GASB Publishes Exposure Draft on Conduit Debt Obligations

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The Governmental Accounting Standards Board (GASB) has issued an Exposure Draft on the topic of conduit debt obligations. GASB’s research indicated a need for more specific guidance to bring consistency in the treatment of conduit debt obligations among governments. The Exposure Draft is posted on GASB’s website.

The proposed standard provides a list of defining characteristics that must be present to have a conduit debt obligation. One of those characteristics is having at least three parties involved: a government that issues the debt, a third party that is obligated for the debt and someone who holds the debt. If an issuer and third-party obligor are within the same financial reporting entity (a primary government and its component units), the arrangement would not be covered by the proposed standard.

A government that issues a conduit debt obligation would not recognize a liability for the debt. However, it might need to recognize a liability for certain contingencies. In addition, if the debt proceeds are used to construct or acquire a capital asset and the issuer retains title to the capital asset from the beginning of the arrangement, the proposed standard outlines recognition and measurement guidance under three scenarios, none of which are reported as leases by the issuer:

  • Issuer relinquishes title at the end of the arrangement
  • Issuer retains title and third-party obligor has exclusive use of the entire capital asset
  • Issuer retains title and third-party obligor has exclusive use of portions of the capital asset

Proposed disclosure requirements include a general description of the issuer government’s conduit debt obligations and the aggregate outstanding principal amount of conduit debt obligations by type of commitment. Additional disclosures would be required if a liability is recognized for certain contingencies.

The proposed effective date is for reporting periods beginning after December 15, 2020, with earlier application encouraged.

Comments are due November 2, 2018, and should be addressed to the Director of Research and Technical Activities, Project No. 26-6, at All comments received are posted on GASB’s website.



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