Skip to content
Breadcrumbs

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Note: To navigate this guide on a mobile device you must use the Table of Contents.

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Specialized Accounting

Exchange and Exchange-Like Financial Guarantees

GASB 99 provides guidance on accounting and financial reporting for exchange and exchange-like financial guarantees, which amends GASB 70. For more information, see Non-Exchange Financial Guarantees.

An exchange or exchange-like financial guarantee is a guarantee of an obligation of a legally separate government, agency or individual (including a blended or discretely presented component unit) that requires the guarantor to indemnify a third-party obligation holder under specified conditions, in an exchange or exchange-like transaction.

An agency that has extended an exchange or exchange-like financial guarantee must recognize a liability and an expense or expenditure related to the financial guarantee:

  • Economic Resources Measurement Focus — When qualitative factors indicate that it is more likely than not that an agency will be required to make a payment related to the financial guarantees it extended for liabilities of other entities or individuals, the agency must recognize a liability and an expense in financial statements prepared using the economic resources measurement focus. The amount recognized must be the discounted present value of the best estimate of the future outflows expected to be incurred because of the guarantee.
  • Current Financial Resources Measurement Focus — When qualitative factors indicate that it is more likely than not that an agency will be required to make a payment related to the financial guarantees it extended for liabilities of other entities or individuals, the agency must recognize a fund liability and an expenditure in financial statements prepared using the current financial resources measurement focus, to the extent the liability is normally expected to be liquidated with expendable available financial resources. Liabilities for financial guarantees extended are normally expected to be liquidated with expendable available financial resources when payments are due and payable on the guaranteed obligation.

When an agency (A) that offers a financial guarantee recognizes a liability for the guarantee, the agency (B) that issued the guaranteed obligation must recognize a receivable equal to the amount of the liability recognized by the agency (A) — but only if one of the following is true:

  • The issuing agency (B) is a blended component unit of the offering agency (A)
  • The offering agency (A) is a blended component unit of issuing agency (B)
  • The agencies (A & B) are both blended component units of the same reporting agency.

According to GASB 99, exchange or exchange-like financial guarantees do not apply to guarantees that are:

  • Related to special assessment debt within the scope of GASB 6
  • Financial contracts within the scope of GASB 53
  • Related to conduit debt obligations within the scope of GASB 91

Agencies that extended an exchange or exchange-like financial guarantee will apply the provisions in GASB 70, paragraphs 14–15.

For information on note disclosures and samples, see Note 30 – Financial Guarantees.