Preliminary Views Document on Derivatives

Accounting Technology, July, 2006

The Governmental Accounting Standards Board has issued a preliminary views document that intends to improve the accounting and financial reporting of derivatives by state and local governments. The proposal would require that the fair value of derivatives be reported in the financial statements as well as the change in that fair value.

If, however, a derivative is effectively hedging (reducing) the risk it was created to address, then the annual changes in the derivative's fair value would be deferred and reported in a government's balance sheet. (c) 2006 Accounting Technology and SourceMedia, Inc. All Rights Reserved.