GASB issued two statements Wednesday that the board said provide taxpayers and others with information about how past transactions will impact a government’s financial statements in the future and clarify the circumstances in which hedge accounting continues to be applied when a swap counterparty, or related credit support provider, is replaced.
The new standards include Statement no. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position , and Statement no. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions (an amendment of GASB Statement no. 53).
board said Statement no. 63 provides users of state and local
government financial reports with information about how past
transactions will continue to impact a government’s financial
statements in the future. The statement provides a new statement of
net position format to report all assets, deferred outflows of
resources, liabilities, deferred inflows of resources, and net
position (which is the net residual amount of the other elements).
It requires that deferred outflows of resources and deferred inflows
of resources be reported separately from assets and liabilities.
Statement no. 63 also amends certain provisions of Statement no. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments , and related pronouncements to reflect the residual measure in the statement of financial position as net position, rather than net assets.
The board said Statement no. 64 clarifies the circumstances in which hedge accounting continues to be applied when a swap counterparty, or a swap counterparty’s credit support provider, is replaced.
Statement no. 64 clarifies that, when certain conditions are met, the use of hedge accounting should not be terminated. Those conditions are: (1) The collectability of swap payments is considered to be probable, (2) the replacement of the counterparty or credit support provider meets the criteria of an assignment or in-substance assignment as described in the statement, and (3) the counterparty or counterparty credit support provider (and not the government) has committed the act of default or termination event. When all of these conditions exist, GASB believes that the hedging relationship continues and hedge accounting should continue to be applied.
Statement no. 63 is effective for financial statements for periods beginning after Dec. 15, 2011. Statement no. 64 is effective for periods beginning after June 15, 2011. The board encourages early application of both standards.