Academic journal article Journal of Accountancy

Fair Value for Governments

Academic journal article Journal of Accountancy

Fair Value for Governments

Article excerpt

The Governmental Accounting Standards Board issued a standard requiring governments to report their investments at fair value in their annual financial statements. Statement no. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, applies to all investments held by government external investment pools. Such pools--usually sponsored by one government--invest the funds of other participating governments.

Fair value is the amount, such as the current price of a five-year U.S. treasury bond, at which an investment could be exchanged between two willing parties. Randy Finden, GASB project manager, said the GASB believed fair value was the best measure of the resources available to finance operations. "Fair value provides financial statement users with information that can help them assess the government's accountability, the level of services it can provide and its financial position and condition," said Finden. "These are all the objectives of financial reporting."

For governments that are not sponsoring external investment pools, Statement no. 31 establishes fair value standards for investments in

* Participating interest-earning investment contracts. …

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