For many state and local government finance professionals, the arrival of a new Governmental Accounting Standards Board (GASB) statement often signals months of additional work, extensive analysis, and increased pressure during audit season. But what if some of that work isn’t actually necessary?

A newly released white paper, GASB Statement Implementation and Materiality Considerations, argues that many governments can significantly reduce the time and effort associated with implementing GASB standards by more effectively applying one of accounting’s most fundamental concepts: materiality.

Developed by CalCPA, the California Society of Municipal Finance Officers (CSMFO), the Government Finance Officers Association (GFOA), the League of California Cities and finance professionals from local governments across the country, the white paper provides a practical framework for evaluating new accounting standards while focusing resources where they matter most, as well as shows how materiality decisions, such as adjusting capitalization thresholds, can improve efficiency without sacrificing audit or reporting quality.

A Call to Focus on What Matters

The central premise of the report is straightforward: governments may be spending valuable staff time evaluating, reporting and disclosing items that have little or no impact on financial statement users.

The authors note that GASB has long included a “materiality box” in many of its standards, including major pronouncements such as GASB Statement No. 87 (Leases) and GASB Statement No. 96 (Subscription-Based Information Technology Arrangements, or SBITAs). The guidance states that provisions of a statement need not be applied to immaterial items.

Yet many governments either underutilize or overlook this provision altogether.

According to the white paper, failing to apply materiality consistently can result in unnecessary work, more complicated financial reports and increased strain on already limited resources. Instead, governments should evaluate whether information is truly significant enough to influence the decisions of financial statement users before dedicating extensive effort to implementation.

Materiality Is More Than a Number

One of the report’s key findings is that materiality should never be viewed solely through a quantitative lens.

The authors emphasize that materiality is both quantitative and qualitative. While governments often establish thresholds based on percentages of assets, revenues or fund balances, other considerations are equally important. Factors such as legal compliance, fraud risk, political sensitivity and stakeholder interest can all make an item material regardless of its dollar value.

The white paper encourages governments to establish formal materiality thresholds and to document the rationale behind those decisions. Just as capitalization thresholds are commonly used to determine whether assets should be capitalized, agencies can develop similar approaches for evaluating leases, SBITAs, compensated absences and other accounting requirements.

The result is a more disciplined and efficient implementation process that remains compliant while avoiding unnecessary work.

Why Management Must Lead the Evaluation

Another important message throughout the report is that responsibility for implementing accounting standards belongs to management—not auditors.

The authors caution governments against waiting for auditors to determine the impact of a new GASB statement. Instead, finance teams should evaluate standards early, often one to three years before the effective date, develop their own conclusions and then engage auditors in informed discussions.

This approach offers several advantages, including reducing the risk of late audit adjustments; improving communication with auditors; demonstrating organizational competence; providing more time to gather data and resources; and supporting smoother implementation and compliance.

The report stresses that auditors validate management’s conclusions; they do not make those decisions on management’s behalf.

The Newport Beach Case Study: Materiality in Action

One of the most compelling sections of the white paper examines how the City of Newport Beach applied materiality concepts to its lease portfolio under GASB 87.

The city maintained 141 leases with a combined value of approximately $268 million. Upon analyzing the portfolio, officials discovered a classic Pareto distribution: just 46 leases valued at more than $1 million accounted for more than 90 percent of the total lease value.

By evaluating lease concentrations and working closely with auditors, Newport Beach determined that adopting a $200,000 threshold would allow the city to eliminate monitoring requirements for 51 leases while still capturing the majority of lease value.

The result? An estimated savings of 40 to 50 staff hours during year-end close without compromising the integrity of the financial statements. And that’s time that can be redirected toward higher-value work.

The case study demonstrates how thoughtful materiality analysis can produce meaningful operational efficiencies while maintaining transparency and audit quality.

Training and Documentation Are Essential

The report repeatedly underscores the importance of training, calling it a critical internal control rather than an optional activity.

Whether a government is large or small, staff must understand new standards well enough to evaluate applicability, document decisions and defend conclusions. The white paper points readers to resources available through GFOA, GASB, CalCPA, AICPA, state finance associations and peer networks.

Documentation is equally important. Even when a government concludes that a statement has no material impact, the analysis and reasoning should be documented. According to the authors, a statement is considered implemented once it has been evaluated and appropriately applied—even if the conclusion is that no financial statement changes are required.

A Practical Roadmap for Future Implementations

Beyond theory, the white paper includes a detailed implementation checklist, communication guidance for elected officials and leadership teams, practical FAQs, and additional resources for developing sustainable implementation processes.

Ultimately, the report challenges government finance professionals to rethink how they approach new accounting standards. Rather than treating every requirement as equally significant, the authors encourage agencies to focus on decision-useful information and leverage materiality as a tool for efficiency.