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FASAB Issues an Exposure Draft Entitled Reporting Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates
The Chairman of the Federal Accounting Standards Advisory Board (FASAB), Tom Allen, announced that the FASAB is seeking input on the Exposure Draft (ED), Reporting Gains and Losses from Changes in Assumptions and Selecting Disccount Rates and Valuation Dates. This ED proposes new financial statement display for the gains and losses from changes in assumptions. Such gains and losses will now be shown as individual items on the statement of net cost. In addition, the ED proposes guidance for selecting discount rates and valuation dates for present value measurements.
Displaying gains and losses from changes in assumptions as discrete line items will enhance the usefulness of the information provided on the statement of net cost. Separate display will highlight the effects of changes in assumptions, which can be significant, and distinguish them from other expenses. Thus, the user will be better able to understand the operating performance of the entity as well as the role of gains and losses from changes in assumptions.
In addition to the display issue, there has been uncertainty in practice regarding which U.S. Treasury rates should be used for discount rates for present value measurements of expense and liability amounts. The ED proposes guidance for selecting discount rates for liability measurement. In addition, the ED proposes to codify the guidance for selecting the valuation dates.
“The proposed standards would result in more transparent and useful information prepared in a more consistent manner. This will help users to assess operating performance and stewardship,” according to Chairman Allen.
The exposure draft requests comments by November 30, 2007. Respondents are encouraged to provide the reasons for their positions. The exposure draft in PDF format and the specific questions raised in Word format are available at the FASAB website www.fasab.gov.
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