The Governmental Accounting Standards Board (GASB) has approved a new standard intended to improve accounting and financial reporting for US state and local governments' combinations and disposals of government operations. Government combinations include mergers, acquisitions, and transfers of operations. A disposal of government operations can occur through a transfer to another government or a sale.
Government mergers include combinations of legally separate governments or governmental operations without the exchange of significant consideration (such as a payment). Government acquisitions are transactions in which a government acquires another government, or its operations, in exchange for significant consideration. Disposal of a government's operations results in the removal of specific activities of that government.
GASB Statement No. 69, Government Combinations and Disposals of Government Operations, provides guidance for:
- Determining whether a specific government combination is a government merger, a government acquisition, or a transfer of operations.
- Using carrying values (generally, the amounts recognized in the pre-combination financial statements of the combining governments or operations) to measure the assets, deferred outflows of resources, liabilities, and deferred inflows of resources combined in a government merger or transfer of operations.
- Measuring acquired assets, deferred outflows of resources, liabilities, and deferred inflows of resources based on their acquisition values in a government acquisition.
- Reporting the disposal of government operations that have been transferred or sold.
"This Statement will improve accounting for mergers and acquisitions among state and local governments by providing guidance specific to the situations and circumstances encountered within the governmental environment," said GASB Chairman Robert H. Attmore. "Historically, governments have accounted for their mergers and acquisitions by analogizing to guidance intended for the private-sector business environment, which proved problematic because those standards focus on stock arrangements and ownership interests not present in the governmental setting."
The requirements of this Statement are effective for periods beginning after December 15, 2013, and should be applied on a prospective basis. Early application of the standard is encouraged.
Statement 69 will be available for download at no cost from the GASB website
in February. Printed copies of the Statement will be available for distribution soon thereafter. A plain-language description of the new requirements also will be available on the GASB website.
Source: January 8, 2013, GASB Press Release