Accounting Change for Accreted Interest
School Advisor, 2007 Issue No. 1  

Recently, the GASB has communicated a change of guidance in how the accreted interest on certain debt should be presented in the components of net assets on the government-wide financial statements. Past guidance indicated that accreted interest on capital appreciation bonds, deep discount debt, or similar obligations (such as issued by the School Bond Loan Fund) would be shown as a reduction of net assets invested in capital assets, net of related debt. Now, the GASB has changed its position and indicated the accreted interest should reduce unrestricted net assets, since only the discounted debt proceeds were originally used for asset acquisition. The following is a sample presentation of the change:





If your district carries debt with these characteristics we encourage you to modify your 2007 net asset presentation.

Likewise, there is some question on the treatment of the outstanding principal balance owed to the School Bond Loan Fund (the previous paragraph dealt with outstanding interest). Since GASB is unclear as to the treatment, a revision to the Bulletin 1022 to be released shortly will indicate a district has the option of treating outstanding School Bond Loan Fund principal as a component of capital assets (to the extent total outstanding debt does not exceed the original bonded indebtedness) or unrestricted net assets.