What is the preferred format for the government-wide statement of net assets?

The preferred format for the government-wide statement of net assets is the net assets approach. This approach distinguishes between three components of net assets: invested in capital assets, net of related debt; restricted; and unrestricted. This classification provides a clearer picture of the government's overall financial position and its ability to meet future obligations, as it separates resources that are bound by restrictions from those that are freely available for spending.

Using the net assets approach allows for better focus on the resources available to the government and emphasizes the importance of capital assets, which are pivotal for providing services and fulfilling governmental functions. This format is consistent with generally accepted accounting principles (GAAP) for government entities, ensuring transparency and comparability across different governmental units.

The balance sheet approach does not provide the same level of transparency regarding the restrictions on net assets, nor does it emphasize the different roles of various asset categories in the provision of governmental services. Therefore, opting for the net assets approach is fundamental in governmental accounting practices.