GASB proposes changes to irrevocable split-interest agreement guidance

By Ken Tysiac

GASB proposed changes Friday that are designed to reduce diversity in state and local government accounting for irrevocable split-interest agreements.

In such agreements, a donor transfers assets for the shared benefit of at least two beneficiaries, which often are:

  • A government (such as a public college or university or public health care provider).
  • Another beneficiary designated by the donor.

The donor transfers the assets to either the government or to a separate third party, such as a bank.

GASB is proposing new recognition and measurement guidance in the exposure draft, Accounting and Financial Reporting for Irrevocable Split-Interest Agreements. The proposal addresses when these types of arrangements constitute an asset for accounting and financial reporting purposes when a third party administers the resources.

In addition, the proposal seeks feedback on expanded guidance for such agreements in which the assets are held by the government.

“Irrevocable split-interest agreements can represent a meaningful source of resources for public colleges, universities, and hospitals,” GASB Chairman David Vaudt said in a news release. “The board believes that the proposed guidance will lead to more consistent accounting for these arrangements, which will make the information users have access to more comparable.”

Under the proposal, a government that receives resources under an irrevocable split-interest agreement would be required to recognize:

  • The assets;
  • A liability related to the other designated beneficiary’s portion of those assets; and
  • A deferred inflow of resources related to the government’s portion of those assets.

When a third party administers the agreement, the proposal would require a government to recognize an asset for its beneficial interest. Revenue would be recognized when a government receives a disbursement under the agreement.

Public comment is due Sept. 18 and can be submitted by email to director@gasb.org.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.

SPONSORED REPORT

How to make the most of a negotiation

Negotiators are made, not born. In this sponsored report, we cover strategies and tactics to help you head into 2017 ready to take on business deals, salary discussions and more.

VIDEO

Will the Affordable Care Act be repealed?

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.

QUIZ

News quiz: Scam email plagues tax professionals—again

Even as the IRS reported on success in reducing tax return identity theft in the 2016 season, the Service also warned tax professionals about yet another email phishing scam. See how much you know about recent news with this short quiz.