Spring 2011 issue of Horizons

• Under GASB Statement No. 31, investments in a 2a7-like pool (that is, an investment pool that is not registered with the Securities and Exchange Commission but operates itself in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940) are to be reported at the net asset per share value for the pool. - GASB Statement No. 59 clarifies that a 2a7- like pool must satisfy all the requirements of SEC Rule 2a7, including that a group of individuals fulfills the functions of a board of directors. • The interest-rate risk disclosures required by GASB Statement No. 40 are only applicable to debt mutual funds and investment pools, not to equity mutual funds and investment pools. • Contracts that require penalty payments for nonperformance are not considered derivatives under GASB Statement No. 53. - Similarly, contracts based on specific volumes of sales or service revenues are not considered derivatives under GASB Statement No. 53. • Certain financial guarantee contracts are not considered to be derivatives under GASB Statement No. 53. GASB Statement No. 59 modifies the definition of such financial guarantee contracts to state that such contracts must not be entered into as an investment derivative instrument primarily for the purpose of obtaining income or profit. GASB Statement No. 59 is effective for periods beginning after June 15, 2010. GASB Statement No. 60 Accounting and Financial Reporting for Service Concession Arrangements GASB Statement No. 60 defines a service concession arrangement as an arrangement between a transferor (a government) and an

operator (governmental or nongovernmental entity) in which: 1. The transferor conveys to an operator the right and related obligation to provide services through the use of infrastructure or another public asset in exchange for significant consideration, AND 2. The operator collects and is compensated by fees from third parties. Examples of service concession arrangements include the operation of a city zoo or a parking garage on behalf of a government, or the construction and operation of a tollway on behalf of a government. Transferors under service concession arrangements should recognize the facility subject to the arrangement as a capital asset. New facilities constructed or acquired by the operator should be reported at fair value by the transferor. The transferor will also recognize a liability for the present value of significant contractual obligations to sacrifice financial resources as a result of the arrangement. Such obligations might include obligations for capital improvements, insurance, or

maintenance to the underlying facility, providing a specific level of police and emergency services for the facility, or providing a minimum level of maintenance to areas surrounding the facility. As obligations are satisfied, a deferred inflow of resources

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