Transfers of operations occur when operations of a governmental entity or non-governmental entity (transferor) are transferred to an existing state agency or a new state agency (transferee) with no significant consideration exchanged. An operation is an integrated set of activities conducted and managed to provide identifiable services with associated assets or liabilities.

The effective transfer date is the date the state agency receiving the transfer (transferee) obtains control of the assets and becomes obligated for the liabilities of the transferred operations.

The transferee recognizes (as of the effective transfer date) the transferred operations’ carrying amounts of:

• Assets
• Deferred outflows of resources
• Liabilities
• Deferred inflows of resources

The transferee may need to adjust carrying amounts to reflect a consistent accounting method if a different accounting method was used by the transferor. Apply the adjustments to the beginning balances carried forward into the transferee state agency’s financial statements and explain the adjustments in the applicable notes to the financial statements. Do not adjust balances based on accounting estimates.

Capital Asset Treatment

Capital assets identified for disposal by the transferor entity (prior to the transfer date) are measured based on use:

• If the transferee will use them until the disposal occurs, use the carrying amounts as of the transfer date to measure the capital assets.
• If the transferee will not use them, evaluate the capital assets for impairment based on GASB 42 requirements to determine if the carrying amounts need adjustments. If necessary, make adjustments and disclose the explanation of the adjustments in the applicable notes to the financial statements.

Reporting Transfers of Operations in Governmental and Proprietary Funds

The transferee in a governmental fund recognizes the net fund balance of the operations it receives as a special item on its operating statement.

The existing transferee in a proprietary fund recognizes the net position of the operations it receives as a special item in its operating statement.