Norwalk, CT, October 1, 2007—On November 1, 2007, the Governmental Accounting Standards Board (GASB) will be holding a public hearing as part of the public review of proposed standards for how state and local governments should report their involvement in derivative instruments. The proposal is contained in an Exposure Draft, Accounting and Financial Reporting for Derivative Instruments. On the same day, the GASB also will conduct a roundtable discussion for users of governmental financial reports.
The user roundtable will be held from 9:00 to 11:00 am EDT, and the public hearing will follow. Both will take place at the New York City Office of Management and Budget, 75 Park Place, 8th Floor, Rooms S1 and S2, New York.
Persons and organizations wishing to testify at the public hearing are required to submit written notification of their intent and a copy of their written comments no later than October 12, 2007. The notification and written comments should be addressed to the Director of Research and Technical Activities, Project No. 26–4, and emailed to firstname.lastname@example.org or mailed to GASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. Individuals may testify at the public hearing either in person or via telephone.
External users of financial statements may participate in the roundtable either in person or via telephone. Persons interested in participating in the roundtable are required to notify the GASB in writing, using the email address or postal address above, no later than October 26, 2007.
About the GASB’s Derivatives Proposal
There has been a substantial increase in both the number and dollar amounts of governmental derivative contracts. The Board believes the public needs access to additional information that better reveals the risks these transactions pose and the effect they could have on a government’s finances.
The proposal would require that the fair value of all derivatives be reported as assets or liabilities in the financial statements. If a derivative effectively hedges (significantly reduces) a potential risk of changes in cash flows or fair values of associated items, then its annual fair value changes would be deferred until the derivative ends or becomes ineffective, at which time the accumulated changes, if any, generally would be reported in the government’s change statement. The annual change in the fair value of all other derivatives would be reported each reporting period in the change statement.
The GASB also is proposing that additional information about derivatives be disclosed in the notes to the financial statements, including identification of the risks to which hedging derivatives expose a government and contingent liabilities contained within derivatives.
The Exposure Draft is available to download for free from the GASB website, www.gasb.org. It is accompanied by a plain-language supplement that summarizes the proposed standards for financial statement users and others without an accounting background. The deadline for commenting on the GASB’s proposal is October 26, 2007.
About the Governmental Accounting Standards Board
The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board's diverse constituency, including preparers and auditors of government financial statements, users of those statements and members of the academic community. More information about the GASB can be found at its website www.gasb.org.