GASB Addresses Deferred Inflows and Outflows of Resources
December 1, 2010
On November 24, the Governmental Accounting Standards Board (GASB) issued an Exposure Draft (ED), "Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position." The deadline for submitting written comments is February 25, 2011. The ED proposes requirements for the reporting of deferred inflows of resources, deferred outflows of resources, and net position in a statement of financial position.
Since 2001, public institutions that follow GASB Statements 34 and 35 have presented assets, liabilities and net assets in the statement of financial position. GASB subsequently issued Concepts Statement No. 4, "Elements of Financial Statements," (in 2007) which identifies and defines five elements that make up a statement of financial position. In addition to assets and liabilities, Concepts Statement No. 4 introduced the elements of deferred outflows of resources and deferred inflows of resources, and established the residual measure as net position.
In Concept Statement No. 4, deferred outflows of resources is defined as a consumption of resources of net assets that is applicable to a future reporting period, and deferred inflows of resources is defined as an acquisition of net assets that is applicable to a future reporting period. Both deferred outflows and deferred inflows of resources are distinct from assets and liabilities. Consequently, the notion of net assets is superseded by the term net position, which is defined as the residual of all other elements presented in a statement of financial position.
GASB Statement no. 53, "Accounting and Financial Reporting for Derivative Instruments," and a recent proposal, "Accounting and Financial Reporting for Service Concession Arrangements," address transactions requiring the use of deferred outflows of resources or deferred inflows of resources, but do not provide guidance on the financial statement presentation of such deferrals. The proposed guidance in the November 24th ED will assist preparers in the presentation of newly required financial reporting elements and ensure consistency for readers of financial statements.
Although some authoritative literature may provide for the recognition of amounts that may appear to meet the definition of deferred outflows of resources or deferred inflows of resources in Concepts Statement 4. Paragraph 38 of that document clarifies that recognition of deferred outflows of resources and deferred inflows of resources should be limited to those instances identified by the GASB in authoritative pronouncements that are established after applicable due process procedures, such as Statement 53 and a standard on service concession arrangements, when issued. Thus, public institutions should not reclassify amounts as deferred outflows of resources or deferred inflows of resources until required to do so by a GASB pronouncement.
The provisions of this proposed statement would be effective for financial statements for periods beginning after June 15, 2011, or FY 2012 for the vast majority of public colleges and universities. Earlier application would be encouraged.
The ED can be downloaded from GASB's website. Comments should be submitted by February 25, 2011 to the Director of Research and Technical Activities, Project No. 3-22. NACUBO encourages public institution to submit comments directly to GASB or send comments to NACUBO for inclusion in our industry comment letter.
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