GASB Revises Standards to Improve Reporting of Conduit Debt Obligations

The GASB has issued Statement No. 91, Conduit Debt Obligations. Statement 91 provides a single method for government issuers to report conduit debt obligations and related commitments. The enhanced guidance helps eliminate diversity in practice associated with these issues.


Conduit debt obligations are debt instrument issues by a state or local government to provide financing for a specific third party. The specific third part is primarily liable for repaying the debt instrument. Third parties sometimes seek this kind of tax-exempt financing for projects. These projects include construction of a not-for-profit hospital, a not-for-profit university library, or a qualifying private business’s headquarters building.

The GASB’s existing standards, Interpretation No. 2, Disclosure of Conduit Debt Obligations, allows variation in practice among governments that issue conduit debt obligations, which adversely affects the comparability of financial statement information. The variation arose from the option for government issuers either to recognize conduit debt obligations as their own debt or to disclose them.

Statement 91

Statement 91 addresses the variation in practice by:

-Clarifying what is a conduit debt obligation;

-Eliminating the option for government issuers to recognize conduit debt obligations, thereby providing a single method of reporting;

-Broadening the definition of conduit debt obligations to include those for which government issuers (1) make related additional commitments, such as guarantees or moral obligation pledges, or (2) voluntarily agree to make debt service payments or request an appropriation for such payments, if necessary;

-Clarifying how government issuers should account for and report (1) commitments they extend or voluntarily provide and (2) arrangements associated with conduit debt obligations, which often are characterized in practice as leases, but are not leases for financial reporting purposes; and

-Enhancing note disclosures.

Although government issuers will no longer report conduit debt obligations as liabilities, they may need to recognize a liability related to commitments they make or voluntarily provide associated with that conduit debt. Statement 91 requires a government issuer to recognize a liability if qualitative factors indicate that it is more likely than not that it will support one or more debt service payments for a conduit debt obligation.

Effective Date

Statement 91 is effective for reporting periods beginning after December 15, 2020. Earlier application is encouraged.

Keep Reading on CCH® Accounting Research Manager.

Not a subscriber? Sign up for a Free Trial


CCH ARM Editorial

All stories by: CCH ARM Editorial