Reporting Requirements for Annual Financial Reports of State Agencies and Universities
Universities
Interest Rates
Determining the appropriate interest rate is critical for compliance under GASB 87 and GASB 96 for both leases and subscription-based information technology arrangements (SBITAs). GASB 87, paragraph B40, requires a lessor to apply the interest rate charged to the lessee. GASB 96, paragraph 18, requires future subscription payments to be discounted using the interest rate charged by the SBITA vendor. The interest rate represents the internal rate of return on all payments or receipts associated with the contract and are stated in the contract or are implicit in the agreement.
If the stated or implicit rate is not readily determinable, state agencies may use an estimated incremental borrowing rate that corresponds to the contract term. The contract term includes all noncancelable periods plus any extension options that are reasonably expected to be exercised. The term begins upon delivery, occupancy, or when the lessee or subscriber obtains control of the underlying asset.
The state’s incremental borrowing rate may also be used to determine the discount rate for receivables related to installment payments for Public-Private and Public-Public Partnerships under GASB 94. See Types & Examples of PPP Contracts.
The Contract Term table below identifies the estimated incremental borrowing rates for the state of Texas and is updated quarterly.
Contract Term
| Year | Contract Start date | > 1 year | > 2 year | > 3 year | > 5 year | > 7 year | > 10 year | > 20 year | > 30 year |
|---|---|---|---|---|---|---|---|---|---|
| 2024 | April 01–June 30 | 4.90% | 4.48% | 4.27% | 4.12% | 4.15% | 4.16% | 4.45% | 4.33% |
| 2024 | July 01–Sept. 30 | 5.14% | 4.83% | 4.63% | 4.46% | 4.46% | 4.45% | 4.68% | 4.58% |
| 2024 | Oct. 01–Dec. 31 | 4.47% | 4.05% | 3.88% | 3.80% | 3.86% | 3.96% | 4.31% | 4.23% |
| 2025 | Jan. 01–March 31 | 4.25% | 4.15% | 4.10% | 4.12% | 4.20% | 4.28% | 4.57% | 4.49% |
| 2025 | April 01–June 30 | 4.15% | 4.15% | 4.17% | 4.25% | 4.35% | 4.45% | 4.76% | 4.71% |
| 2025 | July 01–Sept. 30 | 4.03% | 3.86% | 3.85% | 3.97% | 4.15% | 4.36% | 4.86% | 4.83% |
| 2025 | Oct. 01–Dec. 30 | 3.88% | 3.72% | 3.69% | 3.80% | 4.01% | 4.26% | 4.83% | 4.85% |
| 2026 | Jan. 01–March 31 | 3.60% | 3.52% | 3.54% | 3.67% | 3.87% | 4.10% | 4.68% | 4.71% |
Rates are the quarterly average of Treasury Constant Maturities as reported by the Federal Reserve.