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A Governmental Accounting Standards Board (GASB) exposure draft, Certain Risk Disclosures, would require governmental entities to disclose information about risks that could affect services to be provided or obligations that must be fulfilled. NACUBO’s comments to GASB point out:

  • Inconsistencies between proposed disclosure guidance and GASB’s recently issued Concepts Statement No. 7, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements: Notes to Financial Statements
  • Audit challenges of recommended forward-looking disclosures
  • Possible misinterpretations by financial statement users
  • Conflicts with Concepts Statement No. 1, Objectives of Financial Reporting.


The exposure draft explains the notion of risk concentrations and constraints that may limit a government’s ability to meet its obligations or maintain its service levels. Governmental entities, such as a public institution, would be required to assess and disclose concentrations or constraints in the notes to the financial statements when all the following criteria are present:

  1. A concentration or constraint is known to the government prior to the issuance of the financial statements.
  2. An event associated with a concentration or constraint either has occurred or is more likely than not to begin to occur within 12 months of the financial statement date or shortly thereafter.
  3. It is at least reasonably possible that within three years of the financial statement date, the event will cause there to be a substantial effect on the government’s ability to continue to provide services at the level provided in the current reporting period or to meet its obligations as they become due.


Chris Leach

Accounting Policy Analyst


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