Statement No. 70 Accounting and Financial Reporting for Nonexchange Financial Guarantees

The Governmental Accounting Standards Board has issued Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees.

This statement is intended to improve the recognition, measurement and disclosure guidance for governments that have extended or received financial guarantees that are nonexchange transactions.

Statement No. 70 requires governments that extend nonexchange guarantees to recognize a liability when certain facts and/or circumstances indicate that it is more likely than not that a government will be required to honor that guarantee.

This statement gives specific guidance on how the amount of the liability should be determined. Statement No. 70 also requires governments that have issued obligations guaranteed by a third party in a nonexchange transaction to report an obligation until legally released as an obligor. If released as the obligor, the government would recognize revenue for the forgiveness of the obligation.

In addition, Statement No. 70 provides guidance for these transactions involving blended component units and specifies disclosure requirements for governments that extend or receive nonexchange financial guarantees.

The provisions of this statement are effective for reporting periods beginning after June 15, 2013. Early application is encouraged.

The full text of Statement No. 70 is available by clicking here.