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).
The
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.
