The GASB has issued Statement No. 102, Certain Risk Disclosures to provide some additional guidance related to disclosure of risks. The GASB noted that essential information about some risks is not being regularly disclosed due to the disclosures not being explicitly required.
Statement No. 102 focuses on providing information to the users of governmental financial statements regarding certain concentrations and constraints that are common in the governmental space.
Statement No. 102 defines a concentration as a lack of sufficient diversity related to an aspect of a significant inflow of resources or outflow of resources. A constraint is defined as a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority. Both matters may limit a government’s ability to acquire resources or control spending.
Statement No. 102 requires that governments assess whether a concentration or constraint makes a government that reports a liability for revenue debt vulnerable to the risk of a substantial impact. Statement No. 102 also requires that governments assess if any events that related to a concentration or constraint have occurred, have begun to occur or are more likely than not to begin to occur within 12 months of the financial statement issuance date.
If the above matters are identified, disclosure would be made in the footnotes describing each concentration or constraint. The disclosure would describe the concentration or constraint, as well as the event associated with the concentration or constraint and any actions taken by the government prior to the issuance of the financial statements to mitigate the effect.
The Statement is effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter. Earlier application is encouraged.
The full text of Statement No. 102 can be found here.
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