The Governmental Accounting Standards Board has released Statement No. 46, Net Assets Restricted by Enabling Legislation, an amendment to its Statement No. 34.Statement 46 was drafted to help government entities determine when net assets have been restricted by the passage of enabling legislation, and to specify how those net assets should be reported in financial statements when there are changes in the circumstances surrounding said legislation. Enabling legislation is defined as a specific type of legislation that both authorizes the raising of new resources and imposes legally enforceable limits on how they may be used.
Statement 46 clarifies that "legally enforceable" refers to external parties -- i.e. citizens, public interest groups or the judiciary -- that can compel a government entity to use resources only for the purposes stipulated by the enabling legislation.
It also confirms that the determination of legal enforceability is a matter of professional judgment, and that it might entail reviewing the legislation and determinations made for similar legislation, as well as obtaining legal counsel.
Statement 46 is effective for periods beginning after June 15, 2005.
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