On April 2, the Governmental Accounting Standards Board (GASB) issued new guidance designed to enhance debt-related disclosures in notes to financial statements, including those addressing direct borrowings and direct placements. The new standard, GASB Statement 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, clarifies which liabilities governments should include in their note disclosures related to debt. Statement 88 defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established.
Statement 88 requires that all debt disclosures present direct borrowings and direct placements of debt separately from other types of debt. The policy underlying this requirement is that direct borrowings and direct placements may expose a government to risks that are different from or additional to risks related to other types of debt.
Statement 88 requires governments to disclose additional essential debt-related information for all types of debt, including:
- Amounts of unused lines of credit;
- Assets pledged as collateral for debt; and
- Terms specified in debt agreements related to significant: (a) events of default with finance-related consequences, (b) termination events with finance-related consequences, and (c) subjective acceleration clauses.
Effective Date and Transition
The provisions of Statement 88 are effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged.
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