The Governmental Accounting Standards Board (GASB) issued Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, in early April 2018. This new standard was issued in response to concerns about transparency related to borrowings other than public debt, such as direct bank loans.
GASB 88 provides a definition of “debt” for the purposes of note disclosures. That definition is “a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established.” This definition is key to knowing what liabilities are included in the disclosure requirements.
The new disclosure requirements include, if material, the amount of unused lines of credit, assets pledged as collateral for debt and certain debt agreement terms. In addition, the standard requires separate disclosures for direct borrowings from other debt. A nonauthoritative, illustrative disclosure is included in an appendix to the Statement.
The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged.