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Business and Policy Areas
Business and Policy Areas

GASB Improves Reporting for Government Combinations

February 21, 2013

The Governmental Accounting Standards Board (GASB) has issued a new standard, No.69: "Government Combinations and Disposals of Government Operations," that guides accounting and reporting for state and local government mergers, acquisitions, and transfers or disposals of operations. Statement 69 is available for download from the GASB. The standard is effective FY15, and guidance would be applied prospectively. Earlier application is permitted if needed.

The distinction between a government merger and a government acquisition is based upon whether an exchange of significant consideration occurs for the combination.

Government mergers include combinations of legally separate entities without the exchange of significant consideration.

Government acquisitions are transactions in which a government acquires another entity, or its operations, in exchange for significant consideration.

Transfers of operations do not involve entire legally separate entities and no significant consideration is exchanged.

A disposal of a government's operations results in the removal of specific activities of a government. The disposal is a removal that can result from a sale or transfer.

For economic and efficiency reasons, some public systems are currently consolidating operations, services, or colleges. To correctly identify whether such consolidations are eligible for guidance in the new standard, public institutions should evaluate the definitions of mergers, acquisitions, and transfers in combination with the notion of service continuation introduced in paragraph 9 of Statement 69.

According to paragraph 9, to be considered a government combination, an arrangement should result in the continuation of a substantial portion of the services provided by the previously-separate entities or their operations after the transaction has occurred. Service continuation means that the new or continuing government intends to provide services similar to the formerly-separate governments, organizations, or operations. If the specific provisions of an arrangement do not indicate the extent to which services will continue to be provided, professional judgment should be used to determine whether a government combination, subject to the requirements of this statement, has occurred.

Consider the example of a health clinic from a private or public entity, or another college or university. If it is transferred to a public institution - where there will be service continuation - it is deemed a transfer of operations if the clinic is not a legally separate entity and no consideration is exchanged. The same circumstance could be a merger if the clinic is a separate legal entity and there is no consideration. Alternatively, the transfer could be an acquisition if consideration is exchanged, regardless of the original legal entity status of the clinic.

Statement 69 provides very detailed explanations of recognition, measurement, and disclosure requirements for types of government combination; it also addresses recognition and measurement nuances that might arise based on the reporting history or structure of the entities involved. The following paragraphs state the basic recognition, measurement, and disclosure requirements for common government combinations.

Merger Recognition and Measurement

When there is a merger, the new government begins the initial reporting period on the merger date. The combined assets, deferred outflows of resources, liabilities, and deferred inflows of resources of the merging entities should be recognized and measured in the statement of net position as of the beginning of the initial reporting period. The new government should measure the assets, deferred outflows of resources, liabilities, or deferred inflows of resources as of the merger date at the carrying values as reported in the separate financial statements of the merging entities.

Acquisition Recognition and Measurement

In a government acquisition, the acquisition date is the date on which the acquiring government obtains control of the assets and becomes obligated for the liabilities of the entity being acquired, or its operations. Generally, the acquisition date coincides with the date on which the acquiring government provides consideration-the closing date. The acquiring government should recognize the assets, deferred outflows of resources, liabilities, or deferred inflows of resources acquired or assumed at the acquisition date. The acquiring government should measure the acquired assets, deferred outflows of resources, liabilities, or deferred inflows of resources at the value as of the acquisition date.

Transfers of Operations

For transfers of operations, the effective transfer date is the date the transferee government obtains control of the assets and becomes obligated for the liabilities of the operation transferred. A continuing government should report a transfer of operations as a transaction in its financial statements for the reporting period in which it occurs.


Statement 69 requires disclosures about government combinations and disposals of government operations. For each government combination, the government should include the following information in the notes to financial statements for the period in which the combination occurs:

  • A brief description of the government combination, including identification of the entities involved in the combination and whether the participating entities were included within the same financial reporting entity;
  • The date of the combination; and
  • A brief description of the primary reasons for the combination.


Sue Menditto
Director, Accounting Policy