NEWS RELEASE 06/20/13
GASB ISSUES PROPOSALS ON CONCEPTS FOR
MEASUREMENT OF ASSETS AND LIABILITIES AND ON THE MEASUREMENT AND APPLICATION OF
FAIR VALUENorwalk, CT, June 20, 2013—The
Governmental Accounting Standards Board (GASB) today issued for public comment a
proposed Concepts Statement that would guide the GASB when establishing
standards regarding the measurement of assets and liabilities for U.S. state and
local governments. The GASB also issued its Preliminary Views regarding the
measurement of fair value and the application of fair value, including note
disclosures. Finally, the GASB issued a Plain-Language
Supplement that addresses both proposals and is intended to solicit feedback
on the proposals from non-accountant financial statement users.
proposed Concepts Statement would establish concepts for both measurement
approaches and measurement attributes," said GASB Chairman Robert H. Attmore.
"Measurement is a necessary component of a complete GASB conceptual framework,
which will enhance consistency in future standards setting for state and local
Regarding the Preliminary Views on fair value, Mr. Attmore
said, "In conjunction with the proposed Concepts Statement, the proposed changes
to GASB´s fair value standards are intended to increase consistency and
comparability in governments´ fair value measurements and related disclosures.
The goal is to enhance financial statement users´ ability to assess a
government´s financial health and accountability."
The Exposure Draft, Measurement
of Elements of Financial Statements, proposes concepts that will inform
the GASB´s decisions when establishing future standards for how state and local
governments would determine the dollar amount at which to report assets and
The GASB is proposing two approaches to measuring assets
and liabilities—initial amounts and remeasured amounts. Initial amounts are
determined at the time an asset is acquired or a liability is incurred.
Remeasured amounts are determined anew as of the date of each year´s financial
The GASB also is proposing four measurement attributes (the
characteristic of an asset or liability that is being measured):
Fair Value Measurement and
- Historical cost is the price paid to acquire to acquire
an asset or the amount received when a liability is incurred in an actual
- Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
- Replacement cost is the price that would be paid to
acquire an asset with equivalent service potential in an orderly market
transaction at the measurement date.
- Settlement amount is the amount at which an asset could
be realized or a liability could be liquidated with the counterparty, other
than in an active market.
The Preliminary Views, Fair
Value Measurement and Application, describes how fair value should be
defined and measured, what assets and liabilities should be measured at fair
value, and what information about fair value should be disclosed in the notes to
the financial statements.
It is the GASB´s preliminary view that
investments generally should be measured at fair value. An investment would be
defined as a security or other asset that a government holds primarily for the
purpose of income or profit and the present service capacity of which is based
solely on its ability to generate cash, to be sold to generate cash, or to
procure services for the citizenry.
Certain investments would be excluded
from measurement at fair value and should continue to be measured according to
existing GASB standards, such as investments in money market instruments with
remaining maturity at time of purchase of one year or less.
current accounting standards, state and local governments are required to
disclose how they arrived at their measures of fair value if they are not based
on quoted market prices. In the Preliminary Views document, the GASB proposes
expanding those disclosures to include the levels of inputs a government uses to
measure fair value and the judgments made to arrive at those
Both proposals and the
Plain-Language Supplement are available on the GASB website, http://www.gasb.org/. Stakeholders are
encouraged to review the proposals and provide comment by September 30, 2013.
The GASB also is planning to host a public hearing on both proposals in
Flushing, New York, on November 1, 2013, at 8:30 a.m. EST.
Preliminary Views on Fair Value Measurement and Application, the GASB
will be conducting a field test (in which governments go through the
hypothetical process of applying the proposed standards) and is seeking state
and local governments to participate. Governments interested in participating
should contact GASB Project Manager Randy Finden at email@example.com.
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. 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, http://www.gasb.org/.