On June 29, the Governmental Accounting Standards Board (GASB) announced that it has proposed new standards for how state and local governments should report their involvement in derivative instruments. The proposal is contained in an exposure draft, Accounting and Financial Reporting for Derivative Instruments. The proposal would require that the fair value of all derivatives be reported as assets or liabilities in financial statements.
GASB is also looking for governmental entities that would be willing to participate in field testing of this proposed derivatives standard. Among GASB healthcare organizations, those that follow the “par. 7 option” under GASB 20 currently account for derivatives under Financial Accounting Standards Board (FASB) statement 133 like private sector entities, while those that follow the “par. 6” option do not report derivatives on their balance sheet at all. GASB is interested in evaluating the impact on entities that would be required to convert from FASB statement 133 to the new GASB standard (i.e., the par. 7 entities) as well as those who would be putting derivatives on their balance sheets for the first time (i.e., the par. 6 entities). There may be some practical benefits to participating in the field test, as the final standard is scheduled for issuance in the second quarter of 2008. Download the exposure draft.
