On the Horizon

Tax Abatement Disclosures


The issue of tax abatements and their use as a tool by governments gets its fair share of media attention. In general, tax abatements are a reduction of taxes, offered by a government to a specific taxpayer, typically for the purpose of spurring economic development.

The project on tax abatement disclosures was added to the current agenda in late 2013 after being identified as a high priority of the GASB’s advisory body, the Governmental Accounting Standards Advisory Council (GASAC).

In it, the Board is considering developing disclosure guidance for governments that have granted tax abatements. But first, it has to decide exactly how the term is properly defined and what is included within the scope of the project.

The project would not consider guidance for programs that reduce the tax liabilities of broad classes of taxpayers, such as senior citizens or veterans, and which are not the product of individual agreements with each taxpayer. The project also would not consider issues related to how tax abatements affect the recording of revenue and expenses in the financial statements.

The Board is scheduled to issue an Exposure Draft in the project by the end of 2014.

More information on the Tax Abatement Disclosures project


Pre-Agenda Research


The GASB conducts pre-agenda research on certain accounting and financial reporting areas identified by stakeholders and the Board as topics the GASB may need to address through standards setting.

There are currently four areas actively being researched by the GASB.

One area of pre-agenda research, the potential reexamination of the financial reporting model, is addressed in the From the Chairman’s Desk column. The remainder of this article looks at the other three issues:
  • Asset Retirement Obligations
  • Blending Requirements for Certain Business-Type Activities
  • Extinguishments of Debt, including Debt Refundings.
The Board is looking at the various types of asset retirement obligations in the governmental space, and considering whether current guidance is sufficient or if additional guidance should be developed.
Asset Retirement Obligations

In its research into asset retirement obligations (AROs), the Board is looking at the various types of these obligations—like requirements to retire nuclear power plants, for example—that exist in the governmental space, and considering whether the current guidance is sufficient or if additional guidance should be developed.

Existing GASB standards address AROs related to the closing of municipal landfills and caring for them after closure, but are not specifically applicable to other kinds of AROs.

Blending Requirements for Certain Business-Type Activities

Business-type activities (BTAs) are activities for which a government charges a fee to customers in return for a service, like those provided at a public hospital.
The GASB is researching how certain BTAs should report legally separate entities for which the BTAs are financially accountable.
Here, the GASB is researching how certain BTAs should report legally separate entities for which the BTAs are financially accountable. These “component units” are either shown in a separate column from the BTA in the BTA’s financial statements, or are “blended” with the BTA. The method of presentation depends upon the nature of the relationship between the BTA and the component unit.

Extinguishments of Debt, including Debt Refundings

The GASB is looking at issues related to the early retirement of debt through the lens of the current refinancing environment.
In this area, the GASB is looking at issues related to the early retirement of debt through the lens of the current refinancing environment.

Specifically, the primary research objectives are:
  • To evaluate the effectiveness of the current guidance, and
  • To consider the need for revisions to existing standards.
One key research area relating to extinguishment of debt will involve determining what constitutes a debt extinguishment, which would help clarify the differences in treatments between ordinary or early repayment of debt and extinguishments involving the issuance of refunding bonds.

More information on GASB pre-agenda research