GASB Fact Sheet: Financial Reporting Model Improvements

Link: https://www.gasb.org/cs/Satellite?c=Document_C&cid=1176176133242&pagename=GASB%2FDocument_C%2FDocumentPage

Executive Summary: https://www.gasb.org/cs/Satellite?c=Document_C&cid=1176176134838&pagename=GASB%2FDocument_C%2FDocumentPage

Excerpt:

Would the GASB’s proposal treat borrowing as revenue?

No. In fact, the proceeds of bond sales, bank loans, and other forms of borrowing are not reported as revenue in the governmental funds under the existing standards. Under the proposal, those proceeds increase fund balance in the governmental funds but are reported as inflows (not revenues) in the resource flows statement. The governmental funds
statements are intended to report inflows and outflows of short-term financial resources, not revenues and expenses; that is the purpose of the government-wide financial statements. In the government-wide financial statements, the borrowing proceeds are recorded as an increase in cash and an increase in long-term debt.

Fund balance is the difference between assets and liabilities in the governmental funds. The portion of fund balance that comes from borrowing should not be mistaken for resources that can be used by a government for any purpose, such as paying bills or employee
salaries—that would be assigned fund balance and unassigned fund balance. Unspent borrowing proceeds are reported in accounts such as fund balance restricted for capital projects; in other words, in this example, those resources can be used only for investment in roads, buildings, equipment, and other capital assets.

Date Accessed: 22 February 2021

Publication Site: GASB