Prior to 2013, the Government Accounting Standards Board’s (GASB) response to governments’ acquisitions, mergers and transfers of operations was to account for them utilizing APB Opinion No. 16, Business Combinations, which is accounting and financial reporting guidance intended for business, not government. Governments followed the “pooling of interests” and the “purchase method” to the extent that either of those methods could be applied to government combinations. The application of these methods was not specifically geared to government. The significant modifications necessary to adapt either method to the government environment drove GASB to address this topic separately from the GASB 34 reporting model.
Business combinations are very complicated in the world of consolidations, acquisitions, mergers and dissolutions; place them in the world of government accounting and the complications multiply.
GASB reformed its approach and created GASB 69. Simplifications include:
- Measuring assets and liabilities at carrying amounts
- Disposing of a government’s operations results in the removal of those activities
- Governments that are transferred or sold have guidance for their disposal
- Certain other disclosures to be made about government combinations and disposals of government operations to enable investors to evaluate the nature and financial effects of those transactions
The requirements of this Statement are effective for government combinations and disposals of government operations occurring in financial reporting periods beginning after December 15, 2013, and should be applied on a prospective basis. Earlier application is encouraged.
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