Impact financial statements, financial impact statements, or fiscal impact statements are documents prepared to analyze and summarize the financial impact of an event or decision. They are prepared not only by corporations, but by governments contemplating the foreseeable financial effects of a policy decision.
Financial statements called for by the Generally Accepted Accounting Principles can include balance sheets, which summarize a business’s current financial position; profit and loss, or income, statements, which report the income and outgo over a specified period of time; retained earnings statements, which calculate changes to the business‘s retained earnings (the amount of income kept by the corporation instead of being paid out in dividends); and cash flow statements. Federal governmental financial statements are governed by the 1990 Chief Financial Officers Act, part of an effort to reform federal fiscal management, and the Federal Accounting Standards Advisory Board.
Impact financial statements focus this information specifically on the consequences of a determination that needs to be made by the organization. There may be some speculative element involved, such as if a corporation is considering a reduced price for its product in anticipation of an increase in demand and total profits.
Fiscal impact statements are especially associated with government ballot measures. Such statements estimate the cost to a state or municipal treasury of implementing a proposed measure; interested voters and other parties can then have a sense of the effect on their taxes or other government spending areas of this measure. Depending on the measure, this can of course be a highly politicized matter. Some states have adopted formal procedures for the preparation of impact statements related to ballot initiatives. Alaska requires that simplified impact statements be included in initiative petitions, so that those petitioning to get a measure included on the ballot have been informed of the cost. The attorneys general of California and Montana evaluate each proposed measure to determine if it will have a fiscal impact; if it does, they order an analysis prepared by a state government body. In California’s case, this is the executive branch’s Department of Finance and the legislature’s Joint Legislative Budget Committee. Montana gives the matter to the state budget director, who works in conjunction with the state agencies affected by the ballot measure.
Florida has a state commission, the Financial Impact Estimating Conference, that produces impact statements within 45 days of a measure’s final revision, submitting the statements to the attorney general and secretary of state. The conference includes a member from the governor’s office and representatives from the Senate, House of Representatives, and the Office of Economic and Demographic Research. Meetings are open to the public.
- James Bandler, How To Use Financial Statements (McGraw-Hill, 1994);
- Thomas R. Ittelson, Financial Statements (Career Press, 1998).
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