Statement No. 65 Items Previously Reported as Assets and Liabilities

In 2007, the Governmental Accounting Standards Board (GASB) released Concepts Statement No. 4 Elements of Financial Statements which provides a framework for determining the nature of a financial accounting or reporting issues. Since the release of the framework, GASB has been looking at the assets and liabilities on the balance sheet to determine if they should continue to be reflected as such. GASB has concluded that, in order to improve financial reporting, there are assets and liabilities that no longer should be reflected as assets and liabilities. These changes are included in the recently-issued GASB Statement No. 65, Items Previously Reported as Asset and Liabilities.

While GASB Statement No. 65 covers such transactions as leases, nonexchange transactions, and sales of future revenues, we anticipate the most common impact will be on debt issuance costs (other than prepaid insurance), lending and mortgage banking activities. This pronouncement will remove the deferral of such costs and activities and will require the governmental entity to expense the costs in the period incurred, except for certain defined transactions. In regards to the certain other transaction types, the pronouncement requires the transaction to be reflected as deferred inflows of resources or deferred outflows of resources.

The most common deferred inflows and outflows of resources are gain/loss on debt refunding and imposed nonexchange transactions, such as when taxes are levied for property taxes and received or recognized as a receivable. Government-mandated and voluntary exchange transactions will be reported as an inflow or outflow in the period unless the resources are provided or received in advance of time requirements being met.

GASB Statement No. 65 is specifically limited to the transactions provided in the pronouncement and the concepts and reasoning for classification of said assets and liabilities should not be applied to other transactions. GASB Statement No. 65 is effective for periods beginning after December 15, 2012 and is to be applied retroactively; early adoption is allowed.