GASB Issues Deriviative Disclosure Improvement Bulletin

GASB Press Release

In an effort to improve disclosures about the risks associated with derivative contracts, the Governmental Accounting Standards Board (GASB) has released for public comment accounting guidance that would provide more consistent reporting by state and local governments. The proposed Technical Bulletin, Disclosure Requirements for Derivatives Not Presented at Fair Value on the Statement of Net Assets, is designed to increase the public’s understanding of the significance of derivatives to a government’s net assets and would provide key information about the potential effects on future cash flows.

While state and local governments use a vast array of increasingly complex derivative instruments to manage debt and investments, they also may be assuming significant risks. Governments must communicate those risks to financial statement users and the proposed Technical Bulletin would help clarify existing accounting guidance so that more consistent disclosures can be made across all governments.

In commenting on why the GASB believes this issue is so important, GASB Project Manager, Randal J. Finden, remarked, “The market for derivative instruments has recently exploded for state and local governments as current financing needs have changed in connection with a more constrained budgetary environment. Some derivative contracts may pose substantial risks, and we want to help governments better disclose those risks in their financial statements.”

Governments would be required to disclose the derivative’s objective, its terms, fair value and risks. The proposed accounting guidance would require governments to disclose in their financial statements credit risk, interest rate risk, basis risk, termination risk, rollover risk and market access risk.

This Technical Bulletin would be effective for periods ending after June 15, 2003. The proposed Technical Bulletin is available from the GASB’s website. Comments on the proposed documents may be made through May 16, 2003.

You may like these other stories...

Credit Suisse says pension assets at risk unless court delays sentencingJohn Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for...
The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...
House proposes $10.5B, eight-month highway billThe House Ways and Means Committee proposed a transportation funding bill on Tuesday that calls for a temporary extension of current transportation funding levels until May 31,...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.