Norwalk, CT, May 11, 2004The Governmental Accounting Standards Board (GASB) has issued its Technical Bulletin No. 2004-1, Tobacco Settlement Recognition and Financial Reporting Entity Issues, which addresses accounting by state and local governments in connection with settlements made by U.S. tobacco companies.
In 1998, the U.S. tobacco industry reached an agreement, known as the Master Settlement Agreement, with state governments releasing tobacco companies from present and future smoking-related claims that had been, or potentially could be, filed by the states. In exchange, the tobacco companies agreed to make annual payments in perpetuity to the states, subject to certain conditions and adjustments.
The GASB’s Technical Bulletin clarifies accounting guidance on whether a Tobacco Settlement Authority that is created to obtain the rights to all or a portion of future tobacco settlement resources is a component unit of the government that created it. In addition, the Technical Bulletin clarifies recognition guidance for these transactions and for payments made to settling governments pursuant to the Master Settlement Agreement. According to GASB project manager Ken Schermann, "the guidance provided by the Technical Bulletin is needed to provide users of financial statements comparable information on these significant transactions."
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.
Governmental Accounting Standards Board
Improving governmental accountability through better financial reporting