GASB 53 for Governmental Entities

DerivActiv is an independent valuation service that provides governmental entities with all the calculations necessary for GASB 53 compliance. Our full service support includes using the best method available to evaluate the effectiveness of a potential hedging instrument (qualitative or quantitative) and providing guidance to clients related to the disclosures required to comply with the GASB 53 statement.

GASB 53 requires that all derivatives used by a governmental entity be reported in the entity’s financial statements.  This new statement became effective for all reports after June 15, 2009.  If the derivative being measured effectively hedges the risk that is identified by the governmental entity, the fair value changes will be deferred; otherwise fair value changes will be immediately reported as investment income or loss.

MuniMarket Pulse Podcast on GASB 53

To learn more about GASB 53 and the requirements for reporting, MuniMarket Pulse has produced an audio podcast interview with Jim Towne, Senior Vice President of DerivActiv on the subject. Listen Here.

Our staff verifies the details of the hedging transaction, reviews all of the critical terms and determines whether or not the transaction meets the requirements of the consistent critical terms method of GASB 53 compliance.  If this qualitative approach fails, then DerivActiv will perform the calculations necessary to determine the effectiveness of the potential hedging instrument.  The synthetic instrument method, dollar offset method, and regression analysis are used to test the potential hedging derivative.  DerivActiv performs all of the possible mathematical tests available under GASB 53 and provides a report to the governmental entity showing which (if any) of the tests passed the hedging requirements of GASB 53. 

Call 1-866-200-9012 to speak to a GASB 53 Expert.

Valuation Services and GASB 53 Compliance

DerivActiv performs valuations on the potential hedging derivative instrument that meet the rigorous standards in today’s market.  In addition, we perform all of the GASB 53 calculations and provide a report to the governmental entity that can be used to prove the hedging relationship to the auditors.

GASB 53 Methodologies

• Consistent Critical Terms Method
• Synthetic Instrument Method
• Dollar Offset Method
• Regression Analysis
• Hybrid Instrument Analysis

If you are interested in learning more about GASB 53 reporting, you can download a GASB 53 white paper here.