United States

Proposed disclosures related to debt

FINANCIAL REPORTING INSIGHTS  | 

To improve the information related to debt that is disclosed in notes to government financial statements, the Governmental Accounting Standards Board (GASB) recently issued an Exposure Draft, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements – an amendment of GASB Statements No. 34 and No. 38. For purposes of disclosure in notes to financial statements, this proposed Statement would define debt as a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of payment of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. For disclosure purposes, debt would not include leases or trade accounts payable.

The proposed Statement would require that additional essential information related to debt be disclosed in the notes to financial statements, including:

  • Amount of unused lines of credit
  • Collateral pledged as security for debt
  • Terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences and significant subjective acceleration clauses

For notes to financial statements related to debt, the proposed Statement also would require that existing and proposed additional information be provided for direct borrowings and direct placements of debt separately from other debt.

If finalized, the proposed Statement would be effective for reporting periods beginning after June 15, 2018. The Exposure Draft is available for comment until September 15, 2017.