Norwalk, CT, September 30, 2005—In response to increased constituent interest, the Governmental Accounting Standards Board (GASB) today issued an exposure draft designed to clarify existing guidance on accounting for sales and pledges of receivables and future revenues.
Specifically, the proposal will address 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.
Historically, guidance for reporting the effects of such transactions in governmental financial statements have been provided in several standards or in certain cases, have 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 proposal will:
"Today’s proposed standard 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."
The requirements of this proposed Statement would be effective for financial statements for periods beginning after December 16, 2005.
The GASB encourages interested individuals and organizations to comment on its proposals through written response. The deadline for submitting comments is December 30, 2005. Additional information about submitting a response is included in the Exposure Draft, which is available free of charge on the GASB’s 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.