A Financial Accounting Foundation (FAF) review has affirmed the effectiveness of GASB standards established to improve state and local government financial reporting for deposit and investment risk, and repurchase and reverse repurchase agreements.
FAF announced Thursday the results of the post-implementation review of two GASB statements. The FAF team reviewed:
- GASB Statement No. 3, Deposits With Financial Institutions, Investments (Including Repurchase Agreements), and Reverse Repurchase Agreements.
- GASB Statement No. 40, Deposit and Investment Risk Disclosures.
Both statements require note disclosures about deposit and investment risk. Statement No. 3 also provides guidance for reporting of repurchase and reverse repurchase agreements.
After receiving input from creditors, analysts, citizen and taxpayer groups, preparers, auditors, and academics, the review team concluded that:
- The statements generally meet the needs of stakeholders.
- Governments are providing decision-useful information about deposit and investment risks to financial statement users.
- In general, the statements can be understood and applied as intended, and result in reliable deposit and investment risk information.
- The statements did not significantly change financial reporting or operating principles and did not have significant economic consequences.
- The costs and benefits associated with the statements’ requirements are consistent with the board’s and stakeholders’ expectations.
Some stakeholders said the deposit and investment risk disclosures were inadequate during the period leading up to the recent financial crisis. But there was “disagreement on whether compliance with, or the requirements of, the statements was responsible,” FAF said in the report.
GASB Chairman Robert Attmore said in a news release that GASB will review the findings and provide a response in coming weeks.
This was the first post-implementation review conducted on GASB standards. A review of GASB statements No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, and No. 30, Risk Financing Omnibus—an Amendment of GASB Statement No. 10, is beginning.
These standards govern reporting of risk financing and insurance-related activities of state and local governments, including public risk pools. Those interested in participating in surveys on the standards can register at the FAF website.
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.