THE GASB’S NEW STATEMENT FOR NONEXCHANGE FINANCIAL GUARANTEES IS NOW AVAILABLENorwalk, CT, April 30, 2013—The Governmental Accounting Standards Board (GASB) today published a new Statement that provides accounting and financial reporting guidance to state and local governments that offer nonexchange financial guarantees and for governments that receive nonexchange financial guarantees on their obligations. The pronouncement, which was approved on April 22, is available to download at no charge on the GASB website.
GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, requires a state or local government guarantor that offers a nonexchange financial guarantee to another government, organization, or individual to recognize a liability on its financial statements when it is more likely than not that the guarantor will be required to make a payment to the obligation holders under the agreement.
Statement 70 also requires:
- A government guarantor to consider qualitative factors when determining if a payment on its guarantee is more likely than not to be required. Such factors may include whether the issuer of the guaranteed obligation is experiencing significant financial difficulty or initiating the process of entering into bankruptcy or financial reorganization.
- An issuer government that is required to repay a guarantor for guarantee payments made to continue to report a liability unless legally released. When a government is released, the government would recognize revenue as a result of being relieved of the obligation.
- A government guarantor or issuer to disclose information about the amounts and nature of nonexchange financial guarantees.
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. Those standards govern the preparation of financial reports and are officially recognized as authoritative by U.S. state and local governments and the American Institute of Certified Public Accountants. 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.