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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 6 – Bonded Indebtedness

General Introduction

Much of the information on bonds is disclosed in the supplementary bond schedules. However, agencies should provide at least a description of each outstanding issue in Note 6. Additionally, disclose if the bonds are general obligation or revenue bonds and if they are in governmental activities or business-type activities. Disclose any other significant policies or requirements related to each bond issue.

Capitalization and amortization are required for premiums, discounts and prepaid insurance costs that are individually equal to or greater than 5 percent of the par value of each bond issue. Amortize amounts over the remaining life of the bonds using one of the following methods:

  • Straight-line
  • Bonds outstanding
  • Interest method

Amounts less than 5 percent of the par value may be capitalized or expensed at the time of bond issuance as determined by each individual agency. Unamortized discounts and premiums are netted against par value bonds payable. The 5 percent calculation applies to each category — not the combined total of all.

The implementation of GASB 65 in fiscal 2014 requires the following changes:

  • GASB 65, paragraph 6, requires unamortized gain or loss on refunding to be recognized as deferred outflows of resources and deferred inflows of resources — rather than as a component of net bonds payable as previously required.
  • GASB 65, paragraph 15, eliminates the amortization of issuance costs, other than for prepaid insurance, by requiring these to be expensed in the year the bond is issued. Report any prepaid insurance as a noncurrent asset. With the reclassification of deferred charges to deferred outflows of resources, another asset account (such as prepaid insurance) is required.
Glenn Hegar
Texas Comptroller of Public Accounts
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