Press Release

In an effort to provide the public with better information about the risks that could potentially impact a government’s ability to provide services and pay its debts, the Governmental Accounting Standards Board (GASB) has published Statement No. 40, Deposit and Investment Risk Disclosures, an amendment of GASB Statement No. 3. The Statement amends GASB Statement No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements and addresses additional risks to which governments are exposed.

According to GASB Project Manager Randal J. Finden, “All deposits and investments can be exposed to risk. Under the GASB standard, we looked at the most common risks, that is, the risks that have been the cause of depository and investment losses in the past. This Statement requires disclosures to communicate those risks in what we believe is an easily understandable manner.”

The new accounting guidance requires that state and local governments communicate key information about deposit and investment risks, frequently one of the largest assets on a government’s balance sheet. Under Statement 40, state and local governments are required to disclose information covering four principal areas:

• Investment credit risk disclosures, including credit quality information issued by rating agencies;

• Interest rate disclosures that include investment maturity information, such as weighted average maturities or specification identification of the securities;

• Interest rate sensitivity for investments that are highly sensitive to changes in interest rates (example, inverse floaters, enhanced variable-rate investments and certain asset-backed securities); and

• Foreign exchange exposures that would indicate the foreign investment’s denomination.

The provisions of Statement 40 are effective for financial statements for periods beginning after June 15, 2004. Earlier application is encouraged.

Statement 40 (Product Code No. GS40) can be ordered through the GASB’s Order Department at 800 748-0659 or on-line via its website at www.gasb.org.