The Governmental Accounting Standards Board has proposed new financial reporting standards for state and local governments to help them account for government combinations such as mergers, acquisitions and transfers of operations, along with disposals such as sales and transfers of government operations.

The proposed statement, contained in the exposure draft, “Government Combinations and Disposals of Government Operations,” aims to improve accounting and financial reporting by providing standards for combinations in the governmental environment.

Specifically, it would require state and local governments to identify whether a government combination is a government merger, government acquisition, or a transfer of operations. Government entities would also be required to use carrying values to measure the assets and liabilities combined in a government merger or transfer of operations. They would need to measure their acquired assets and liabilities based upon their acquisition values in a government acquisition. The proposed standards also provide guidance for government operations that have been transferred or sold.

In addition, the proposed statement would require disclosures to be made about government combinations and disposals of government operations to enable users of financial statements to evaluate the nature and financial effects of those transactions.

“Until now, state and local governments have accounted for mergers and acquisitions by referring to accounting and financial reporting guidance intended for the business environment,” said GASB chairman Robert Attmore in a statement. “Based on our research and feedback from stakeholders, the GASB decided to propose new guidance tailored to governmental situations and circumstances, to enable financial statement users, preparers, and auditors to evaluate the specific nature and financial effects of those transactions.”

The amendments in the proposal would be effective for periods beginning after Dec. 15, 2013, and would be applied on a prospective basis.  Early application of the standards would be encouraged.
The exposure draft is open for comment until June 15, 2012, and is available for review and download at

Comments should be addressed to the Director of Research and Technical Activities, Project No. 3-17 and emailed to or mailed to the following address:

Governmental Accounting Standards Board
401 Merritt 7
PO Box 5116
Norwalk, CT 06856

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