GASB provides a definition of fair value and describes how it should be measured in new accounting and financial reporting guidance for state and local governments.

Under GASB Statement No. 72, Fair Value Measurement and Application, fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

The statement, available at, also describes which assets and liabilities should be measured at fair value and what information about fair value should be disclosed in the financial statements. The guidance defines investments—which generally are measured at fair value—as securities or other assets that governments hold primarily for the purpose of income or profit and the present service capacity of which are based solely on their ability to generate cash or to be sold to generate cash.

State and local governments previously have been required to disclose how they arrived at their measures of fair value, if their measurement was not based on quoted market prices. Statement No. 72 expands those disclosures to categorize fair values according to their relative reliability and to describe positions held in many alternative investments.


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