New GASB standard addresses government combinations and disposals

GASB on Tuesday approved a standard geared toward the specific needs of state and local governments’ financial reporting of mergers, acquisitions, transfers of operations, and disposals of government operations.

“Historically, governments have accounted for their mergers and acquisitions by analogizing to guidance intended for the private-sector business environment, which proved problematic because those standards focus on stock arrangements and ownership interests not present in a governmental setting,” GASB Chairman Robert Attmore said in a news release.

GASB Statement No. 69, Government Combinations and Disposals of Government Operations, provides guidance for:

• Determining whether a combination is a merger, acquisition, or transfer of operations.
• Using carrying values to measure the assets, deferred outflows of resources, liabilities, and deferred inflows of resources combined in a government merger or transfer of operations.
• Measuring acquired assets, liabilities, deferred outflows of resources, and deferred inflows of resources based on their acquisition values in a government acquisition.
• Reporting the disposal of government operations that have been transferred or sold.

A substantial majority of the 28 comment letters GASB received on the exposure draft in the project expressed at least general agreement with the proposed standard. A few commenters said the government-specific guidance was welcome at a time when many governments are using combinations, mergers, and disposals to reduce costs.

Statement No. 69 will be available for download on the GASB website in February. A description of the new requirements also will be available on the GASB website.

The standard takes effect for periods beginning after Dec. 15, 2013, and should be applied on a prospective basis. GASB encourages early application.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.