In reflecting on the impact of the proposed accounting Statement, GASB Project Manager, Randal J. Finden, stated "All investments carry some form of risk and those risks must be communicated to the public in financial statements. Deposit and investment resources often represent the largest assets of governmental and fiduciary funds. Proprietary funds also report significant deposit and investment balances. These resources are critical to delivering governmental services and programs."
Financial statement disclosures would cover deposit and investment risks. Credit risk disclosures would include credit quality information issued by rating agencies. Interest rate disclosures would include investment maturity information, such as weighted average maturities or specification identification of the securities. For investments that are highly sensitive to changes in interest ratesfor example, inverse floaters, enhanced variable-rate investments and certain asset-backed securitiesdisclosures would indicate the basis for their sensitivity. Foreign investment disclosures would indicate the foreign investment’s denomination. Deposit and investment policies related to disclosed risks also would be disclosed.
The GASB has begun a comprehensive review of existing accounting standards. Its first project in this effort is the reconsideration of the existing requirements in Statement 3, evaluating the ongoing usefulness of current requirements by taking into consideration recent Federal banking reforms. The custodial credit risk disclosures of Statement 3 are being modified to limit required disclosures to deposits and investments exposed to significant custodial credit risk. For example, this includes deposits that are uninsured and uncollateralized and investments that are held by the counterpartyor holder of a deposit or seller of an investmentsuch as a bank in which the deposit is made.
The effective date of the standard would be for fiscal years beginning after June 15, 2004. The Exposure Draft may be ordered by telephoning the GASB Order Department at 800-748-0659.
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