State and local governments will be required to present direct borrowings and direct placements of debt separately from other types of debt in their financial statement note disclosures under a new standard issued by GASB.
GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, clarifies which liabilities governments should include in their note disclosures related to debt. GASB is requiring direct borrowings and direct placements to be presented separately because they may expose a government to risks that are different from, or additional to, risks related to other types of debt.
The new standard also requires the disclosure of additional essential debt-related information for all types of debt, including amounts of unused lines of credit and assets pledged as collateral for debt. Also required to be disclosed are terms specified in debt agreements related to:
- Significant events of default with finance-related consequences.
- Significant termination events with finance-related consequences.
- Significant subjective acceleration clauses.
The requirements take effect for reporting periods beginning after June 15, 2018, and GASB encourages earlier application.