The Governmental Accounting Standards Board issued two new standards in late July that aim to improve government financial reporting in two timely areas: providing taxpayers and others with information about how past transactions will continue to affect a government's financials in the future, and clarifying the circumstances in which hedge accounting continues to be applied when a swap counterparty, or related credit support provider, is replaced.
The first of the new statements, Statement No. 63, provides a new statement of net position format to report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position (which is the net residual amount of the other elements). The statement requires that deferred outflows of resources and deferred inflows of resources be reported separately from assets and liabilities.
Statement 63 also amends certain provisions of Statement No. 34 and related pronouncements to reflect the residual measure in the statement of financial position as net position, rather than net assets.
The second, GASB Statement No. 64, is an amendment to Statement No. 53, and is aimed at improving financial reporting by state and local governments by clarifying the circumstances in which hedge accounting continues to be applied when a swap counterparty, or a swap counterparty's credit support provider, is replaced.
Statement 64 clarifies that when certain conditions are met, the use of hedge accounting should not be terminated. Those conditions are: the collectability of swap payments is considered to be probable; the replacement of the counterparty or credit support provider meets the criteria of an assignment or in-substance assignment as described in the statement; and the counterparty or counterparty credit support provider (and not the government) has committed the act of default or termination event.
The provisions of Statement 63 are effective for financial statements for periods beginning after Dec. 15, 2011, with earlier application encouraged. Statement 64 is effective for periods beginning after June 15, 2011, again with earlier application encouraged.
