GASB issues proposal requiring disclosure of certain governmental risks

By Bryan Strickland

GASB issued a proposal on Thursday that would require governments to disclose information about certain risks they face that could affect their level of services or their ability to meet obligations as they come due.

The exposure draft of "Certain Risk Disclosures" is available for stakeholder comment through Sept. 30, 2022. Comments can be made through an electronic input form or in writing.

The proposal would require the disclosure of information that, according to GASB, would provide financial statement users with an early warning that state and local governments are susceptible to the financial effects of certain risks that aren't always currently disclosed.

It would require governments to disclose essential information about risks related to "certain concentrations" and to "certain constraints common in the governmental environment."

The proposal defines "concentration" as "a lack of sufficient diversity related to an aspect of a significant revenue source or expense — for example, a small number of companies that represent most of the employment in a government's jurisdiction, or a government that relies on one revenue source for most of its revenue.

It defines a "constraint" as a limitation imposed on a government by an external party or by formal action of the government's highest level of decision-making authority — such as a voter-approved property tax cap or a state-imposed debt limit.

Concentrations and constraints may limit a government's ability to acquire resources or control spending.

The proposal would require a government to disclose information about a concentration or constraint if all the following criteria are met:

  • It is known to the government prior to issuing the financial statements.
  • An associated event either has occurred or is more likely than not to occur or begin to occur within 12 months of the financial statement date or shortly thereafter.
  • It is at least reasonably possible that within three years of the financial statement date the event will cause a substantial effect on the government's ability to (1) continue to provide services at the level provided in the current reporting period or (2) to meet its obligations as they come due.

If a government determines the criteria have been met, it would disclose information in notes to financial statements, providing detail that would allow users of financial statements to understand the general nature of the circumstances disclosed and their potential effect on the government's ability to provide services or meet its obligations.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at

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