The GASb has issued this exposure draft with a proposed effective date for fiscal years ending June 30, 2008.

Objectives
This exposure draft establishes accounting and financial reporting standards for transactions in which a government receives, or is entitled to, proceeds in exchange for future cash flows generated by collecting specific receivables or specific future revenues. It also contains provisions that apply to certain situations in which a government does not receive proceeds but, nevertheless, pledges or commits future cash flows generated by collecting specific future revenues.

This proposed statement would establish criteria that governments would use to ascertain whether the proceeds received should be reported as revenue or as a liability. The criteria would be used to determine the extent to which a transferor government either retains or relinquishes control over the receivables or future revenues through its continuing involvement with those receivables or future revenues. The proposed statement presumes that a transaction would be reported as a collateralized borrowing unless the criteria indicating that a sale has taken place are met. If it is determined that a transaction involving receivables should be reported as a sale, the difference between the carrying value of the receivables and the proceeds would be recognized as a gain in the period of the sale. If it is determined that a transaction involving future revenues should be reported as a sale, the revenue would be deferred and amortized, except when specific criteria are met.

This proposed statement also includes guidance that would be used for recognizing other assets and liabilities arising from a sale of specific receivables or future revenues, including residual interests and recourse provisions. The proposed disclosures pertaining to future revenues that have been pledged or sold are intended to provide financial statement users with information about which revenues will be unavailable for other purposes and how long they will continue to be so.

How the Changes in This Proposed Statement Would Improve Financial Reporting
The requirements in this proposed statement would improve financial reporting by establishing consistent measurement, recognition, and disclosure requirements that would apply to both governmental and business-type activities. It would alleviate the confusion that arises when there are multiple sources from which GAAP (generally accepted accounting principles) requirements may derive. Deferral requirements that would be applicable to sales of future revenues are provided to contribute to the measurement and reporting of inter-period equity in accordance with the objectives set forth in Concepts Statement No. 1, Objectives of Financial Reporting. Specific provisions that address the effects of intra-entity transactions are provided so that revenue recognition will not be accelerated through the use of internal transactions. The proposed Statement also would improve the usefulness of financial reporting by requiring that specific relevant disclosures be made to inform financial statement users about the unavailability of future revenues that have been pledged or sold.