The GASB has been observing that the elected officials of some governments are having trouble grasping the concept of deferrals and why they are starting to pop up in financial statements. You will be acting as the finance officer of a county government whose board of supervisors has been expressing its confusion about deferrals. They don't understand what deferrals are, where they came from, and what their impact will be on the county's financial health as reported in its CAFR. Some of the supervisors, in their confusion, want to know why the county should have to follow these standards and are threatening to pass an ordinance prohibiting the county from reporting deferrals. To address their concerns, develop a memorandum to the supervisors. The memorandum will begin with a background section. The next section will explain what deferred outflows of resources and deferred inflows of resources are. The third section will explain why the county has begun to report deferrals. The fourth section will describe what is required by Statements 63 and 65 and how it differs from what the county currently is doing. The last section will be a conclusion. This section will present your opinion of the requirements of GASB Statements 63 and 65. If you agree with them, explain why.

a) Focus on the background section of the memorandum. Explain that you have been asked by the board of supervisors to write a memorandum and why. Briefly preview what the memo will cover and why it is important to the supervisors.