New Amortized Cost Guidance for Investment Pools

Thoughtware Article Published: Jan 01, 2016
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Executive Summary

On December 23, 2015, the Governmental Accounting Standards Board (GASB) released GASB Statement No. 79, Certain External Investment Pools and Pool Participants (GASB 79). Current GASB guidance on investment pools references Securities and Exchange Commission (SEC) regulations that will change in April 2016. This standard creates an election for governments to continue amortized cost accounting (rather than fair value) for certain investment pools and eliminates reference to SEC guidance. Participants in qualifying pools would be permitted to continue measuring investments at amortized cost.

GASB’s chosen criteria reduces the risk that a pool’s investment portfolio measured on an amortized cost basis does not closely approximate fair value. If elected, external investment pools and pool participants could continue reporting their investments at amortized cost. Since this is an accounting election, investment pools will retain the option to measure investments at fair value, even if they meet all proposed criteria to report at amortized cost. New disclosure is required for qualifying pools and participants about limitations or restrictions on participant withdrawals.

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