Magazine article Government Finance Review

New GASB Guidance on Deferred Items and Risk Financing

Magazine article Government Finance Review

New GASB Guidance on Deferred Items and Risk Financing

Article excerpt

In March 2012, the Governmental Accounting Standards Board (GASB) issued two new statements. GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, identifies a number of specific items that in the future will need to be reported separately from assets and liabilities on the statement of net position. It also identifies several items currently reported as assets or liabilities that henceforth will need to be treated instead as outflows or inflows of resources. GASB Statement No. 66, Technical Corrections--2012, resolves several discrepancies in existing standards. In doing so, it most notably modifies existing guidance on the appropriate fund type for risk financing activities.

RECLASSIFYING CERTAIN "ASSETS" AND "LIABILITIES"

GASB Concepts Statement No. 4, Elements of Financial Statements, identified seven basic financial statement elements:

* Assets;

* Liabilities;

* Deferred outflows of resources;

* Deferred inflows of resources;

* Net position;

* Inflows of resources; and

* Outflows of resources.

Two of these elements, deferred outflows of resources and deferred inflows of resources, are new and were intended to comprise items that until now have been reported as assets and liabilities. Consequently, the GASB envisioned that governments would reclassify some "assets" as deferred outflows of resources and some "liabilities" as deferred inflows of resources. At the same time, the GASB reserved to itself the determination of which specific items should be so reclassified.

In GASB Statement No. 65, the GASB:

* Identifies which specific "assets" should be reclassified as deferred outflows of resources and which specific "liabilities" should be reclassified as deferred inflows of resources;

* Identifies a few items currently reported as "assets" that should instead be reported as outflows of resources (expense/expenditure), and a few items currently reported as "liabilities" that should instead be reported as inflows of resources (revenues); and

* Directs that the term deferred be used exclusively in connection with deferred outflows of resources and deferred inflows of resources.

One highly visible change resulting from GASB Statement No. …

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