GASB ISSUES EXPOSURE DRAFT ON FAIR
VALUE
MEASUREMENT AND APPLICATION
Norwalk, CT, May
15, 2014—The Governmental Accounting Standards Board (GASB) today
issued for public comment a proposed Statement addressing accounting and
financial reporting issues related to fair value measurements.
The
Exposure Draft, 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.
“The proposed changes to the GASB’s fair value
standards are intended to increase clarity, consistency, and comparability in
governments’ fair value measurements and their related disclosures,” said GASB
Chairman David A. Vaudt. “The Board believes that fair value measurements
enhance the relevance of reported financial information, particularly when
accompanied by robust disclosures.”
The GASB is proposing that fair value
be defined as 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. The Exposure Draft also proposes that investments would
generally be measured at fair value. Investments 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 or to be sold to generate cash.
Certain investments
would continue to be excluded from measurement at fair value, such as
investments in money market instruments with remaining maturities at time of
purchase of one year or less.
Under 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
Exposure Draft, the GASB is proposing to expand those disclosures to include the
inputs a government uses to measure fair value and the judgments made to arrive
at those inputs.
The Exposure Draft is available on the GASB website, http://www.gasb.org/. Stakeholders are
encouraged to review the proposals and provide comments by August 15,
2014.
The GASB will hold a live, one-hour, CPE webinar on the Exposure
Draft at 1 p.m. EDT on Tuesday, July 15 aimed at auditors and preparers. On
Thursday, July 17 at 1 p.m. EDT, the GASB will host a one-hour, non-CPE webinar
for financial statement users. Registration for both events will be announced on
the GASB website in the coming weeks.
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/.