NEWS RELEASE 04/21/09

GASB Issues Guide to Implementation of Statement 53 on Derivative Instruments

Norwalk, CT, April 21, 2009—The Governmental Accounting Standards Board (GASB) today issued its Guide to Implementation of Statement 53 on Derivative Instruments. The purpose of the guide is to assist preparers and auditors of governmental financial statements and those who advise them in implementing the GASB's recently issued standard on accounting and financial reporting for derivative instruments.

The guide provides answers to more than 100 questions on topics relating to the implementation of Statement 53, including:

  • Scope and applicability of Statement 53 with special emphasis on the normal purchases and normal sales scope exception;
     
  • Definition of derivative instruments focusing on the distinguishing characteristics of a derivative instrument—settlement factors, leverage, and net settlement; 
     
  • Embedded derivative instruments, and when an embedded derivative instrument results in a hybrid instrument; 
     
  • Hedge effectiveness criteria, and how to apply the methods of evaluating effectiveness—the consistent critical terms, the synthetic instrument, the dollar-offset, and the regression analysis methods; 
     
  • Disclosures; and 
     
  • Effective date and transition.

In addition to the illustrations that were included in Statement 53, the journal entries that support the transactions in the illustrations have now been added.

Implementation of Statement 53 starts with fiscal years beginning after June 15, 2009.

The GASB Guide to Implementation of Statement 53 on Derivative Instruments is available for order by logging on to www.gasb.org.


About the Governmental Accounting Standards Board

The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board's diverse constituency, including preparers and auditors of government financial statements, users of those statements and members of the academic community. More information about the GASB can be found at its website, www.gasb.org.