GASB 69:
Government Combinations
GASB 69 – Government Combinations
Table of Contents
EXECUTIVE SUMMARY ........................................................................................................................................... 3
BACKGROUND ....................................................................................................................................................... 3
KEY PROVISIONS .................................................................................................................................................... 3
OVERVIEW & SCOPE .......................................................................................................................................................3
MERGER & TRANSFER OF OPERATIONS ..............................................................................................................................4
Mergers .................................................................................................................................................................4
Transfers of Operations ........................................................................................................................................5
Recognition & Measurement ................................................................................................................................5
GOVERNMENT COMBINATION BY ACQUISITION ....................................................................................................................6
DISPOSALS OF GOVERNMENT OPERATIONS .........................................................................................................................7
DISCLOSURE REQUIREMENTS ............................................................................................................................................8
Mergers & Transfers of Operations ......................................................................................................................8
Acquisitions ...........................................................................................................................................................8
Disposals of Government Operations ...................................................................................................................8
PRACTICAL COMBINATION CONSIDERATIONS .......................................................................................................................8
CONCLUSION ......................................................................................................................................................... 8
APPENDICES........................................................................................................................................................... 9
CONTRIBUTOR ..................................................................................................................................................... 16
2
GASB 69 – Government Combinations
Executive Summary
The Government Accounting Standards Board (GASB) issued financial reporting guidance for combinations and
disposals of operations in the governmental environment. Statement No. 69, Government Combinations and
Disposals of Government Operations, satisfies the need for guidance specific to governmental combinations and
disposals. Contained within the standard are long-awaited criteria for identifying government combinations, as
well as criteria for distinguishing between different types of government combinations (merger versus acquisition
versus transfer of operations). In general, carrying value is used to measure assets and liabilities in merger and
transfer of operations transactions, while acquisition values are used to measure assets and liabilities in
government acquisitions. Disclosure requirements are comprehensive. The accounting and financial reporting
guidance is effective for government combinations and disposals of government operations occurring in financial
reporting periods beginning after December 15, 2013, applied on a prospective basis. Early adoption is
encouraged.
Background
The timing is right. Throughout the U.S., government combination discussions are prevalent—caused by the
increasing cost of core operations and the need to gain economies of scale. When cutting costs isn’t enough,
mergers, acquisitions, spinoffs or transfers become attractive options for governments striving to serve their
constituents. The primary objective of Statement No. 69 is to develop financial reporting requirements for
government combinations accomplished through mergers and acquisitions. Prior to the release of the statement
in January 2013, governments involved in merger and acquisition transactions often looked to the purchase and
pooling of interest methods applied to government combinations, the guidance in Accounting Practice Bulletin
(APB) Opinion No. 16, Business Combinations.
Key Provisions
Overview & Scope
Statement No. 69 addresses the needs of government constituents through enhancement of the accounting,
measurement and reporting, display and disclosures of combined financial statement elements. It requires
disclosures about government combinations and disposals of government operations in sufficient detail to provide
users with the information needed to evaluate the nature and financial effects of those transactions.
GASB No. 69 does not replace or amend any existing standard but adds to the framework’s depth of guidance. The
scope of the standard includes government combinations that occur in general governmental activities, businesstype activities and fiduciary activities. The statement does not address combinations in which a government
acquires another organization that continues to exist as a separate entity or equity interests in organizations that
remain legally separate. Forms of government combination arrangements included under the scope of Statement
No. 69 include annexations, reorganizations and shared services agreements meeting certain criteria. The
statement also addresses disposals of operations from the disposing government’s perspective when the disposing
government transfers or sells operations.
The appropriate method of combination accounting and reporting is determined in two phases. First, entities
evaluate the transaction to determine whether it qualifies as a combination. To qualify as a government
combination, an arrangement results in the continuation of a substantial portion of the services provided by the
previously separate entities or their operations after the transaction has occurred. Service continuation means the
new or continuing government intends to provide services similar to the formerly separate governments,
organizations or operations, e.g., when a city and county join together to form a consolidated government and the
same services continue.
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GASB 69 – Government Combinations
A government combination assumes the continuation of a substantial portion of the services to the precombination constituents after the transaction has occurred. Service continuation is an important distinction, as
accounting and reporting is significantly different from accounting and reporting of an acquisition of assets.
After meeting the criteria for a government combination, the entity classifies the combination in one of three
categories—as a merger, acquisition or transfer of operations, based on the significance of consideration given and
the post-government structure. The appropriate accounting and financial reporting for government combinations
is based on whether consideration is transferred.
For the purposes of distinguishing between government mergers and government acquisitions, the defining
factor is the transfer of significant consideration—in relation to the assets and liabilities acquired.
Merger & Transfer of Operations
Mergers
A merger is defined as a combination of legally separate entities that does not entail the exchange of significant
consideration. Some merging entities will cease to exist as legally separate entities, and a new government will be
created. In other mergers, a legally separate entity may be dissolved and its operations absorbed into one or more
existing governments without the creation of a new entity. An existing entity continues to exist in an altered state.
The initial presentation of a merged government’s financial statements will depend on whether or not a new
government entity is created as the result of the merger. When a new legally separate government is created as a
result of the merger arrangement, the merger date is the date on which the combination becomes effective.
When a new legally separate entity is not created as a result of the merger arrangement, the financial statements
of the continuing government are prepared as if the merger had taken place at the beginning of the reporting
period, regardless of the date of the actual merger. Regardless of whether the merger results in a new
government, assets, deferred outflows, liabilities and deferred inflows of the combining entities are measured at
carrying value. GASB made this decision considering that the same assets will be used to provide essentially the
same services before and after the government merger. In addition, since the entities do not exchange significant
consideration, there is no basis for financial position revaluation.
EXHIBIT 1 – Post-Merger Initial Reporting
GASB 69 Recognition & Measurement
Post-Merger Structure
Initial Reporting
New government entity is created
The merger effective date, or the date the merging
governments are combined, becomes the date the
financial statement elements are measured and
financial reporting period begins.
Existing government continues to exist
The merger date is the beginning of the reporting
period in which the combination occurs, regardless of
the actual date of the merger.
Basing the presentation of financial statements on the merger date (for mergers where a new government is
created) may result in “short-year” presentations of the merged government’s initial reporting period. The
board noted that, in practice, government mergers generally are designed to become effective on the first day of
the merged government’s fiscal year.
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GASB 69 – Government Combinations
Transfers of Operations
Transfers of operations are combinations without the transfer of an entire legally separate entity or exchange of
significant consideration. The effective date of the transfer is the date the government obtains control of the
assets and becomes obligated for the liabilities of the operation transferred. If a transfer of operations results in a
new government, the new government’s initial reporting period would begin at the effective date of the transfer.
Operations are defined with some subjectivity and include many ways in which governments deliver services to
their constituents. By definition, they are an integrated set of activities that comprise less than a legally
separate entity. Operations are conducted and managed for the purpose of providing an identifiable service,
function or activity with associated assets and liabilities. Therefore, the transfer of operations involves only the
assets and liabilities previously used by an entity to provide those specific services. Caution should be used in
identifying operations based solely on fund accounting, as a single fund may contain multiple activities or,
conversely, a single activity may be allocated across multiple funds.
The definition of a transfer of operations is pivotal in determining whether the service continuation provision has
been met or whether a government has merely acquired a group of assets and related liabilities (a noncombination
activity). The determining question is: Will the merged or acquiring government continue to provide services
similar to those formerly provided by the individual governments or organizations? Professional judgment is
required to determine whether the scope of services to be provided and the manner in which those are provided
constitutes a “similar” service.
GASB clearly distinguished government merger transactions from acquisitions or contributions of assets and
liabilities. Upon classification as a combination, the distinction between a government merger and a
government acquisition is based on whether an exchange of significant consideration is present.
Transfers of operations are generally entered into for substantially the same reasons as mergers, and both are
executed without significant, if any, financial consideration. Consequently, both types of combinations maintain
a predominately historical cost perspective (carryforward method) for measuring financial statement elements
and have similar accounting and financial reporting requirements.
Recognition & Measurement
Entities will use a three-step process to measure the carrying values of a merged government’s or a transfer of
operations’ financial statement elements. The first step is to identify and bring forward the carrying values. The
second step is to adjust the carrying values of one or more of the entities for conformity with authoritative
guidance, e.g., generally accepted accounting principles (GAAP). Lastly, adjust the carrying values of one or more
of the entities as desired to bring into alignment the accounting principles to be used by the new or continuing
combined government.
In an instance where different accounting policies are in effect for the combining governments, the combining
government is allowed to change its accounting policies to conform differences in accounting principles. The
differences due to the change in accounting principles should be reflected in the opening balances of the merged
government’s financial statements. Changes to conform or modify accounting estimates should be made on a
post-combination basis and recognized in the merged government’s flows statement. However, the new
government is not precluded from having multiple accounting policies, as long as they are in conformity with
authoritative guidance for state and local governments.
Capital asset impairment should be evaluated as of the merger date for capital assets of the dissolving government
in accordance with GASB Statement 42, Accounting and Financial Reporting for Impairment of Capital Assets and
for Insurance Recoveries.
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GASB 69 – Government Combinations
Elimination of Transactions
Governments should consider the elimination of transactions between the merging governments that occurred
before the combination that would be included in the flows statement of the continuing government.
Governments would identify these transactions during the process of aggregating interfund services provided and
used in accordance with the provisions of Statement 34, Basic Financial Statements – and Management's
Discussion and Analysis – for State and Local Governments. Receivables and payables between the merging
entities also should be eliminated in accordance with Statement No. 34.
Transfer of operations includes (a) reorganizations or annexations (in which operations are combined through
jurisdictional changes in boundaries) that include transfers of assets and liabilities between two or more legally
separate governments that will continue to exist and (b) shared service arrangements in circumstances where
governments jointly agree to provide services and transfer resources to new or existing legally separate entities
in order to provide those services.
Government Combination by Acquisition
Acquisition transactions are those where a government acquires another entity or its operations in exchange for
significant consideration. The acquiring government measures assets in acquisition transactions at acquisition
value.
In order to qualify for classification as a government acquisition, the consideration would be required to contain
characteristics of “significant consideration” in relation to the assets and liabilities acquired. Consideration is
defined as the assets transferred or liabilities incurred to the former owners of the acquired organization.
The assets and liabilities of a government acquired through financial consideration must be specifically identified
and measured at acquisition value. Acquisition value equates to a market-based entry price as of the date the
government acquires assets and assumes liabilities. Exceptions to the use of acquisition value include:
•
Measurement of the acquired entity's employment benefit arrangements
•
Deferred outflows of resources and deferred inflows of resources (except those relating to certain
effective hedging arrangements)
•
Investments including derivatives required to be reported at fair value
•
Certain solid waste and pollution remediation obligations (and assets, if any) where the value would
be determined using existing GAAP
In addition, goodwill (or deferred outflows of resources from previous acquisition transactions for a governmental
entity) has no carryover value and is excluded from recognition and measurement for government acquisitions.
Special requirements apply to contingent consideration and to intraentity government acquisitions where the
assets are transferred between components of the same financial reporting entity. In general, consideration
contingent on future events should be recognized as a component of consideration when the payment of
consideration is probable and the amount is reasonably estimable in conformity with GASB Statement 62. The
assets transferred between components of the same financial reporting entity would not be revalued but instead
would be recorded and measured using existing carrying values.
Consideration given in excess of the acquiring government’s net assets is recorded as a deferred outflow of
resources attributable to future periods recognized in a systematic and rational manner using professional
judgment considering the acquisition circumstances.
Consideration given less than the net assets acquired is recognized in the period of acquisition as a reduction to
the acquisition values assigned to the noncurrent assets. An exception occurs when there is evidence that the
seller’s intent is to accept a lower price in order to provide economic benefit without directly receiving equal value
6
GASB 69 – Government Combinations
in exchange. In the latter situation, the acquiring government would recognize a contribution equal to the excess
net position received.
Entities will account for acquisition-related costs separately as an outflow of resources in the period the costs are
incurred, with special requirements for costs to issue debt securities.
Combinations in which a government combines with another organization and simply assumes the negative net
position of the acquired entity should not be treated as a government acquisition. In this situation, the exchange
of substantial consideration is missing.
Arrangements that involve the transfer of assets and liabilities in exchange for a nominal amount more closely
resemble a government merger than the acquisition of another organization.
In situations where the acquiring government is unable to measure specific assets or liabilities at the reporting
date, the acquiring government would record the assets at estimated provisional amounts. Measurement
adjustments would be made on a prospective basis in the period in which they occur, similar to the reporting
requirements for changes in accounting estimates.
Transfer or sales of operations within the same financial reporting entity should be accounted for in accordance
with the guidance contained in GASB No. 48, Sales and Pledges of Receivables and Future Revenues and IntraEntity Transfers of Assets and Future Revenues.
EXHIBIT 2 – Government Combinations Measurement Basis
Combination Type
Government acquisition
Acquired Unit*
Separate legal entity or
its operation
Government merger
Transfer of operations
Significant Consideration
Exchanged
Measurement Basis
Yes
Acquisition value
Separate legal entity
No
Carrying value **
Operations of separate
legal entity
No
Carrying value**
*The scope of Statement No. 69 applies to government combinations where a governmental entity combines with a not-for-profit or a for-profit
entity as long as the new or continuing organization is a government.
**Also termed “carryforward method”
Disposals of Government Operations
Disposals of a government’s operations result in the removal of specific activities of a government through transfer
or sale resulting from a government combination. Disposal transactions are required to be recognized as of the
effective date at which operations are transferred or sold. A disposing government would recognize a gain or loss
on the disposal of operations, based on the effective transfer date of a transfer of operations or the date of sale
for operations that are sold. Operating activities up to the measurement date are not included in the calculation
of gain or loss—only the costs directly associated with the disposal should be included.
Computation of the gain or loss includes only those costs directly attributable to the disposal transaction.
Examples include costs associated with employees and professional services fees.
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GASB 69 – Government Combinations
The disposal of operations should be reported as a special item in the flows statement in the period in which the
disposal occurs. Disposal of an operation is measured as the difference between the net position of the disposed
operation and any consideration received, less any expenditure directly associated with the disposal. Expenditures
directly associated with the disposal of operations include involuntary termination benefits, costs of terminating
long-term contracts early and professional costs such as legal or accounting fees directly associated with the
transfer or sale. Expected costs should be estimated and included in the gain or loss related to the transfer or sale
of an operation as of the effective date of the disposal if it is probable a liability will be incurred and the obligation
can be estimated.
Professional services expenditures directly associated with the disposal of government operations may be similar
to an acquirer’s acquisition costs. The acquisition agreement will dictate which entity absorbs the costs.
Disclosure Requirements
Due to the complexity and variety of combination arrangements, notes are an integral part of the required
disclosures. Disclosure requirements include information such as the type of government combination, the
effective combination date, the entities involved, the purpose of the combination, disclosure of the nature of and
reasons for changes in accounting principles and the nature of modifications to transferred balances. Disclosures
about disposals of government operations will help users assess the effects of the disposal in relation to the
government’s activities as a whole. (Refer to Appendix 5 for note disclosure requirements.)
Mergers & Transfers of Operations
To explain pertinent details of government mergers and transfers of operations, the notes must present the
carrying values of assets, deferred outflows of resources, liabilities, deferred inflows of resources of the combining
entities and the adjustments (to reflect the consistent application of accounting principles and capital asset
impairment) to arrive at the merged or transferred balances.
Acquisitions
Regarding acquisitions, the acquiring government should disclose the net position of the entity or operation that is
acquired and a brief description of the nature of consideration transferred, including terms of financing
arrangements, as applicable, and its acquisition value.
Disposals of Government Operations
The disposing government would disclose a detailed description of the revenues and expenditures/expenses of the
operations transferred or sold.
Practical Combination Considerations
The carryforward method of combining assets requires congruent financial statements. Therefore, separate
financial statements of each combined government are required to be reported in conformity with GAAP as of the
combination date.
Government combinations may result in the creation of new legally separate entities. At the time of combination,
the structure of the new financial reporting entity will require evaluation to determine whether relationships such
as joint ventures, jointly governed organizations and related organizations of the combining governments still
exist. The definition of these relationships will often affect and define the structure of the new governing board.
Conclusion
The guidance in GASB 69 involves comprehensive disclosures and many time-sensitive, subjective computations.
New standards bring new risks to material financial reporting misstatements, and GASB 69 is no exception. Efforts
to mitigate those risks generally translate into significant advance planning for financial statement preparers.
Governments should assess their existing resources, policies and procedures and the impact of this evaluation on
their financial reporting compliance requirements.
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GASB 69 – Government Combinations
Appendices
APPENDIX 1 – MERGERS, NEW GOVERNMENTS – Recognition, Measurement & Disclosure
Accounting Topic
Merger Accounting – New Governments
GASB 69 Guidance
1
Note
Disclosure
Financial Statement Element –
Measurement Date
Financial statement elements are measured as of the date on which the
merger becomes effective. Presentation of the financial statements begins
as of the merger date.
N/A
Financial Statement Element
Recognition – General
New government recognizes financial statement elements based on
accounting principles applied in the dissolved entity’s most recent financial
statements, with special considerations for adjustment for accounting
principles alignment, capital asset impairment and adjustments for
conformity with authoritative guidance. Regarding governmental fund
financial statements, individual financial elements reported in governmental
funds would be recognized pursuant to the financial reporting requirements
for governmental funds.
N/A
Financial Statement Elements
Measurement –
Adjustments for Conformity
with Authoritative Guidance
The new government should adjust the carrying values of one or more of the
merging entities to bring the financial statement elements into conformity
with authoritative guidance for state and local governments. Adjustments
would be made to the opening balances carried forward into the new
2
government financial statements.
Explanation of
Adjustments
Financial Statement Elements
Measurement –
Adjustments for Accounting
Principles Alignment
The new government has the option to adjust the carrying values of the
dissolved entity to bring inconsistent accounting principles into alignment.
Adjustment would be made to the opening balances carried forward into the
new government's financial statements.
Financial Statement Elements
Measurement –
Adjustments for Capital Asset
Impairment
Capital assets identified for disposal either are (a) measured and reported at
carrying value if the new government will use those assets or (b) evaluated
for impairment (i) if the new government will not use them or (ii) if the new
3
government will use the capital asset in a changed manner or duration.
Financial Statement Elements
Based on Accounting
Estimates
Financial statement elements based on accounting estimates should be
carried forward into the opening balances of a new government without
modification. Changes in accounting estimates would be recognized
prospectively as period costs in the new merged government’s flows
statement.
(1)
For purposes of this schedule, “financial statement elements” refers to assets, deferred outflows of resources, liabilities or deferred
inflows of resources.
(2)
The new government should not recognize financial statement elements that authoritative guidance for state and local governments
does not require or permit the merging governments to recognize, e.g., intangible assets that were not required to be reported.
(3)
In accordance with the provisions of Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for
Insurance Recoveries, as amended
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GASB 69 – Government Combinations
APPENDIX 2 – MERGERS, CONTINUING GOVERNMENTS – Recognition, Measurement & Disclosure
Accounting Topic
Merger Accounting – Continuing Governments
GASB 69 Guidance
Note
Disclosure
1
Financial Statement Element –
Measurement Date
The continuing government measures the financial statement elements as
of the merger date at the carrying values reported in the separate financial
statements of the merging entities. Regardless of the actual date of
merger, the merger date for financial reporting purposes is the beginning
of the reporting period in which the combination occurs as though the
entities had been combined at the beginning of the continuing
government’s reporting period.
N/A
Financial Statement Element
Recognition – General
The continuing government recognizes dissolved entity based on
accounting principles applied in the dissolved entity’s most recent financial
statements, with special considerations for adjustment for accounting
principles alignment, capital asset impairment and adjustments for
conformity with authoritative guidance. Regarding governmental fund
financial statements, individual financial elements reported in
governmental funds would be recognized pursuant to the financial
reporting requirements for governmental funds.
N/A
Financial Statement Elements
Measurement – Adjustments
for Conformity with
Authoritative Guidance
The continuing government should adjust the carrying values of one or
more of the merging entities to bring the financial statement elements into
2
conformity with authoritative guidance for state and local governments.
Adjustments would be made before the continuing government combines
financial statement elements.
Explanation of
Adjustments
Financial Statement Elements
Measurement – Adjustments
for Accounting Principles
Alignment
The continuing government has the option to adjust the carrying values of
the merging entities to bring inconsistent accounting principles into
alignment. Adjustment would be made to the opening balances carried
forward into the merged government's financial statements.
Explanation of
Adjustments in
the context of
a restatement
disclosure
Financial Statement Elements
Measurement – Adjustments
for Capital Asset Impairment
Capital assets identified for disposal either are (a) measured and reported
at carrying value if the continuing government will use those assets or (b)
evaluated for impairment (i) if the continuing government will not use
them or (ii) if the continuing government will use the capital asset in a
3
changed manner or duration.
Explanation of
Adjustments
Financial Statement Elements
Based on Accounting
Estimates
Financial statement elements based on accounting estimates should be
carried forward into the opening balances of a merged government
without modification; accounting estimate changes would be recognized
prospectively as period costs in the flows statement of the continuing
government.
N/A
Eliminations
Transactions (and payables and receivables balances) between the merging
entities that occur before the combination that would be included in the
flows statement of the continuing government should be considered for
elimination in the combination process; special considerations are provided
for interfund services provided and used.
N/A
(1)
For purposes of this schedule, “financial statement elements” refers to assets, deferred outflows of resources, liabilities or deferred
inflows of resources.
(2)
The continuing government should not recognize financial statement elements that authoritative guidance for state and local
governments does not require or permit the merging governments to recognize, e.g., intangible assets that were not required to be
reported.
(3)
In accordance with the provisions of Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for
Insurance Recoveries, as amended
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GASB 69 – Government Combinations
APPENDIX 3 – MERGERS, TRANSFER OF OPERATIONS – Recognition, Measurement & Disclosure
Accounting Topic
Transfer of Operations
GASB 69 Guidance
Note
Disclosure
Financial Statement Element –
Measurement Date and
Amounts
A continuing government would report a governmental or
nongovernmental entity transfer of operations as a transaction in its
financial statements as of the effective transfer date, measuring the
1
transferor financial statement elements at carrying value. If a transfer
results in the formation of a new government, the new government’s
reporting period begins at the effective transfer date. The effective
transfer date is the date the transferee government obtains control of the
assets and becomes obligated for the liabilities of an acquired entity or its
operations.
N/A
Financial Statement Element
Recognition – General
The net position received or assumed by a continuing transferee
government should be reported as a special item. Financial statement
elements of an operation received when establishing a new government
should be included in the statement of net position at the beginning of its
initial reporting period.
N/A
Regarding government fund financial statements, individual financial
elements reported in governmental funds would be recognized pursuant to
the financial reporting requirements for governmental funds. The
transferee government would recognize the net fund balance acquired as a
special item in the statement of revenues, expenditures and changes in
fund balances in the period in which the transfer occurs.
The acquiring government would not recognize deferred outflows of
resources of the transferor, e.g., goodwill by a nongovernmental entity.
Financial Statement Elements
Measurement – Adjustments
for Conformity with
Authoritative Guidance
The continuing government should adjust the carrying values of one or
more of the transferor’s operations to bring the financial statement
elements into conformity with authoritative guidance for state and local
2
governments. The transferee government would make adjustments
before the transferee government recognizes the transferor’s financial
statement elements.
Explanation of
Adjustments
Financial Statement Elements
Measurement – Adjustments
for Accounting Principles
Alignment
The transferee government has the option to adjust the carrying values of
the transferor’s financial statement elements to bring inconsistent but
2
acceptable accounting principles into alignment. The transferee
government would make adjustments to the balances carried forward into
its financial statements.
Explanation of
Adjustments
Financial Statement Elements
Measurement – Adjustments
for Capital Asset Impairment
Capital assets identified before the effective transfer date for disposal
either are (a) measured and reported at carrying value, if the transferee
government will use those assets, or (b) evaluated for impairment (i) if the
transferee government will not use them or (ii) if the transferee
3
government will use the capital asset in a changed manner or duration.
Explanation of
Adjustments
Financial Statement Elements
Based on Accounting
Estimates
The transferor’s financial statement elements based on accounting
estimates should be carried forward into the opening balances of the
transferee government's financial statements without modification. If
changes in accounting estimates are made, they would be recognized
prospectively as period costs in the flows statement of the continuing
government.
N/A
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GASB 69 – Government Combinations
(1)
For purposes of this schedule, “financial statement elements” refers to assets, deferred outflows of resources, liabilities or deferred
inflows of resources.
(2)
The transferee government should not recognize financial statement elements that authoritative guidance for state and local
governments does not require or permit the merging governments to recognize, e.g., intangible assets that were not required to be
reported.
(3)
In accordance with the provisions of Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for
Insurance Recoveries, as amended
12
GASB 69 – Government Combinations
APPENDIX 4 – ACQUISITIONS – Recognition, Measurement & Disclosure
Accounting Topic
Acquisitions
GASB 69 Guidance
Note
Disclosure
Financial Statement Element –
Measurement Date and
Amounts
The acquiring government would measure the financial statement
1
2
elements acquired at acquisition value as of the acquisition date. The
acquisition date is the date the acquiring government obtains control of the
assets and becomes obligated for the liabilities of an acquiree entity or its
operations. In general, the acquisition date coincides with the closing
date—the date the acquiring government provides consideration.
N/A
Recognition – Deferred
Outflows of Resources and
Deferred Inflows of Resources
Deferred outflows of resources and deferred inflows of resources are
measured at their carrying values, with the exception of those related to
certain effective hedging arrangements.
N/A
The acquiring government would not recognize deferred outflows of
resources from previous acquisition transactions in which consideration
provided exceeded the net position acquired (or goodwill by a
nongovernmental entity) on the books of the acquired entity.
Acquirer’s Acquisition Costs
Acquisition costs are the costs the acquiring organization incurs to effect a
government transaction, such as fees for legal, accounting, valuation,
professional or consulting services. The acquiring government should
recognize acquisition costs as an expense/expenditure in the periods in
which the costs are incurred and the services received. Costs to issue debt
are not considered acquisition costs.
N/A
Financial Statement Element
Recognition – General
The acquiring government should evaluate the financial statement
elements acquired or assumed in accordance with authoritative guidance
for state and local governments. The acquiring government should
recognize significant items not previously booked by the acquired entity
(because it was not required to do so).
N/A
Governmental Fund Reporting
Regarding government fund financial statements, individual financial
elements reported in governmental funds would be recognized pursuant to
the financial reporting requirements for governmental funds. The
acquiring government would recognize the net fund balance acquired as a
special item in the statement of revenues, expenditures and changes in
fund balances in the period of acquisition.
N/A
Financial Statement
3
Recognition – Consideration
Provided Exceeds the Net
Position Acquired
The difference between consideration amounts given in excess of the net
position acquired is recorded as a deferred outflow of resources. The
deferred outflow of resources would be attributed to future periods in a
systematic and rational manner, based on professional judgment,
considering the relevant circumstances of the acquisition. The acquiring
government should review and consider revision of the estimate of the
attribution period in subsequent reporting periods.
Explanation of
Consideration
Provided
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GASB 69 – Government Combinations
Financial Statement
Recognition – Consideration Is
Less than the Net Position
Acquired
When consideration is less than the net position acquired, the excess net
position acquired and consideration provided would be eliminated through
the reduction of the acquisition values assigned to the noncurrent assets,
other than financial assets, that are acquired. Special provisions apply
when the noncurrent assets have been reduced to zero. An exception
occurs when the acquisition arrangement indicates the excess
consideration should be recognized as a contribution, such as when the
seller intends to accept a lower price in order to provide economic aid to
the acquiring government.
Explanation of
Consideration
Provided
Financial Statement Elements
Measurement – Adjustments
for Conformity with
Authoritative Guidance
The continuing government should adjust the carrying values of one or
more of the transferor’s operations to bring the financial statement
elements into conformity with authoritative guidance for state and local
2
governments. The transferee government would make adjustments
before the transferee government recognizes the transferor's financial
statement elements.
Explanation of
Adjustments
Financial Statement Elements
Measurement – Adjustments
when Measurements Are not
Finalized
When the initial measurement of the assets is not finalized by the end of
the reporting period in which the government acquisition occurs, the
acquiring government would estimate recorded amounts. The acquiring
government then would prospectively update the estimated amounts to
reflect new information obtained about facts and circumstances that, if
known at the acquisition date, would have affected the measurement of
amounts recognized as of that date.
N/A
Financial Statement Elements
Based on Accounting
Estimates
Financial statement elements based on accounting estimates should be
carried forward into the opening balances of a merged government
without modification.
N/A
(1) For purposes of this schedule, “financial statement elements” refers to assets, deferred outflows of resources,
liabilities or deferred inflows of resources.
(2) For purposes of this statement, acquisition value is based on a market-based exchange; market value represents the
price that would be paid for acquiring similar assets, having similar service capacity, or for discharging the liabilities
assumed in an orderly transaction.
(3) Consideration is measured as the sum of the values of the assets remitted or liabilities incurred to the former owners
of the acquired entity. Consideration may include financial and nonfinancial assets, e.g., cash, investments or capital
assets. A liability incurred may represent an obligation to provide consideration to the former owners of the acquired
entity. The negative net position acquired does not, in and of itself, constitute consideration given.
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GASB 69 – Government Combinations
APPENDIX 5 – Government Combinations Note Requirements
Note Requirements in the Period in which a Combination or Disposal Occurs
Note Disclosure
Mergers
Transfer of Acquisitions
Operations
Disposals
In the period in which the combination occurs:
(1) A brief description of the government
combination, including identification of the
entities involved and whether the
participating entities were included within
the same financial reporting entity
x
x
x
N/A
x
x
N/A
N/A
x
x
N/A
N/A
x
x
N/A
N/A
N/A
N/A
x
N/A
(2) The date of the combination
(3) A brief description of the primary reasons
for the combination
The amounts recognized as of the merger date or the
effective transfer date, as follows:
(1) Total assets – distinguishing between
current, capital and other assets
(2) Total deferred outflows of resources
(3) Total liabilities – distinguishing between
current and long-term liabilities
(4) Total deferred inflows of resources
(5) Total net position by component
A brief description of the nature and amount of
significant adjustment made to bring into conformity
the individual accounting policies or to adjust for
impairment of capital assets resulting from the
merger or transfer
The initial amounts recognized by the new or
continuing government, if different from the
recognized amounts before consideration of
adjustments due to alignment of accounting policies
or impairment of capital assets
In the period in which the combination occurs:
(1) A brief description of the consideration
provided
(2) The total amount of net position acquired
as of the date of acquisition
(3) A brief description of contingent
consideration arrangements, including the
basis for determining the amount of
contingent payments
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GASB 69 – Government Combinations
In the period in which the operations are transferred
or sold:
A brief description of the facts and
circumstances leading to the disposal of the
operations, and the following additional items,
if not separately presented in its financial
statements:
a.
Total expenses – distinguishing
between operating and nonoperating,
if applicable
b.
Total revenues – distinguishing
between operating and nonoperating,
if applicable
c.
Total governmental fund revenues and
expenditures, if applicable
n/a
n/a
n/a
x
Contributor
Connie Spinelli
Director
303.861.4545
[email protected]
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