Financial Facts

April 4, 2016


On March 29, GASB issued recognition and measurement guidance for governments that benefit from irrevocable split-interest agreements.  A typical irrevocable split-interest agreement provides benefits to at least two beneficiaries-a government and another beneficiary designated by the donor.  The donor transfers the related assets either to the government or to a separate third party.

Examples of these types of agreements include charitable lead trusts, charitable remainder trusts and life interest in real estate.  GASB Statement No. 81, Irrevocable Split-Interest Agreements describes when these types of arrangements constitute an asset for accounting and financial reporting purposes when the resources are administered by a third party.  It also provides expanded guidance for circumstances in which the government holds the assets.

A government that receives resources pursuant to an irrevocable split-interest agreement is required to recognize the assets, liabilities and deferred inflows of resources at the inception of the agreement.  In addition, the standard requires a government to recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests.  A government is required to recognize revenue when the resources become applicable to the reporting period.

The standard takes effect for financial statements for reporting periods beginning after December 15, 2016, and is required to be applied retroactively.

VACo Contact: Vicky Steinruck

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