Government

September 1, 2013

  GASB proposed a two-approach system to guide standard setting for measuring assets and liabilities of state and local governments. The board also issued its preliminary views regarding the measurement of fair value and the application of fair value, including note disclosures.

The two-approach system is described in the proposed concepts statement Measurement of Elements of Financial Statements, available at tinyurl.com/kexxdyx. Initial amounts and remeasured amounts form the two approaches described in the proposal.

Initial amounts are determined when an asset is acquired or a liability is incurred. Remeasured amounts are determined anew as of the date of each year’s financial statements. GASB also is proposing four measurement attributes or characteristics of assets or liabilities that are being measured:

  • Historical cost is the price paid to acquire an asset or the amount received when a liability is incurred in a transaction.
  • Fair value is the price that would be received to sell an asset or paid to transfer a liability at the measurement date.
  • Replacement cost is the price that would be paid to acquire an asset with equivalent service potential at the measurement date.
  • Settlement amount is the amount at which an asset could be realized or a liability could be liquidated with the counterparty, other than in an active market.


The Fair Value Measurement and Application preliminary views document, available at tinyurl.com/mh43eaa, describes:

  • How fair value should be defined and measured.
  • What assets and liabilities should be measured at fair value.
  • What information about fair value should be disclosed in the notes to the financial statements.


Stakeholders can visit gasb.org to comment on the proposals through Sept. 30.


  GASB issued a proposal that is designed to eliminate a potential source of understatement during a state or local government’s transition to the board’s new pension standard.

Under the current transition provisions, a GASB news release states, there is potential for understatement of restated beginning net position and expense during the first year that a state or local government implements GASB Statement No. 68, Accounting and Financial Reporting for Pensions.

GASB’s proposed statement, available at tinyurl.com/k2qw53o, would require, during transition, recognition of a beginning deferred outflow of resources for a state or local government’s pension contributions made between the measurement date of the beginning net pension liability and the beginning of the initial fiscal year of implementation.

The provisions would take effect simultaneously with Statement No. 68, which is required to be applied in fiscal years beginning after June 15, 2014. Comments on the proposal were due Aug. 26.


  GASB’s standard regarding the impairment of capital assets and insurance recoveries will be the subject of a Financial Accounting Foundation (FAF) post-implementation review.

A FAF team will review GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, according to a FAF news release. The standard provides measurement guidance for capital asset impairments.

State and local governments are required by the standard to report impairments when they occur. Before GASB No. 42 was issued in 2003, some state and local governments reported impairments as part of the ongoing depreciation expense for the capital asset, or upon disposal of the asset. GASB No. 42 also provides uniform reporting guidance for insurance recoveries of state and local governments.

Stakeholders who would like to participate in surveys on the standard can register at tinyurl.com/c467dkj.

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