The User's Perspective—May 2007

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Derivatives: Significant Changes in Disclosure Proposals  
In May 2006, the GASB issued a Preliminary Views document that proposed to report derivatives at their fair value in the financial statements. If a derivative is an effective hedge against the loss of fair value or cash flows, then changes in its fair value would be deferred until it ends or becomes ineffective. If a derivative is not an effective hedge or is associated with an investment carried at fair value, the changes in the fair value of the derivative would be reported as investment income in the change statements. This basic approach will be retained in a draft Statement to be issued in June, but based on public response to the Preliminary Views, the GASB has made significant changes to the disclosure requirements that it believes will make them more useful and usable, while keeping the effort required to prepare the disclosures reasonable.


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Touring the Financial Report, Part I: The Statement of Net Assets   
The centerpieces of the state and local government financial report introduced by GASB Statement 34 are its two government-wide financial statements. The financial statements previously spread a government’s financial activities across various funds, which reported information using different accounting bases. The government-wide statements bring together a government’s finances in one place and report them using full accrual. This article walks through the first of the government-wide statements, the statement of net assets.

Touring the Financial Report, Part II: The Statement of Activities   
The companion to the government-wide statement of net assets is the statement of activities, but it is not your father’s income statement. The statement of activities introduces a new design to the reporting of revenues and expenses that particularly emphasizes how a government’s functions and programs are financed. This article continues the tour of the government-wide financial statements by pointing out the major features of the statement of activities.

GASB Project Update   
Projects on the GASB’s current technical agenda range from broad considerations of the basic concepts of accounting and financial reporting to detailed examinations of highly technical issues. This article briefly summarizes selected projects, including two new projects on performance reporting and intergovernmental risks.

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Derivatives Proposal Coming Soon:   
Keep an eye open for the GASB's proposed standards on derivatives, which will be published at the end of June. Please take a look at these proposed standards and share your opinion with us.