Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 4 – Short-Term Debt

According to GASB 38, paragraph 12, agencies must report details about short-term debt activity during the fiscal year, even if no short-term debt is outstanding at fiscal year-end. Short-term debt results from borrowings characterized by anticipation notes, use of lines of credit and similar loans. Details include:

• A schedule of changes in short-term debt disclosing:
  • Beginning balances
  • Increases
  • Decreases
  • Ending balances
• The purpose for which the short-term debt was issued.

For recording short-term debt in USAS, use CL short-term debt — notes & loans payable (GL 1068).

Required Note Disclosures

Per GASB 88, agencies are required to disclose the following summarized information:

• Amount of unused lines of credit
• Assets pledged as collateral for debt
• Terms specified in debt agreements related to significant:
  • Events of default with finance-related consequences
  • Termination events with finance related consequences
  • Subjective acceleration clauses

Per GASB 62, paragraph 38, short-term debt may properly be excluded from current liabilities if both of the following conditions are met:

• The agency must intend to refinance the obligation on a long-term basis.
  –AND–
• The agency must demonstrate an ability to consummate the refinancing.

According to GASB 62, paragraph 36, the intention to refinance on a long-term basis means the agency intends to refinance the short-term obligation so the use of working capital will not be required during the current reporting period.

Per GASB 62, paragraph 39, the ability to consummate the refinancing is demonstrated by:

• Refinancing the short-term obligations by issuing a long-term obligation or equity securities after the date of the balance sheet but before it is issued.
  –OR–
• Entering into a financing agreement that clearly permits the agency to refinance the debt on a long-term basis on terms that are readily determinable, and meet all the following conditions:
  1. The agreement does not expire within one year from the date of the financial statements. During that period the agreement is not cancelable by the lender (or the prospective lender).
  2. No violation of any provision exists in the financing agreement at the date of the financial statements and there is no available information that indicates a violation has occurred. If a violation exists at the date of the financial statements or has occurred after the date of issuance, a waiver was obtained.
  3. The lender (or the prospective lender) of the financing agreement is expected to be financially capable of honoring the agreement.

If short-term debt is issued to fund a long-term activity, it may be considered long-term debt and, if so, is reported in Note 5. For example, if commercial paper is purchased to fund ongoing agency activities and is issued in one fiscal year, it then matures, but is issued again to continue funding of the same long-term activity — it may be considered long-term debt. Though commercial paper itself is short-term in nature, the intent is long-term and is reported as long-term debt.

Note: If the short-term obligation requires the use of existing current assets, the short-term obligation is included in the current liabilities.