GASB 90 Update: Majority Equity Interests

Introduction

The Governmental Accounting Standards Board (GASB) issued GASB Statement No. 90 in August 2018. This standard will improve the reporting of a government’s majority equity interest in a legally separate organization.

Objectives

• Improve the consistency in the measurement and comparability of reporting a government’s majority equity interest in a legally separate organization.
• Improve the relevance of financial statement information for certain component units.

Key Takeaways/Changes

• A majority equity interest in a legally separate organization should be reported as an investment, using the equity method, if a government’s holding of the equity interest meets the definition of an investment.
• Special-purpose governments engaged only in fiduciary activities, a fiduciary fund or an endowment/permanent fund should measure the majority equity interest at fair instead of the equity method.
• All other holdings of a majority interest in a legally separate organization, not meeting the definition of an investment, should report the legally separate organization as a component unit using the equity.

When Is GASB 90 Effective?

The requirements of this Statement become effective for reporting periods beginning after December 15, 2018. Earlier implementation is encouraged. The requirements should be applied retroactively, except for the provisions related to (1) reporting a majority equity interest in a component unit and (2) reporting a component unit if the government acquires 100 percent equity interest which should be applied on a prospective basis.

What Should Be Done Now?

Review your reporting entity for any majority interest in legally separate organizations and assess the impact to your organization and the changes to your financial statement presentation as a result of implementation, if any.

Please note this summary is not meant to substitute for reading the Statement in its entirety.