The Governmental Accounting Standards Board (GASB) Staff recently released a paper to explain how environmental, social and governance (ESG) matters are related to public accountability, and how ESG matters may affect amounts reported and disclosed in the financial statements.
The document defines environmental, social and governance matters for the purpose of the document and provides examples of topics commonly considered as ESG matters in these broad categories. The document explains how ESG matters intersect with public accountability in many GASB standards. Examples are also provided to illustrate how the GASB’s authoritative guidance that supports assessments of accountability intersects with ESG matters.
Further, the document sets out examples of areas where ESG matters may be considered when applying the GASB standards, including those related to:
- The useful life and residual value determination for capital assets, as well as asset impairment (e.g., damage caused by floods)
- Asset retirement obligations and expenses
- Accrual and disclosure of loss contingencies
- Valuation approaches to determine fair value for assets held as an investment by endowments
- Costs of closing municipal solid waste landfills
- Pollution remediation liabilities and expenses
- Premiums specifically identified as being collected for future catastrophes for public entity risk pools
- The condition of infrastructure assets and other capital assets
- Disclosures about related party transactions
- The identification of major component units for the reporting entity
- The recognition of special assessments for capital improvements that are not provided by the government
- Reductions in tax revenues because of tax abatements
- Reporting unemployment compensation benefit plans in an enterprise fund
- The description of component units within the reporting entity and its relationship to them, and the nature of accountability for those organizations, in the note disclosures
- Identifying joint ventures, related organizations, and jointly governed organizations
- The description of any employee termination benefits
- Disclosures about any Chapter 9 bankruptcies
- Recognition of postemployment benefits
