GASB 53 on Derivatives Now Applicable
Posted 1-13-2011 | By David Mol | Download Article
GASB’s Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, is effective for 2010 financial statements. If you haven’t given it much thought, now is the time.
By way of background, GASB defines a derivative as a financial instrument that has all of the following characteristics:
- Settlement factors
- Leverage
- Net Settlement
Many smaller- and even medium-sized governments generally do not enter into derivative instruments.
The more common derivatives are interest rate swaps, interest rate locks, options, forward contracts and future contracts. For example, a government that has issued variable rate debt may have entered into an interest rate swap agreement to hedge its exposure to interest rate risk.
We recommend organizations review their financial instruments to identify potential derivatives. If you have questions about implementation of GASB 53, please contact David Mol, CPA, at 651-407-5803 or dmol@hlbtr.com, or Peggy Moeller, CPA, at 651-407-5832 or pmoeller@hlbtr.com.