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GASB Requests Tribal Government Input on Equity Interest Ownership Project

May 10, 2016

The GASB is conducting research on how governments report their equity interest ownership in legally separate entities. The objective of this research project is to improve financial reporting by addressing issues related to inconsistent presentation of certain component units in financial reporting of governments. Currently there is no clear existing guidance and determining the accounting and financial reporting of tribal businesses is complicated by the fact that a business entity may meet the definition of a component unit and also meet the definition of an investment or a joint venture. 

Key GASB Codification Definitions:

Reference

Text

2600.116 

If a government owns a majority of the equity interest (as defined in paragraph .105 of Section J50) in a legally separate organization (for example, through acquisition of its voting stock), the government's intent for owning the equity interest should determine whether the organization should be presented as a component unit or an investment of the primary government.

I50.531 

Investment. A security or other asset acquired primarily for the purpose of obtaining income or profit.

2600.119 

Component units are legally separate organizations for which the elected officials of the primary government are financially accountable.

2100.515 

Joint venture. A legal entity or other organization that results from a contractual arrangement and that is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control, in which the participants retain (a) an ongoing financial interest or (b) an ongoing financial responsibility.

Applying these concepts to typical tribal scenarios can be a challenge. For example, some tribal governments holding equity interest ownership in an entity may be both (1) financially accountable for the entity and (2) holding the equity interest ownership primarily for the purpose of income or profit. Some tribes could be reporting this entity as an investment, while others are reporting the entity as a component unit, and some reporting as both.

To conduct the research, GASB needs your assistance in identifying tribal government entities that hold equity interest ownership in legally separate entities. If you are interested in participating in the survey, please send the information to the GASB by June, 30 2016.

For questions or comments, please contact Jennifer Parisien at Jennifer@nafoa.org or (202) 558-8040. 

GASAC Representation

NAFOA holds a seat on the Governmental Accounting Standards Advisory Council, which is responsible for consulting with the GASB on technical issues on the GASB's agenda, project priorities, matters likely to require the attention of the GASB, and concerns of tribal governments.