This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

GASB issues Concepts Statement on the measurement of assets and liabilities

  • GASB (Governmental Accounting Standards Board) (blue) Image

Apr 15, 2014

Yesterday, the GASB issued Concepts Statement No. 6, “Measurement of Elements of Financial Statements.” The Statement establishes concepts the GASB would use to make decisions about future standard setting related to how state and local governments determine the dollar amount at which to report assets and liabilities.

Concepts Statement 6 establishes two approaches to measuring assets and liabilities:

  • Initial amounts — Determined at the time an asset is acquired or a liability is incurred; more appropriate for assets that are used directly in providing services.
  • Remeasured amounts — Determined as of the date of each year’s financial statements; more appropriate for assets that will be converted to cash (financial assets) and for liabilities for which there is uncertainty about the timing and amount of payments.

The Statement also establishes the four measurement attributes that are used in financial statements:

  • Historical cost — The “price paid to acquire an asset or the amount received pursuant to the incurrence of a liability in an actual exchange transaction. Historical cost is an entry price and can only be used when measuring initial amounts.”
  • Fair value — The “price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is an exit price.”
  • Replacement cost — The “price that would be paid to acquire an asset with equivalent service potential in an orderly market transaction at the measurement date. Replacement cost generally is considered to be appropriate only for assets that will be used in providing services, rather than assets that will be converted to cash. Replacement cost is an amount that reflects an entry value.”
  • Settlement amount — The “amount at which an asset could be realized or a liability could be liquidated with the counterparty, other than in an active market. A settlement amount can be either (a) the amount that the counterparty would accept to settle the liability or would pay to satisfy a receivable at the measurement date or (b) the amount that will be realized from an asset or will be needed to liquidate the liability in due course according to the terms of the arrangement between the government and the counterparty.”

For more information, see the press release and Concepts Statement No. 6 on the GASB's Web site.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.