GASB No. 52: Statement No. 52 of the Governmental Accounting Standards Board-Land and Other Real Estate Held as Investments by Endowments

Article excerpt

SUMMARY

Accounting standards previously required permanent and term endowments, including permanent funds, to report land and other real estate held as investments at their historical cost. Endowments exist to invest resources for the purpose of generating income. Other entities that exist for similar purposes--pension and other postemployment benefit plans, external investment pools, and Internal Revenue Code Section 457 deferred compensation plans--however, report land and other real estate held as investments at their fair value.

This Statement establishes consistent standards for the reporting of land and other real estate held as investments by essentially similar entities. It requires endowments to report their land and other real estate investments at fair value. Governments also are required to report the changes in fair value as investment income and to disclose the methods and significant assumptions employed to determine fair value, and other information that they currently present for other investments reported at fair value.

How This Statement Will Improve Financial Reporting

This Statement more appropriately reports the resources available in endowments and more closely aligns financial reporting with the objectives of endowments. It results in property held for similar purposes by comparable entities being reported in the same manner. Reporting land and other real estate held as investments at fair value enhances users' ability to meaningfully evaluate an entity's investment decisions and performance.

Unless otherwise specified, pronouncements of the GASB apply to financial reports of all state and local governmental entities, including general purpose governments; public benefit corporations and authorities; public employee retirement systems; and public utilities, hospitals and other healthcare providers, and colleges and universities. Paragraph 2 discusses the applicability of this Statement.

CONTENTS

Introduction/1
Standards of Governmental Accounting and
Financial Reporting/2-5
  Scope and Applicability/2-3
  Land and Other Real Estate Held as
  Investments by Endowments/4-5
Effective Date and Transition/6
Appendix A: Background Information/7-9
Appendix B: Basis for Conclusions/10-21
Appendix C: Codification Instructions/22

INTRODUCTION

1. Endowments were previously required to report their land and other real estate held for investment purposes at historical cost. However, such investments are reported at-fair value by similar entities, such as pension plans. Questions have arisen regarding the appropriateness of this difference in the accounting standards. The objective of this Statement is to enhance the comparability and usefulness of financial reporting by endowments by establishing a common approach to reporting land and other real estate held as investments.

STANDARDS OF GOVERNMENTAL ACCOUNTING AND FINANCIAL REPORTING

Scope and Applicability

2. This Statement establishes standards for accounting and financial reporting for land and other real estate held as investments by endowments. …