GASB 88 Update: Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements

Overview

The Governmental Accounting Standards Board (GASB) has issued Statement No. 88 Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements. The primary objective of GASB 88 is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also will clarify which liabilities governments should include when disclosing information related to debt.

When is GASB 88 Effective?

GASB 88 is effective for reporting periods beginning after June 15, 2018.

How Does GASB 88 Define the Disclosures That Should Be Reported?

GASB 88 defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash in one or more payments to settle an amount that is fixed at the date the contractual obligation is established.

The statement requires that the additional essential information related to debt be disclosed in the notes to financial statements:

• Unused lines of credit
• Assets pledged as collateral for the debt
• Terms specified in debt agreements related to significant events (such as default, termination, accelerated clauses)

For notes to financial statements related to debt, this Statement also will require that existing and additional information be provided for direct borrowing and direct placements of debt separately from other debt.

How Will GASB 88 Impact Your Financial Statements?

Your entity will need to expand disclosures that currently are not required to be provided regarding unused lines of credit, resources to liquidate debt and the changes in terms associated with debt. In addition, separation of disclosures will be necessary if your entity has direct borrowings or direct placement of debt. As a result, users of the financial statements will have better information to understand the effects of debt on an entity’s future resource flows.

Please note this summary of GASB 88 is not meant to be a substitute for reading it in its entirety.