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GASB Issues Exposure Draft on Majority Equity Interests

New accounting and financial reporting guidance could be on the way for state and local governments with a majority equity interest in an organization that is legally separate following acquisition.

In its recently issued Exposure Draft, Accounting and Financial Reporting for Majority Equity Interests, the Governmental Accounting Standards Board (“GASB”) proposes that a government’s majority equity interest in a legally separate organization could be disclosed as an investment if the equity interest falls under the board’s definition of an investment. The equity method would be applied to majority equity interests that fit the definition of an investment, with the exception of certain situations. If a majority equity interest in a legally separate entity does not fit the definition of an investment, a government would have to disclose it as a component unit.

Comments on the proposal are due by January 12, 2018.

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