GASB issues new derivatives guidelines

The US Governmental Accounting Standards Board (GASB), a not-for-profit organisation that seeks to establish standards of financial accounting and reporting for state and local governmental entities, has issued new derivatives accounting guidelines for state and local governments. GASB said the new guidelines will better inform users of financial statements about the risks assumed in derivatives contracts.

“Derivatives are often used by governments as a means to potentially reduce borrowing costs,” said GASB, which is based in Norwalk, Connecticut. “While derivatives may support financing needs, the lower costs come with additional risks. The objectives and terms of derivatives contracts, their risks and the fair value of the contracts are generally not specified in financial reports today.”