HomeMy WebLinkAboutIR 9937 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9937
To the Mayor and Members of the City Council October 11, 2016
Pagel of 2
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*a SUBJECT: IMPLEMENTATION OF GOVERNMENTAL ACCOUNTING
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STANDARDS BOARD STATEMENT NO. 72, "FAIR VALUE
MEASUREMENT AND APPLICATION"
Background
On March 2, 2015 the Governmental Accounting Standards Board (GASB) issued Statement
Number 72, requiring local governments to change the way they are completing the fair value
measurements of investments. This accounting standard is effective for the City's current fiscal
year and implementation will be included in the 2016 Comprehensive Annual Financial Report.
The objective of this Statement is to improve financial reporting by clarifying the definition of fair
value, establishing general principles for measuring fair value, providing additional application
guidance, and enhancing disclosures about fair value measurements.
Prior to the issuance of Statement 72, state and local government have been required to disclose
how they arrived at their measures of fair value, if those values were not based on quoted market
prices. The City's current valuation practices use market prices and other relevant information
generated by market transactions involving identical or comparable assets, liabilities, or a group
of assets or liabilities. Under the new guidance, these disclosures have been expanded to
categorize fair values according to their relative reliability and to describe positions held in many
alternative investments. In fewer words, some valuations are more precise and reliable than
others. The new guidance establishes a hierarchy of inputs to valuation techniques which has
levels 1 , 2 and 3. All three levels are designed for the development of a more consistent and
measureable valuation. These levels are defined as:
• Level 1 data: Quoted prices from an active market for identical assets or liabilities
• Level 2 data: Quoted prices from an inactive market for similar or identical assets
or liabilities
• Level 3 data: Unobservable in the market and are the least reliable
Overall Effect on the Financial Reporting of Fair Value Measurements
The hierarchy is not meant to be an indication of the risk of an investment but rather an indication
of the reliability and precision of the fair value measurement that is included in the financial
statements. The requirements of this Statement will enhance comparability of financial
statements among governments by requiring measurement of certain assets and liabilities at fair
value using a consistent and more detailed definition of fair value and accepted valuation
techniques.
ISSUED BY FINANCIAL MANAGEMENT SERVICES FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9937
To the Mayor and Members of the City Council October 11, 2016
Page 2 of 2
�i
{i7 Y
*a SUBJECT: IMPLEMENTATION OF GOVERNMENTAL ACCOUNTING
rrn f
STANDARDS BOARD STATEMENT NO. 72, "FAIR VALUE
MEASUREMENT AND APPLICATION"
Impact on City
The City has been using Level 1 data in the past, and plans to continue this approach to the
valuation of our investments. Therefore, no financial or reporting impact should be seen. Rather,
the disclosures on investments will require us to provide how we got to the fair value of our
investments. To ensure compliance with this statement, the Treasury Division of the Department
of Finance will require that entities that are selected to invest City funds provide Level 1
information required by Statement No. 72 for each investment held at each fiscal period-end. The
Financial Reporting Division of the Department of Finance will utilize this information in preparing
the disclosures for the financial statements.
If you have any questions, please call Aaron Bovos, Chief Financial Officer, at 817-392-8517
David Cooke
City Manager
ISSUED BY FINANCIAL MANAGEMENT SERVICES FORT WORTH, TEXAS