We reviewed the fiscal 2003 financial statement footnote disclosures of the fifty states and the 100 largest cities in the United States (US) to ascertain the nature and extent of derivative activities among US state and municipal governments. There were 23 state governments and 23 municipal governments that have engaged in such transactions with an aggregate notional value approaching $32 billion. These governments enter into these transactions primarily to hedge the interest rate and cash flow risks associated with their long term variable rate demand obligations and auction rate debt. Our findings also indicate that the widespread implementation of GASB TB 2003 - 1 has improved the quality of state and municipal disclosures with respect to their derivative activities. In June 2008, the GASB issued its Statement 53 which mandates the accounting measurement of these derivative financial instruments at their fair value on the statement of net assets and promises to further improve their footnote disclosure.
Stewart, L. and Cox, C. (2008), "Debt-related derivative usage by u.s. state and municipal governments and evolving financial reporting standards", Journal of Public Budgeting, Accounting & Financial Management, Vol. 20 No. 4, pp. 466-483. https://doi.org/10.1108/JPBAFM-20-04-2008-B004Download as .RIS
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