GASB PROPOSES GUIDANCE ON CAPITALIZATION OF INTEREST COST AND IMPLEMENTATION OF RECENT PRONOUNCEMENTS
Norwalk, CT, December 8, 2017—The Governmental
Accounting Standards Board (GASB) has issued two Exposure Drafts
proposing accounting and financial reporting guidance—a proposed
Statement related to capitalization of interest cost and a proposed
Implementation Guide that addresses multiple topics.
Capitalization of Interest Cost
The Exposure Draft, Accounting for Interest Cost during the Period of Construction,
proposes guidance that would enhance the relevance and comparability of
information about capital assets and the cost of borrowing for a
reporting period. It also would simplify accounting for interest cost
incurred during the period of construction.
For financial statements prepared using the economic resources
measurement focus, interest cost incurred during the period of
construction would be recognized as an expense in the period in which
the cost is incurred. Such interest cost would not be capitalized as
part of the historical cost of a capital asset.
For financial statements prepared using the current financial resources
measurement focus, interest incurred during the period of construction
would continue to be recognized as an expenditure on a basis consistent
with governmental fund accounting principles.
The proposed Implementation Guide, Implementation Guidance Update—201Y,
contains questions and answers intended to clarify, explain, or
elaborate on GASB Statements. It proposes guidance on a range of topics,
including pensions, other postemployment benefits, the statistical
section, regulatory reporting, and tax abatement disclosures. The
proposed Implementation Guide also includes amendments to previously
issued implementation guidance.
Both Exposure Drafts are available on the GASB website, www.gasb.org. Stakeholders are encouraged to review and provide comments on the Exposure Drafts.
Comments are due on the Exposure Draft, Accounting for Interest Cost during the Period of Construction, by March 5, 2018.
Comments are due on the Exposure Draft of Implementation Guide No. 201Y-X, Implementation Guidance Update—201Y, by February 16, 2018.
About the Governmental Accounting Standards Board
Established in 1984, the GASB is the independent, private-sector
organization based in Norwalk, Connecticut, that establishes accounting
and financial reporting standards for U.S. state and local governments
that follow Generally Accepted Accounting Principles (GAAP). These
standards are recognized as authoritative by state and local
governments, state Boards of Accountancy, and the American Institute of
CPAs (AICPA). The GASB develops and issues accounting standards through a
transparent and inclusive process intended to promote financial
reporting that provides useful information to taxpayers, public
officials, investors, and others who use financial reports. The
Financial Accounting Foundation (FAF) supports and oversees the GASB.
For more information, visit www.gasb.org.