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GASB Summaries |
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GASB Summaries |
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Statement No. 7 Advance Refundings Resulting in Defeasance of Debt STATUS Issue Date: March 1987 Effective Date: Fiscal periods beginning after December 15, 1986 Affects: Amends NCGAS 1, fn20 Amends NCGAS 1, paragraphs 108 and 109 Amends NCGAI 6, paragraph 5 and Appendix Amends NCGAI 9, paragraphs 13 and 14, which superseded NCGAS 1, paragraph 107 fn20 Affected by: Paragraphs 13 and 14 amended by GASBS 14, ¶11, ¶62, and ¶63 Paragraph 43, Note X amended by GASBS 23, ¶4 Primary Codification Section Reference: D20 Abbreviations for Accounting Pronouncements GASBS - GASB Statements GASBI - GASB Interpretations GASBTB - GASB Technical Bulletins GASBCS - GASB Concepts BFC - Basis for Conclusions NCGAS - NCGA Statements NCGAI - NCGA Interpretations SOP - AICPA Statements of Position ASLGU - AICPA Audit Guide SUMMARY This Statement provides guidance on accounting for advance refundings resulting in defeasance of debt recorded in the general long-term debt account group. The proceeds of the new debt should be reported as an "other financing source-proceeds of refunding bonds" in the fund receiving the proceeds. Payments to the escrow agent from resources provided by the new debt should be reported as an "other financing use-payment to refunded bond escrow agent." Payments to the escrow agent made with other resources of the entity should be reported as debt service expenditures. This Statement also provides guidance on disclosures about advance refundings for all governmental entities regardless of where the debt is recorded. Among other things, the economic gain or loss on the refunding should be disclosed. The economic gain or loss is the difference between the present value of the old debt service requirements and the present value of the new debt service requirements, discounted at the effective interest rate (as defined by this Statement) of the new debt and adjusted for additional cash paid. Unless otherwise specified, pronouncements of the GASB apply to financial reports of all state and local governmental entities, including public benefit corporations and authorities, public employee retirement systems, and governmental utilities, hospitals, colleges, and universities. Paragraph 7 discusses the applicability of this Statement. Copyright by Governmental Accounting Standards Board. All Rights Reserved. Used by Permission. Click Here for Order Information
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