GASB Statement #63 – Are You Ready?

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GASB Statement #63 – Are You Ready?

By Tara Bradley

This pronouncement issued by the Governmental Accounting Standards Board (GASB) in June 2011 could have a significant impact on the financial reporting process for some governmental entities over the next year.  For those entities with no deferred outflows or inflows of resources, the changes are not as drastic as for those that do include these items in their financial reporting process.  This statement is effective for financial reporting periods beginning after December 15, 2011 with early implementation encouraged.

The application of this pronouncement will change the language commonly used in the financial statements to now report “net assets” as “net position”.  The definition will essentially remain the same, but it will also include the differences between deferred outflows and deferred inflows of resources along with assets and liabilities.  The appearance of the Statement of Net Position will also be updated to include specific sections for each of these items on the face of the statement.

Deferred Outflows of Resources will be reported in a separate section below assets on the Statement of Net Position.  As defined by the GASB, deferred outflows of resources are the consumption of net assets that are applicable to a future reporting period.  One example of a deferred outflow of resources is an interest rate swap with a negative fair value.

Deferred Inflows of Resources will be reported in a separate section below liabilities on the Statement of Net Position.  These are acquisitions of net assets related to future periods.  An example is a service concession arrangement in which the revenue will be earned in a future year.

With the implementation date approaching, these areas will require some attention and planning by governmental entities with either this year’s financial statements or next year’s depending on the decision to early implement.  The initial year of implementation will also require retroactive application to all prior periods presented.

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