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Business and Policy Areas
Business and Policy Areas

GASB Issues Proposal on Split-Interest Agreements

July 30, 2015

In June the Governmental Accounting Standards Board (GASB) issued the Exposure Draft, "Accounting and Reporting or Irrevocable Split-Interest Agreements." The proposal has a comment deadline of September 18 and outlines recognition criteria for split-interest agreements donated directly to a public institution, as well as funds held in trust by others for the benefit of the institution.

Irrevocable split-interest agreements are a specific type of giving arrangement used by donors to provide resources to beneficiaries, including governments. Examples of these types of arrangements include charitable lead trusts, charitable remainder trusts, charitable annuity gifts, and life-interests in real estate.

Under the proposal, when a public institution is the holder (or intermediary) and also a beneficiary of an irrevocable split-interest agreement, the institution would recognize assets, liabilities, and deferred inflows of resources when the agreement is executed and the resources are received. Measurement principles consistent with Statement No. 72, "Fair Value Measurement and Application," would apply. 

Currently public institutions are precluded from recognizing interests in a trust for which the institution is not the holder or intermediary. Such arrangements are commonly known as "funds held in trust by others." As such, assets and revenues are only recognized when cash is received from the trust. GASB's exposure draft would change this.

Under the proposal, if a government is not the holder (intermediary) of an irrevocable split-interest agreement, an asset and a deferred inflow of resources would be recognized when the government becomes aware of the agreement and has sufficient information to measure the beneficial interest.

The draft's proposed effective date is FY18 for the vast majority of public higher education. Accounting changes adopted to conform to its provisions would be applied retroactively by restating financial statements, if practical, for all prior periods presented. If restatement for prior periods is not practical, the cumulative effect of applying the new guidance would be reported as a restatement of beginning net position for the current period. 

Comments are due to GASB by September 18. NACUBO encourages public institutions to comment directly to GASB or to contact NACUBO with thoughts and observations for the industry comment letter.


Sue Menditto
Director, Accounting Policy