The User's Perspective

June 2009

Several Opportunities to Share Your Thinking with the GASB

            Five proposals have been posted on the GASB website,, in the last week of June, seeking to elicit public comment. These documents present both potential new standards of accounting and financial reporting and proposed suggested guidelines for voluntary reporting of service efforts and accomplishments (SEA) performance information.

            If you want to help make sure that financial reports provide the information you need, then you need to let the GASB know what works for you in these proposals and what does not. Your response to these documents is important to assisting the GASB in its efforts to issue standards that will result in decision-useful information. This article briefly describes each of the five proposals.

Chapter 9 Bankruptcies

            Chapter 9 of the U.S. Bankruptcy Code deals specifically with municipalities. While municipal bankruptcies have historically been uncommon, with the recent experiences of a major filing and potential filings still fresh in mind, this guidance should prove to be particularly timely.

            The current state of the economy aside, it is critical for governments to have accounting and financial reporting guidance in the event, however unlikely, that they should find themselves in a state of financial distress such that they have been granted Chapter 9 protection. The purpose of this project is to provide the guidance needed in that circumstance, including an analysis of the financial reporting consequences.

            Impact on the financial report: The proposed accounting and financial reporting guidance would apply only in the rare case in which a municipal government has filed for Chapter 9 bankruptcy protection and would involve modifications to debt, other liabilities, and certain long-term contractual obligations when a plan of adjustment has been approved by the court.

Contact:   Wesley Galloway

More information: Chapter 9 project page 

Financial Instruments Omnibus

            This proposal deals with potential revisions to existing standards regarding financial reporting and disclosure requirements of some financial instruments and external investment pools for which significant issues have been identified in practice. Specifically, the standards at issue address financial reporting for certain investments and “2a7-like” investment pools, deposit and investment risk disclosures, and derivative instruments. One exception to the general requirement that investments be reported at fair value relates to “2a7-like” pools. The proposal would clarify that, to qualify for the exception, an investment pool needs to meet all Securities and Exchange Commission (SEC) requirements for money market funds, except that they are not required to file compliance reports with the SEC. The proposal also would extend fair value reporting to unallocated insurance contracts and limit the required interest rate risk disclosures for mutual funds to just bond mutual funds.

            Impact on the financial report: This proposal would improve financial reporting by measuring the value of financial instruments more consistently and appropriately by clarifying the existing standards.

Contact:   Randy Finden

More information: Financial Instruments Omnibus project page 

OPEB Implementation Issues

            This proposed Statement would address certain issues relating to accounting and financial reporting for other postemployment benefits (OPEB). Specifically, the issues deal with employers in agent multiple-employer plans, including the timing and frequency of actuarial valuations and eligibility for the alternative measurement method. An agent multiple-employer plan is one in which a number of single-employer plans are aggregated with pooled administrative and investment functions. Separate accounts are maintained for each employer and risks and benefit costs are attributable to the individual employers.

            The cost of conducting actuarial valuations on an individual basis for small employers can be significant, and these changes will be proposed primarily as a means of providing some measure of cost relief to those small employers that are required by the plan to procure an individual valuation. The proposal would allow a larger number of small agent employers to use the alternative measurement method to produce actuarially based information for financial reporting purposes. Consequently, compliance costs related to the OPEB standards could be reduced for certain small agent employers while still achieving an appropriate balance between the goals of reliable measurement of reported information and reasonable cost. Also, the consistency of application of the OPEB standards is expected to improve due to the clarification in the proposal that reported OPEB measures should be determined at the same frequency and as of a common date.

            Impact on the financial report: While the proposed changes are not expected to materially impact financial reports, they are expected to reduce compliance costs associated with the OPEB standards in certain cases and improve consistency in their application.

Contacts: Karl Johnson
               Michelle Czerkawski

More information: OPEB Implementation Issues project page 

Service Concession Arrangements

            This proposal would establish accounting and financial reporting guidance for public/private and public/public service concession arrangements (SCAs). (This project was called Public/Private Partnerships until the Board decided to eliminate service and management arrangements from the scope of the project and focus on SCAs exclusively.) An example of an SCA would be a state contracting out the construction and operation of a toll road for an extended period during which the operator will collect tolls from those using the road, and ultimately the road will revert to the state at the end of the SCA.

            Impact on the financial report: The guidance in this proposed Statement would have two basic impacts. First, it would guide the determination of who should report the asset associated with the SCA—the government or the operator (when it is a government). Second, it would guide the determination of when a government may report as revenue any upfront payment it receives from the operator.

Contact:   Lisa Avis

More information: Service Concession Arrangements project page 

Suggested Guidelines for Voluntary Reporting of SEA Performance Information

            This project is designed to encourage the reporting of service efforts and accomplishments (SEA) performance information by developing conceptually based suggested guidelines for voluntary reporting. These suggested guidelines would help officials effectively communicate a government’s SEA performance in a way that the public would find meaningful and understandable.

            The proposed suggested guidelines for voluntary SEA reporting are composed of four essential components of an effective SEA report and six qualitative characteristics representing the attributes SEA performance information needs to possess. The proposal also offers suggestions on how to effectively communicate SEA performance information. The essential components of an effective SEA report are purpose and scope, major goals and objectives, key measures of SEA performance, and discussion and analysis of results and challenges. The six qualitative characteristics are relevance, understandability, comparability, timeliness, consistency, and reliability.

            The overall project does not include establishing the goals and objectives of state or local governmental services, establishing specific nonfinancial measures or indicators of service performance, or establishing benchmarks for service performance. These determinations are appropriately left to individual governments.

            Impact on the financial report: While this project would not impact the financial statements (the performance information is normally expected to be provided in a separate SEA report), its intent is to make additional information available to users of financial reports beyond what traditional financial statements provide. This would enable users to have access to the information they need to assess actual performance and to determine the degree to which the government was successful in maintaining or improving the well-being of its citizens by providing services.

Contact:   Lisa Parker

More information: SEA Reporting project page