GASB issued Statement no. 53, Accounting and Financial Reporting for Derivative Instruments, for periods beginning after June 15, 2009, (early application is encouraged). Statement no. 53 gives financial statement users information to evaluate the inherent risks that derivative instruments can potentially pose to the financial health of governments, and to obtain a better understanding of the nature of these transactions, including how their value and cash flows change over time.

Derivative instruments can help state and local governments manage their exposure to economic risks, lowering borrowing costs, and generating income. They also may expose a government to significant risks and require special expertise and ongoing monitoring.

Statement no. 53 requires governments to measure most derivative instruments at fair value as assets or liabilities in their accrual-based governmentwide, proprietary fund, and fiduciary fund financial statements (but not in the governmental fund financial statements). Derivative instruments must be reported on the face of the financial statements of state and local governments, making these arrangements more consistent and transparent for users of governmental financial statements.

Statement no. 53 also improves disclosures, providing a summary of the government’s derivative instrument activity, its objectives for entering into derivative instruments, and their significant terms and risks.

More information about Statement no. 53—including a question-and-answer document, fact sheet, and plain language article—is available at


©2008 AICPA


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