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). These interest rates are the internal rate of return on all payments or receipts related to the contract. GASB 87, Paragraph B40, specifies that the lessor will apply the interest rate it charges the lessee. GASB 96, Paragraph 18, specifies the future subscription payments must be discounted using the interest rate the SBITA vendor charges the agency. These rates are stated in the contract or are implicit interest rates.
If either of those rates is not readily determinable, then state agencies may use their estimated incremental borrowing rate that corresponds to the contract term. The term length includes all non-cancelable periods plus any extensions expected to be exercised. The contract term begins upon delivery, occupancy or when the lessee or subscriber has control of the underlying asset. Existing contract terms are calculated based on the remaining contract payments as of the beginning period of the GASB implementation or the beginning of the earliest period restated.
The state’s incremental borrowing rate can be used to determine the discount rate for the receivable for installment payments related to Public-Private and Public-Public Partnerships under GASB 94. See Types & Examples of PPP Contracts.
The following Contract Term table 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 |
|---|---|---|---|---|---|---|---|---|---|
| 2023 | Jan 01–Mar 31 | 4.61% | 4.39% | 4.25% | 4.00% | 3.93% | 3.83% | 4.12% | 3.90% |
| 2023 | Apr 01–Jun 30 | 4.76% | 4.34% | 4.08% | 3.80% | 3.74% | 3.65% | 3.90% | 3.75% |
| 2023 | Jul 01–Sep 30 | 4.95% | 4.26% | 3.95% | 3.69% | 3.65% | 3.60% | 3.94% | 3.81% |
| 2023 | Oct 01–Dec 31 | 5.39% | 4.92% | 4.60% | 4.31% | 4.25% | 4.15% | 4.42% | 4.24% |
| 2024 | Jan 01–Mar 31 | 5.23% | 4.81% | 4.58% | 4.43% | 4.47% | 4.45% | 4.77% | 4.59% |
| 2024 | Apr 01–Jun 30 | 4.90% | 4.48% | 4.27% | 4.12% | 4.15% | 4.16% | 4.45% | 4.33% |
| 2024 | Jul 01–Sep 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% |
Rates are the quarterly average of Treasury Constant Maturities as reported by the Federal Reserve.