Norwalk, CT, September 29, 2006—The Governmental Accounting Standards Board (GASB) has issued Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues. This Statement establishes criteria that governments will use to ascertain whether certain transactions should be regarded as a sale or a collateralized borrowing. Such transactions are likely to comprise the sale of delinquent taxes, certain mortgages, student loans, or future revenues such as those arising from tobacco settlement agreements.
This Statement also includes a provision that stipulates that governments should not revalue assets that are transferred between financial reporting entity components.
Guidance for reporting the effects of such transactions in governmental financial statements have been provided in several standards or, in certain cases, has not been authoritatively addressed. This has resulted in considerable diversity in practice in the manner that such transactions have been reported.
In addition to clarifying guidance on accounting for sales and pledges of receivables and future revenues, the Statement:
"Statement 48 is intended to clarify accounting by establishing clear criteria for determining whether proceeds received from a given transaction should be reported as revenue or a liability," said Robert H. Attmore, Chairman of the Governmental Accounting Standards Board. "Moreover, the standard’s enhanced disclosure requirements will improve the usefulness of financial reporting by enabling the public to become better informed about the status of future revenues that may have been pledged or sold."
According to Chairman Attmore, GASB’s open deliberations in this project benefited from the thoughtful comments and suggestions of individuals and constituent organizations in response to the Exposure Draft of the proposed standards.
In response to that feedback, the final standard contains several modifications from the Exposure Draft, including the following:
The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2006.
Statement 48 (Product Code GS48) can be ordered through the GASB’s order department at 800-748-0659 or via its website at www.gasb.org.
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.