GASB Clarifies Accounting for Partnership Arrangements

GASB issued a pair of new standards last week, one that addresses how to account for and report service concession arrangements (SCAs) and another that the board said is designed to improve financial reporting for governmental entities by amending the requirements of Statement no. 14 and Statement no. 34.


Statement no. 60, Accounting and Financial Reporting for Service Concession Arrangements , addresses how to account for and report SCAs, which are a type of public-private or public-public partnership that GASB said state and local governments are increasingly entering into.

GASB said in its press release that common examples of SCAs include long-term arrangements in which a government (the “transferor”) engages a company or another government (the “operator”) to operate a major capital asset—such as toll roads, hospitals and student housing—in return for the right to collect fees from users of the capital asset. In SCAs, the operator generally makes a large upfront payment to the transferor. Alternatively, the operator may build a new capital asset for the transferor and operate it on the transferor’s behalf.

Statement no. 60 provides guidance on whether the transferor or the operator should report the capital asset in its financial statements, when to recognize upfront payments from an operator as revenue, and how to record any obligations of the transferor to the operator. The statement also provides guidance for governments that are operators in an SCA.

The board said Statement no. 61, The Financial Reporting Entity: Omnibus, is designed to improve financial reporting for governmental entities by amending the requirements of Statement no. 14, The Financial Reporting Entity, and Statement no. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. The board said in a press release that the new standard will meet user needs better and address reporting entity issues that have come to light since those statements were issued in 1991 and 1999, respectively.

The board said Statement no. 61 will improve the information presented about the financial reporting entity, which is comprised of a primary government and related entities (component units). The board also said amendments to the criteria for including component units allow users of financial statements to better assess the accountability of elected officials of the primary government by ensuring that the financial reporting entity includes only organizations for which the elected officials are financially accountable or that the government determines would be misleading to exclude.

Statement no. 60 is effective for financial statements for periods beginning after Dec. 15, 2011. In general, its provisions are required to be applied retroactively for all periods presented. Statement no. 61 is effective for financial statements for periods beginning after June 15, 2012. Earlier application is encouraged. More information on each standard is available at .


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