Journal Entries

This recurring website feature highlights articles from The GASB Report, the GASB’s monthly newsletter. The current article appeared in the November 2010 issue.

Statement of Net Position Exposure Draft Approved

On November 17, the GASB approved an Exposure Draft of a proposed Statement, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, that proposes guidance for the reporting of deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position.

The Exposure Draft also included proposed related amendments to the requirements of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, and other pronouncements. The Exposure Draft was posted on the GASB website (www.gasb.org) on November 24, and the comment deadline is February 25.

Concepts Statement No. 4, Elements of Financial Statements, identifies and defines five elements that make up a statement of financial position: assets, liabilities, deferred outflows of resources, deferred inflows of resources, and net position. Statement 34, however, which was issued several years prior to that Concepts Statement, requires the presentation of assets, liabilities, and net assets in a statement of financial position. Consequently, guidance is needed to address the presentation of deferred outflows of resources, deferred inflows of resources, and net position in a financial statement.

The need for this guidance is more urgent because GASB pronouncements have already addressed transactions requiring the use of deferred outflows of resources or deferred inflows of resources. Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, for example, provides for the reporting of deferred outflows of resources and deferred inflows of resources for the changes in fair value of hedging derivatives. In addition, the guidance on service concession arrangements in Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, addresses the reporting of deferred inflows of resources amounts. The GASB also is deliberating other projects that may result in the recognition of deferred outflows of resources and deferred inflows of resources. For example, the current reexamination of the existing pension accounting and financial reporting standards may result in the reporting of deferrals.

The Exposure Draft proposes a framework detailing how these elements should be reported, which would result in standardizing the presentation of deferrals and their effects on a government’s net position. This also would serve to lessen uncertainty regarding the role of these financial statement elements.

Proposed Effective Date

The provisions of this proposed Statement would be effective for financial statements for periods beginning after June 15, 2011, with earlier application encouraged.

How to Obtain a Copy of the Exposure Draft

Copies of the Exposure Draft may be downloaded free of charge from www.gasb.org. Alternatively, a single photocopy of the Exposure Draft may be obtained by calling the GASB Order Department at (800) 748-0659.