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GASB Aims to Improve Reporting for Irrevocable Split-Interest Agreements

Jun 16th 2015
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The Governmental Accounting Standards Board (GASB) on June 12 proposed changes to recognition and measurement guidance for state and local governments that benefit from irrevocable split-interest agreements.

According to the GASB, split-interest agreements are a specific type of giving arrangement used by donors to provide resources to two or more beneficiaries, including state and local government entities, such as public colleges, universities, and hospitals. The donor transfers the assets to either the government or to a separate third party, such as a bank.

Examples of such arrangements include charitable lead trusts, charitable remainder trusts, charitable annuity gifts, and life-interests in real estate.

The proposal addresses when these types of arrangements constitute an asset for accounting and financial reporting purposes in cases where the resources are administered by a third party, according to the exposure draft, Accounting and Financial Reporting for Irrevocable Split-Interest Agreements.

In addition, the proposal also seeks input on expanded guidance for irrevocable split-interest agreements in which the government holds the assets.

“The board believes that the proposed guidance will lead to more consistent accounting for these arrangements, which will make the information users have access to more comparable,” GASB Chairman David Vaudt said in a written statement.

The new guidance would require a government that receives resources under an irrevocable split-interest agreement to recognize the following:

  • Assets
  • A liability related to the other designated beneficiary’s portion of those assets
  • A deferred inflow of resources related to the government’s portion of those assets

Also, a government would be obligated to recognize as assets beneficial interest in such agreements that are administered by a third party, if those beneficial interests are under the control of the government and embody present service capacity, according to the GASB.

Revenue would be recognized when a government receives a disbursement under the agreement.

Written comments on the proposal should be emailed to [email protected] by Sept. 18.

If approved by the GASB, the new requirements would be effective for financial statements for periods beginning after Dec. 15, 2016, and would be applied retrospectively. Earlier application would be permitted.


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