United States

Accounting for irrevocable split-interest agreements


Irrevocable split-interest agreements are arrangements in which a donor transfers assets for the shared benefit of at least two beneficiaries: (a) a government — typically a public college, university or hospital and (b) another beneficiary designated by the donor. The donor transfers the assets to either the government or to a separate third party, such as a bank, to hold and administer.

The Governmental Accounting Standards Board recently issued recognition and measurement guidance in Statement 81, Irrevocable Split-Interest Agreements, for governments that benefit from irrevocable split-interest agreements. Statement 81 requires a government that receives resources pursuant to an irrevocable split-interest agreement to recognize the assets, as well as a liability related to the other designated beneficiary’s portion of those assets and a deferred inflow of resources related to the government’s portion of those assets at the inception of the agreement. Further, Statement 81 requires a government to recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party.

Statement 81 is effective for reporting periods beginning after December 15, 2016, and should be applied retroactively. Earlier application is encouraged.