

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model set by the GASB, and showing the interpretations using a multiple linear discriminant analysis

model for the data, which shows how international governments can favor and choose this model as an

effective governmental financial reporting model and why.

The hypotheses for research like this for future research presents the necessity for international

governments to choose the governmental financial reporting model following the GAAP set by the

GASB rather than the GFSM model set by the IMF. Thus, my expectation for future research hypotheses

is the suggested bias I present in this paper as the ( H1: there is a significant percentage of bias to choose

the governmental financial reporting model by the international governments in their countries). This

hypothesis to test is shown by the statistical inferences using the quality tools of gage linearity and bias

study. In addition, I use for assurance a multiple linear discriminant analysis model for a hypothesis

( H2: There is at least one choice for governmental financial reporting model adopted by international

governments in their countries, and contribute to the discriminant among those countries, formed as:

(i ≠ 0,,,,,,,, , for at least one i,,,, where i is the GASB’s recommendations for international governments

to apply an effective governmental financial reporting model).

The remainder of this paper is organized as follows: the second section presents a section for

future research, followed by the third section to present the suggested bias results, and the final section

shows the conclusions and discussion.

II. FOR FUTURE RESEARCH

Data

Data for this paper for future research are based on the choices of international governments in

the world to the effective governmental financial reporting models to apply in their countries. I assume

the choices of the countries, which are 195 countries generate my suggested bias for international

governments to apply an effective governmental financial reporting model based on the GAAP set and

recommended by the GASB rather than the financial reporting model based on the recommendations

of GFSM set by the IMF. I set the weight of 0 to the international governments’ choices that do not

reflect a bias, and the weight of 1 to the international governments’ choices that reflect a bias to choose

the governmental financial reporting model recommended by the GASB.

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 I distribute the choices in a form that nearly shows the reality and rationality I suggest for

governments to apply and use my personal judgment to present a bias and discriminant techniques. In

addition, the period assumed for the data is for two recent years at least. Future research is assumed to

reach the data required in an understandable form, regardless of the different governmental financial

reporting models used by the countries and their governments.

Table A (1) in the appendix presents the data assumed for the 195 countries in the world, which

I set judgementally to show a high percentage of bias to apply the governmental financial reporting

models based on the recommendations of the GASB, and before the statistical test. Figure (1) shows

the histogram with a normal curve for the data in Table A (1), where I show in panel (B) the suggested

bias for international governments to use the GASB financial reporting model compared to the reference

shown in panel (A), which reflects unbiased and normal distribution for the international governments’

choices to other governmental financial reporting models, particularly the model set in accordance to

the GFSM set by the IMF.

Figure (1)
Histogram with normal curve for the international governments' choices
for governmental financial reporting models shown in table A(1)
( Set to be heavily biased to the recommendation of GASB compared to GFSM and other regulations)

Panel (A): Reference of governments’ choices (A) Panel (B): Biased governments’ choices (B)

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 Histogram (with Normal Curve) of Gov Chocies as reference (A)
Mean 158.3
6
StDev 11.50
N 22

Frequency
3

0
140 150 160 170 180
Gov Chocies as reference (A)

Histogram (with Normal Curve) of Gov Choices biased (B)

Mean 185.4
5
StDev 8.797
N 22

4
Frequency

0
168 176 184 192 200
Gov Choices biased (B)

__________________________________________________________________________________

Table A (2) in the appendix presents the data for the choices I set to present the suggested bias

of only the top 50 countries to apply the governmental financial reporting models based on the

recommendations of the GASB, divided into two groups A and B, where group A is set to be of less

bias to apply the models recommended by the GASB, and group B is set to be of heavily bias to apply

the models recommended by the GASB, and before the statistical test as well. Figure (2) shows the

histogram with a normal curve for the data in Table A (2), where I show in panel (B) the suggested bias

for governments to use the GASB financial reporting model compared to the choices shown

in panel (A), which reflect unbiased and normal distribution for the governments’ choices to other

governmental financial reporting models following GFSM set by the IMF and other regulations.

Figure (2)
Histogram with normal curve for the international governments' choices
of governmental financial reporting models shown in table A(2)
( Set to be heavily biased to the recommendation of GASB compared to IMF and other regulations)

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 Panel (A): Reference of governments’ choices A Panel (B): Biased governments’ choices B

Histogram (with Normal Curve) of Group A Unbiased Histogram (with Normal Curve) of Group B Biased
500 Mean 0.4691 500 Mean 0.6636
StDev 0.4995 StDev 0.4729
N 550 N 550

400 400

300 300
Frequency

Frequency
200 200

100 100

0 0
0 1 0 1
Group A Unbiased Group B Biased

Future research can obtain the data required to conduct the same idea applied in this paper,

provided that the governments in their countries must be applying the governmental accounting

standards in ununified form, which is not apparent in practice, because of the difference in the

governmental accounting standards and reporting from country to another, same as the difference

between the GASB’s governmental accounting standards and reporting and the governmental reporting

guidelines set by the IMF’s GFSM.

The Models

Using the data in Table A (1) and A (2), I use two different models to present how this paper’s

hypotheses can be presented for future research, and for presenting the suggested bias for the

international governments to apply an effective governmental financial reporting model using the

recommendations of GASB.

Gage linearity and bias model

Using the data presented in Table A (1), I present the model required to conduct a gage linearity

and bias study, which is one of the statistical quality tools to test and present the bias in the data under

study for the governments’ choices to the governmental financial reporting model recommended by

GASB. The model is based on the following statistical expression for the bias :

^≠^or : ^≠^≠

Where:

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 = the biased governments’ choices B for GASB’s recommendations to apply the effective

governmental financial reporting model.

^ = the expected reference of unbiased governments’ choices A for GASB’s

recommendations to apply the effective governmental financial reporting model.

^= the expected value of the unbiased reference of governments’ choices A for GASB’s

recommendations to apply the effective governmental financial reporting model.

Subsequently, I use the Minitab statistical package to run this statistical expression using a gage

linearity and bias study to present how the gage can express the suggested bias for governments to apply

the effective governmental financial reporting model recommended by the GASB rather than the model

recommended by the IMF and other models. The study assesses the linearity of the governments’

choices to the GASB model through the expected range and assesses the bias of the governments'

choices to the GASB model compared to the expected reference value of the choices, where the bias

examines the difference between the average biased governments’ choices B and the expected reference

value of the unbiased governments' choices A.

Multiple linear discriminant model

The model I design can help future research to apply it for testing whether the recommendations

of the GASB for governmental financial reporting are associated with the governments of the top 50

countries or not, and helps identify the GASB recommendations for governmental financial reporting

models that contribute the most to the separation of the unbiased governments’ choices in group A and

the biased choices in group B of the international governments. Thus, I construct a multiple linear

discriminant model taking into account all the statistical assumptions for running this model and for

identifying the discriminant function, the model takes the following format:

F= CSA + IAOA + IMCARESRA DSARLARA 

IUNINFSPAROARIBCVIDONRE

AFBARIFTFFSAGVAIMDA

SUSMIOINCAP FAR ARAR 

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IACCBGOVACCO(2)

Where:
F = The top 50 international governments divided into groups A and B

CSA = common size analysis

IAOA= inflows and outflows accounts and ratios

IMCARE = improvement for using current and noncurrent activities in the financial resource

SRA = stability of revenues accounts and ratios

DSAR = debt’s structure accounts and ratios

LARA = liquidity accounts and ratios

IUNINF = improvement for displaying unusual and infrequent items

SPAR = spending patterns accounts and ratios

OAR = operating accounts and ratios

IBCV = improvement for budgetary comparison and variances

IDONRE = improvement for distinguishing between operating and nonoperating revenues

and expenses

AFBAR = adequacy of fund balances accounts and ratios

IFT = improvement for disclosing financial trends information

FFSA = footnotes for financial statements accounts

GVA = GAAP for valuation

IMDA = improvement for reporting management discussion and analysis

SUSM = sustainability measures

IOINCAP = improvement for showing operating income and noncapital subsidies

FAR = fiscal effect accounts and ratios

ARAR = adequacy of revenue accounts and ratios

IACCB= improvement of accrual basis of accounting

GOVACCO = Government Accountability Office independent auditors’ report

The model has 22 independent variables to reflect the effective recommendations by the GASB

for the international governments to apply. The dependent variable expressed as the latent variable in

9
the multiple linear discriminant analysis is to be shown to reflect the top 50 international governments

of highest economic performance divided into group A of unbiased governments’ choices to the GASB

recommendations, which reflect the reference, and group B of biased governments’ choices to the

GASB recommendations. Moreover, independent variables of the GASB recommendations are

expected to significantly help predict and assure the separation of the top 50 international governments

into two different groups, and help identify the most influencing recommendations of GASB to help

apply the effective governmental financial reporting models, which will contribute to the separation.

III. SUGGESTED BIAS RESULTS

Results for Gage linearity and bias model

Table (1) displays information about descriptive statistics for the data I set to perform the gage

linearity and bias study, which are significant for researchers to visually analyze and show initially the

bias of governments’ choices B for GASB recommendations to use for applying the effective

governmental financial reporting compared to the unbiased governments’ choices A.

Table (1)
(*)
Descriptive Statistics (n=22)

Governments’ choices Mean SE Mean St. Dev. Variance

Unbiased group A (Reference) 158.27 2.45 11.50 132.21

Biased Group B 185.36 1.88 8.80 77.39
(*)
Test of equal variances: Bartlett's Test = 1.38 , P – Value = 0.848 (< 0.95)
Levene's Test = 0.44 , P – Value = 0.780 (< 0.95)

As a result: The unbiased group A significantly differs from the biased group B & initially accepts hypothesis H1 that not all variances are equal.

Figure (3)
(*)
Results from running the data in Table A (1) using gage linearity and bias,
with the statistical expression of :

^≠^or : ^≠^≠

10
 Gage Linearity and Bias Study for bised Gov Choices (B)
Gage linearity and bias study for biasedReported
governments’
by :
choices B
G age name: Tolerance:
D ate of study : Misc:

Gage Linearity
P redictor C oef S E C oef P
50 Regression
95% CI C onstant 107.56 20.80 0.000
Data S lope -0.5084 0.1311 0.001
Avg Bias
S 6.90712 R-S q 42.9%
40 Linearity 8.13464 % Linearity 50.8

G age Bias
30 Reference Bias % Bias P
A v erage 27.0909 169.3 *
137 28.0000 175.0 *
Bias

141 29.0000 181.3 *

20 142 38.0000 237.5 *
147 40.5000 253.1 *
152 33.0000 206.3 *
153 32.0000 200.0 *
10 154 36.0000 225.0 *

P er cent of P r ocess V ar iation

160

Percent
0 0
80
140 150 160 170 180
Reference Value 0
Linearity Bias

_________________________
=
(*) the biased governments’ choices B for GASB’s recommendations to apply the effective governmental financial reporting model.
^ = the expected reference of unbiased governments’ choices A for GASB’s recommendations to apply the effective governmental financial
reporting model.
^= the expected value of the unbiased reference of governments’ choices A for GASB’s recommendations to apply the effective governmental
financial reporting model.

From Figure (3), gage bias is shown as a measurement of variability, where I set the data to

show a significant bias to indicate my suggested bias of international governments to apply an effective

governmental financial reporting model recommended by the GASB rather than the models

recommended by the IMF or other regulations. Where the percentage of the bias and the linearity

indicate the percentages to take into account in the overall variability and the overall process.

Therefore, reference ^ indicates the expected reference of unbiased governments’ choices A

for GASB recommendations to apply the effective governmental financial reporting model, which is

compared to  the biased governments’ choices B for GASB recommendations to apply the effective

governmental financial reporting model, where the average bias is 27 governments approximately

comprising a significant bias of 169.3 % that the governments’ choices B are significantly more than

the governments’ choices A to choose the effective governmental financial reporting model

recommended by the GASB. Therefore, in reality, more governments can follow my suggested bias

and choose the model recommended by the GASB rather than the IMF model or others, because of its

effectiveness.

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 Nevertheless, the gage linearity and bias model presents the results in total for the number of

international governments that are biased based on my suggestion, but it doesn’t show in this study the

list of recommendations set by the GASB to apply the effective governmental financial reporting model.

Therefore, I present hereinafter a multiple linear discriminant model that analyses the effect of the

recommendations of the GASB on the international governments’ choices separation between the model

of the GASB and the model of the GFSM set by the IMF or other regulations.

Results for multiple linear discriminant model

Descriptive statistics

Table (2) presents the descriptive statistics necessary to identify the biased governments’

choices B when compared to the unbiased governments’ choices A to the recommendations set by the

GASB to apply the effective governmental financial reporting model, and to show significant group

differences, where I set the data to be significantly different and biased. Therefore, researchers can

measure the differences among governments’ choices in groups A and B of the top 50 countries under

study to ensure significant group differences and support the paper hypothesis H2.

As a consequence, descriptive statistics indicate variations between unbiased governments’

choices in group A and the biased governments’ choices in group B, as there are strong differences

between the mean of the two groups, 0.469 versus 0.664 respectively, and the standard error of

Table (2)
(*)
Descriptive Statistics (n=550)

Governments’ choices Mean SE Mean St. Dev. Variance

Unbiased group A (Reference) 0.469 0.021 0.500 0.250

Biased Group B 0.664 0.020 0.473 0.224
(*)
Test of equal variances: F – Test = 0.98 , P – Value = 0.906 (< 0.95)
Levene's Test = 0.18 , P – Value = 0.670 (< 0.95)

As a result: The unbiased group A Significantly differs from the biased group B & initially accepts the hypothesis H1 that not all variances are equal.

the mean is slightly different between the two groups, as the difference = (0.021 – 0.020 = 0.001), which

can represent the accuracy of both samples in the two groups to conduct the analysis and to indicate the

accuracy of the data as well.

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 Moreover, the variation between the two groups shown by the standard deviation shows a slight

difference of 0.03 between the two groups, where the standard deviation for unbiased governments’

choices in group A is slightly greater than it is in biased governments' choices in group B, and equal to

(0.500 versus 0.473 respectively), suggesting and assuring the possibility of the separation of the two

groups. Subsequently, the variance of the two groups is significantly different as well, confirming the

separations of the two groups, where the variance equals 0.250, and 0.224 respectively, and by a

difference equal to 0.026.

To that extent, descriptive statistics predict group membership for the two groups, suggesting

the separation due to the indications that show a significant difference. As a result, the initial analysis

shown by the descriptive statistics promotes the usage of multiple linear discriminant analysis to

measure how the 22 GASB recommendations to apply an effective governmental financial reporting

model (as the independent variables) contribute to the separation of the unbiased governments’ choices

in group A and the biased governments’ choices in group B of top 50 international governments in their

countries, and in the meantime show which recommendations of GASB are more significant to adopt

in the context of choosing an effective governmental financial reporting model internationally.

Results

To investigate the differences shown by descriptive statistics between the two groups A and B,

the discriminant analysis drives equation (1) as a linear combination of the 22 recommendations by the

GASB to choose an effective governmental financial model, that will best discriminate between the two

groups, to generate the discriminant function. Table (3) reports the results of running equation (1) using

the MINITAB statistical package, to result in the primary investigations of the discriminant function,

which is the first step for the multiple linear discriminant analysis.

Table (3)
Primary investigations of discriminant function

13
Panel A: summary of classification

True group
(a)
Probabilities of classifying recommendations of GASB to
Put into group choose an effective governmental financial reporting
(Independent variables) model in the group

GOVACCO 0.920
FAR 0.680
FFSA 0.560
DSAR 0.440

(a)
N=550 N correct = 65 Proportion (Probability) correct = 0.118
- from equation (2), all other variables are dropped because they have a zero probability.

Panel B: Multiple linear discriminant function for groups

F= CSA + IAOA + IMCARESRA DSARLARA 

IUNINFSPAROARIBCVIDONRE
AFBARIFTFFSAGVAIMDA

SUSMIOINCAP FAR ARAR 

IACCBGOVACCO
(a)

Latent variable F

Group A Group B
Unbiased governments’ Biased governments’
choices to GFSM and others, choices to GASB,
(b) (c)
Put into group Linear Linear
(Independent variables) discriminant function discriminant function

DSAR 5.064 -
AFBAR 4.845 -
IAOA 4.843 -
LARA 4.408 -
FAR 3.976 -
ARAR 3.962 -
SPAR 3.958 -
OAR 3.734 -
IUNINF - 7.080
IBCV - 7.041
GOVACCO - 7.041
IMDA - 7.039
IFT - 7.033
IOINCAP - 7.032
IACCB - 7.030
Continued on the next page ,,,,,,,
IMCARE - 7.030
IDONRE - 7.030
GVA - 3.924
SRA - 3.920
SUSM - 3.371

14
 CSA - 3.359
FFSA - 2.531

(a)
Latent variable F represents the LDF ( linear discriminant function)
(b&C)
The descending order for the discriminant function, from MINITAB results, as the group with the smallest squared distance calculated

DSAR = debt’s structure accounts and ratios

AFBAR = adequacy of fund balances accounts and ratios
IAOA= inflows and outflows accounts and ratios
LARA = liquidity accounts and ratios
FAR = fiscal effect accounts and ratios
ARAR = adequacy of revenue accounts and ratios
SPAR = spending patterns accounts and ratios
OAR = operating accounts and ratios
IUNINF = improvement for displaying unusual and infrequent items
IBCV = improvement for budgetary comparison and variances
GOVACCO = Government Accountability Office independent auditors’ report
IMDA = improvement for reporting management discussion and analysis
IFT = improvement for disclosing financial trends information
IOINCAP = improvement for showing operating income and noncapital subsidies
IACCB= improvement of accrual basis of accounting
IMCARE = improvement for using current and noncurrent activities in the financial resource
IDONRE = improvement for distinguishing between operating and nonoperating revenues and expenses
GVA = GAAP for valuation
GVA = GAAP for valuation
SRA = stability of revenues accounts and ratios
SUSM = sustainability measures
CSA = common size analysis
FFSA = footnotes for financial statements accounts

From Table (3), panel A shows the summary of classification, to identify the probabilities of

classifying GASB recommendations to choose an effective governmental financial reporting model to

put into a group, whereas the discriminant analysis mainly and correctly identified N correct = 65

international governments’ choice from total N = 550 choices, and the probabilities of classifying at

least one of the 22 GASB recommendation (independent variables) to apply an effective governmental

financial reporting model are listed in descending order.

As a result, the highest probability showing the suggested bias is identified for the international

governments to choose the GASB recommendation to apply government accountability office

independent auditors’ report GOVACCO by 0.920, followed by the choice for international

governments to apply fiscal effect accounts and ratios FAR by the probability of 0.680, followed by the

choice for international governments to apply footnotes for financial statements accounts FFSA by the

probability of 0.560, and finally the choice for international governments to apply debt’s structure

accounts and ratios DSAR by the probability of 0.440. This descending order for the GASB

recommendations to apply for an effective financial reporting model initially presents the importance

of such recommendations for the international governments to apply for improving the governmental

15
auditing, fiscal performance, the full disclosure in the heart of the financial statements, and the

footnotes, and the debt’s structure and management.

Consequently, the interpretation of the identified probabilities and bias can show for future

research how this primary investigation predicts that the expected governments’ choices and bias for

the recommendations of GASB to apply an effective governmental financial reporting model contribute

to the separation of the two groups of governments’ choices into A and B, and present the bias.

I suggest the separation and the bias to be initially identified by the governments’ choices and

the bias to apply the GASB recommendations to present firstly the government accountability office

independent auditors’ report GOVACCO in the reporting by international governments, because of the

noticeable importance of governments to have a high-quality independent auditors’ report to present to

the interested parties like the investors and other interested parties and attract their investments, in

addition to increasing the governments’ culture of accountability, anticorruption actions, and internal

control practices needed to protect the countries. Then I suggest secondly the importance of

governments’ choice and bias to apply the GASB recommendation of reporting the governments’ fiscal

effect accounts and ratios FAR, to attract investors and other interested parties and show them how

fiscally and financially the governments operate, subsequently, governments will be working to operate

in a manner that should show financial strengths rather than weaknesses.

Moreover, because of the importance of presenting the footnotes of the financial statements in

the reports, I suggest thirdly the importance of governments’ choice and bias to apply the GASB

recommendation of reporting the footnotes of the financial statements and the ratios FFSA in the reports

is to apply the GAAP to the governmental reporting and prepare high quality governmental financial

reporting that would attract the investors and other interested parties. Then I finally suggest the

importance of governments’ choice and bias to apply the GASB recommendation of reporting the

governments’ debt’s structure accounts and ratios DSAR to attract investors and other interested parties

and show them how the financial leverage and debts’ position shouldn’t be of high risk, subsequently,

16
governments will be experiencing caution for their debts’ structure in order not to be in a weak financial

position concerning relying heavily on debts and become risky governments.

Differentiating between the unbiased governments’ choices of group A

and the biased governments’ choices of the group B

In Table (3) panel B, I present the results of using MINITAB to run the equation (2) for the

linear discrimination function for the two groups, where the results are displayed for the two groups A

and B, results show the linear discrimination function F for all recommendations of the GASB for

international governments to apply an effective governmental financial reporting model (independents

variables) in descending order for each group. Using visual analysis, it is obvious how the discriminant

functions’ list of unbiased governments’ choices of group A is greater than the biased governments’

choices of group B for some recommendations, and in the meantime, how the discriminant functions’

list of biased governments’ choices of the group B is greater than unbiased governments’ choices of

group A for more recommendations, which initially indicate that the separation of groups A and B is

due to the prediction of equation (2) to suggest the biased and influencing recommendations of GASB

to be applied by international governments to apply an effective governmental financial reporting

model.

As a result, both groups A and B are to be affected significantly by the governments’ choices

to apply an effective governmental financial reporting model. For unbiased governments’ choices of

group A, the recommendations that I suggest to cause the separation of the two groups (in descending

order, and can be reasonably chosen by both groups as fundamentals of financial reporting) are to report

and apply: debt’s structure accounts and ratios DSAR, adequacy of fund balances accounts and ratios,

AFBAR, inflows and outflows accounts and ratios IAOA, liquidity accounts and ratios LARA, fiscal

accounts and ratios FAR, adequacy of revenue accounts and ratios ARAR, spending patterns accounts

and ratios SPAR, and operating accounts and ratios OAR (F = 5.064, 4.845, 4.843, 4.408, 3.976, 3.962,

3.958, 3.734, respectively). All these independent variables (recommendations ) are significant to report

in the governmental financial reports, for more transparency and high-quality reports that help attract

the investors and interested parties, who are focusing on obtaining information regarding the unrisky

17
debt’s position of the governments, governments’ good management for its funds, positive cash balance

for the governments, strong liquidity position of the governments, good financial analysis for the

financial statements, good governmental spending pattern, and good governmental revenues and

operating accounts.

On the other hand, for the biased governments’ choices of group (B), the recommendations that

I suggest to cause the separation of the two groups and show the bias for international governments to

choose GASB recommendations to apply an effective governmental financial reporting model (in a

descending order, and should be chosen by group (B) as fundamentals for high-quality and transparent

financial reporting) are to report and apply: the improvement for displaying unusual and infrequent

items IUNINF, the improvement for budgetary comparison and variances IBCV, Government

Accountability Office independent auditors report GOVACCO, improvement for reporting management

discussion and analysis IMDA, improvement for disclosing financial trends information IFT,

improvement for showing operating income and noncapital subsidies IOINCAP, improvement of

accrual basis of accounting IACCB, improvement for using current and noncurrent activities in the

financial resource IMCARE, improvement for distinguishing between operating and nonoperating

revenues and expense IDONRE, GAAP for valuation GVA, stability of revenues accounts and ratios

SRA, sustainability measures SUSM, common size analysis CSA, and footnotes for financial statements

accounts FFSA (F = 7.080, 7.041, 7.041, 7.039, 7.033, 7.032, 7.030, 7.030, 7.030, 3.924, 3.920, 3.371,

3.359, 2.531 respectively). Thus far, international governments should tend to apply all of these

recommendations by the GASB and be biased for such applications to provide investors and interested

parties with high-quality governmental financial reporting, which helps in making good decisions by

both the international governments and the interested parties regarding applying the GAAP to the

governmental accounting system and governmental financial reporting model, improving the

governmental budgetary process, and reporting sustainability.

For more accurate and reduced results

18
 Moreover, equation (2) for the multiple discriminant analysis and the separation of the two

groups by the influencing 22 independent variables of the GASB recommendations, can be reduced to

help express the most significant recommendations that cause the separation of the two groups and

express my suggested bias to international governments to choose such recommendations to apply an

effective governmental reporting model. Table (4) shows the results from the last step of running the

linear multiple discriminant equation (2), which presents the summary of misclassification observations

for which GASB’s recommendations are to be left after reducing the 22 GASB recommendations and

can cause the separation of the two groups and shows my suggested bias.

Therefore, the most influencing GASB recommendations to put into groups are for

governments to report (choose) fiscal effect accounts and ratios FAR, to report (choose) debt’s structure

accounts and ratios DSAR for the group (A), and to report (choose) footnotes for financial statement

accounts FFSA, to report (choose) Government Accountability Office independent auditors’ report

GOVACCO, and finally, to report (choose) the improvement for budgeting comparison and variances

IBCV for group B (with posterior probabilities equal to 0.168, and 0.078 for the group (A) respectively,

and 0.230, 0.107, and 0.107 for group (B) respectively). In the meantime, all the GASB

recommendations I suggest for the bias should have the least squared distance in the groups compared

to the other recommendations in both groups, which equals (0.481, and 1.936 for the group (A)

respectively, and 0.989, 0.035, 0.035 for group (B) respectively).

Subsequently, the suggested bias I recommend that international governments follow is to apply

an effective governmental financial reporting model that reports fiscal effect accounts and ratios FAR,

debt’s structure accounts and ratios DSAR, footnotes for financial statement accounts FFSA,

Government Accountability Office independent auditors’ report GOVACCO, and the improvement for

budgeting comparison and variances IBCV, which is the common sequence in practice. Keeping in

mind that both recommendations of fiscal effect accounts and ratios FAR and debt’s structure accounts

and ratios DSAR can be a suggested bias too for the biased international governments (group B) to

report the same as the unbiased international governments (group A), where reporting the fiscal effect

accounts and ratios FAR is comprehensive and includes all the required recommendations by GASB

19
shown in table (3) panel B, regarding the governmental financial aspects. The debt’s structure accounts

and ratios DSAR is a significant focus too for biased and unbiased international governments to follow

because of the importance of the debt’s structure to all governments to plan for perfectly to avoid high

risks of failing to cover the debts.

Table (4)

(a) Summary of misclassification observations

Put into group (A) &(B)

(Independent variables) Squared distance Posterior probabilities

Group (A)
FAR 0.481 0.168
DSAR 1.936 0.078
Group (B)
FFSA 0.989 0.230
GOVACCO 0.035 0.107
IBCV 0.035 0.107

(a)
This summary is identified based on the lowest squared distance in the entire classification and the related highest posterior
probabilities in the entire classification.

FAR = fiscal effect accounts and ratios

DSAR = debt’s structure accounts and ratios
FFSA = footnotes for financial statement accounts
GOVACCO = Government Accountability Office independent auditors’ report
IBCV = improvement for budgetary comparison and variances

Moreover, GASB recommendations of footnotes for financial statement accounts FFSA is

significant for international governments to follow to prove that GAAP is applied and followed, and the

high-quality governmental financial reports requirements are met. In addition, following the GASB

recommendations of reporting the Government Accountability Office independent auditors’ report,

GOVACCO proves that international governments are keen to apply strategies for using anticorruption

activities to protect and attract interested parties, and following the GASB recommendation of

improvement for budgeting comparison and variances IBCV proves effective governmental budgetary

control to all interested parties. Therefore, the bias I suggest in this paper for the international

government to apply an effective governmental financial reporting model is based on the following

reduced equation for a linear discriminant analysis that best condenses the equation (2), which also

confirms the results shown in Table (3) panel A, and including in addition the GASB recommendation

20
of improvements for budgeting comparison and variance IBCV in the equation, the equation takes the

following format:

F= FAR + DSAR + FFSAGOVACCO IBCV........ (3)

Equation (3) is applicable to predict the category to which GASB recommendations

(international governments' choice ) belong to the postulated international perspective of effective

governmental financial reporting, and helps predict any new variable to be classified in the same manner

for the suggested bias. To that extent, the hypothesis (H2) can be supported by my suggestions and

recommendations, where there is at least one choice by international governments to apply an effective

governmental financial reporting model and contribute to the discriminant and the bias among

international governments, (H2 is i ≠ 0,,,,,,,, , for at least one i ,,,, where i is the GASB

recommendations for international governments to apply an effective governmental financial reporting

model). Such results and this paper’s insights can contribute to future research as well as to the

governmental accounting regulators, regulatory bodies, and literature.

IV. CONCLUSIONS AND DISCUSSION

International governments are the focus of this paper, where most of them are following their

own rules and regulations to disclose their financial and non-financial information, and other

international governments are following the government finance statistics GFSM set by the

International Monetary Funds IMF. In this paper, I suggest a bias to follow the recommendations of the

Governmental Accounting Standard Board GASB to improve the governmental financial reporting

model to be applied by the international governments, because of the effectiveness of such

improvements to overcome the governmental issues of lack of comparability, inconsistencies, lack of

transparency and accountability, lack of sustainability, unclear future vision for growth, and the

relevance and reliability of governmental accounting information.

In this paper, I present the results in a manner that shows how future research can follow two

models I use to show my suggested bias for the international governments to apply an effective

governmental financial model following the GASB’s recommendations for improving such reporting

21
system, the first model is a gage linearity and bias model, which I used to show that the suggested bias

for international governments to choose the GASB recommendations should be biased and, in average,

at least 169.3% above the reference average, which is the GFSM or other regulations.

The second model is a multiple linear discriminant analysis model, which I suggest based on

its analysis that the international governments’ choices should be biased to report and apply the GASB

recommendations of fiscal effect accounts and ratios FAR, debt’s structure accounts and ratios DSAR,

footnotes for financial statement accounts FFSA, Government Accountability Office independent

auditors’ report GOVACCO, and improvement of budgetary comparison and variances IBCV, because

of their significance compared to the other GASB recommendations and the GFSM or other regulations.

In this paper, my suggested bias can be meaningful for international governments to follow and

apply the recommendations of the GASB, where the likelihood of attracting interested parties and

investors is high and promising. Future research needs to apply the methodology in this paper soon to

investigate empirically the response of the international governments to apply an effective and high-

quality financial reporting model, where governmental regulatory bodies will benefit from empirical

research results to evaluate the international governmental performance and its effect on growing the

international economy and sustainability, particularly, the world is now facing a lot of economic and

political issues that require reform and more transparency, integrity, and accountability.

REFERENCES

Copley, P. 15th ed. 2024. Essential of Accounting for Governmental and Not-for-Profit Organizations. New
York: McGraw Hill.
Elnashar, T. A. 2018 (a). Discriminant Analysis to the Postulated International Perspectives of Governmental
Accounting and Reporting Models. Available at
SSRN: https://ssrn.com/abstract=3290455 or http://dx.doi.org/10.2139/ssrn.3290455
Elnashar, T. A. 2022 (b). The Impact of the Changes in Governmental Accountability on the Change in
Governmental Revenues. Available at
SSRN: https://ssrn.com/abstract=4172766 or http://dx.doi.org/10.2139/ssrn.4172766
Freeman, R.J., Shoulders, C.D., McSwain, D.N., and Scott, R.B. 11th ed. 2021. Governmental and Nonprofit
Accounting: Theory and Practice. New York: Pearson.
Governmental Accounting Standards Board (GASB). 2020. Proposed Statement of the Governmental
Accounting Standards Board: Financial Reporting Model Improvements Available at:
https://www.gasb.org/Page/Document?pdf=EDFinancial_Reporting_Model_Improvements.pdf&ti
tle=GASB%20EXPOSURE%20DRAFT%E2%80%94FINANCIAL%20REPORTING%20MOD
EL%20IMPROVEMENTS
Granof, M.H., Khumawala, S.B., Calabrese, T.D. 9th ed. 2021. Government and Not–for–profit Accounting:
Concepts and Practices. New Jersy: Wiley.

22
International Monetary Fund (IMF). 2019. Government Finance Statistics Manuals and Guides (GFSM 2014).
Available at: https://www.imf.org/external/pubs/ft/gfs/manual/gfs.htm
Governmental and Nonprofit Accounting, 11th edition
am Houston State University

 Robert B. Scott City of Carrollton, Texas
Dwayne N. McSwain Sam Houston State University
 Robert B. Scott City of Carrollton, Texas

APPENDIX

Table (1) A
The international governments' choices of governmental financial reporting models
( Set to heavily biased to the recommendation of GASB compared to IMF)

23
 Governments’ Governments’
Recommendations of GASB to choices choices
apply for reporting (Reference) (Biased)

CSA 137 165

IAOA 141 170
IMCARE 142 180
SRA 147 185
DSAR 147 190
LARA 152 185
IUNINF 153 185
SPAR 154 190
OAR 155 195
IBCV 157 188
IDONRE 158 190
AFBAR 159 180
IFT 160 178
FFSA 161 170
GVA 161 180
IMDA 162 185
SUSM 165 190
IOINCAP 169 195
FAR 173 193
ARAR 174 194
IACCB 175 195
GOVACCO 180 195

CSA = common size analysis

IAOA= inflows and outflows accounts and ratios
IMCARE = improvement for using current and noncurrent activities in the financial resource
SRA = stability of revenues accounts and ratios
DSAR = debt’s structure accounts and ratios
LARA = liquidity accounts and ratios
IUNINF = improvement for displaying unusual and infrequent items
SPAR = spending patterns accounts and ratios
OAR = operating accounts and ratios
IBCV = improvement for budgetary comparison and variances
IDONRE = improvement for distinguishing between operating and nonoperating revenues and expenses
AFBAR = adequacy of fund balances accounts and ratios
IFT = improvement for disclosing financial trends information
FFSA = footnotes for financial statements accounts
GVA = GAAP for valuation
IMDA = improvement for reporting management discussion and analysis
SUSM = sustainability measures
IOINCAP = improvement for showing operating income and noncapital subsidies
FAR = fiscal effect accounts and ratios
ARAR = adequacy of revenue accounts and ratios
IACCB= improvement of accrual basis of accounting
GOVACCO = Government Accountability Office independent auditors’ report

Table (2) A
Choices I set to present the suggested bias of only the top 50 countries to apply the governmental financial
reporting models based on the recommendations of the GASB

24
 CSA = common size analysis
IAOA= inflows and outflows accounts and ratios
IMCARE = improvement for using current and noncurrent activities in the financial resource
SRA = stability of revenues accounts and ratios
DSAR = debt’s structure accounts and ratios
LARA = liquidity accounts and ratios
IUNINF = improvement for displaying unusual and infrequent items
SPAR = spending patterns accounts and ratios
OAR = operating accounts and ratios
IBCV = improvement for budgetary comparison and variances
IDONRE = improvement for distinguishing between operating and nonoperating revenues and expenses
AFBAR = adequacy of fund balances accounts and ratios
IFT = improvement for disclosing financial trends information
FFSA = footnotes for financial statements accounts
GVA = GAAP for valuation
IMDA = improvement for reporting management discussion and analysis
SUSM = sustainability measures
IOINCAP = improvement for showing operating income and noncapital subsidies
FAR = fiscal effect accounts and ratios
ARAR = adequacy of revenue accounts and ratios
IACCB= improvement of accrual basis of accounting
GOVACCO = Government Accountability Office independent auditors’ report

Table (3) A
Total MINITAB results for the bias percentages
with the statistical expression of :

25
 ^≠^or : ^≠^≠

Gage Linearity and Bias for Gov Choices biased (B)

Gage Bias

Reference Bias %Bias P

Average 27.0909 169.3 *
137 28.0000 175.0 *
141 29.0000 181.3 *
142 38.0000 237.5 *
147 40.5000 253.1 *
152 33.0000 206.3 *
153 32.0000 200.0 *
154 36.0000 225.0 *
155 40.0000 250.0 *
157 31.0000 193.8 *
158 32.0000 200.0 *
159 21.0000 131.3 *
160 18.0000 112.5 *
161 14.0000 87.5 *
162 23.0000 143.8 *
165 25.0000 156.3 *
169 26.0000 162.5 *
173 20.0000 125.0 *
174 20.0000 125.0 *
175 20.0000 125.0 *
180 15.0000 93.8 *

26