GASB’s Fair Value Standard Gets a Reality Check

The Governmental Accounting Standards Board (GASB) just wrapped up its Post-Implementation Review (PIR) of Statement No. 72, the rulebook for fair value standard measurement in government financial statements. If you’re in the trenches whether as a CPA, auditor, or public-sector finance professional, this is your heads-up on what’s working, what’s a headache, and what tweaks might be on the way. So, what’s the bottom line? Let’s break it down.

No Smoke and Mirrors

Since 2015, GASB 72 has been the referee making sure governments measure and report fair value consistently. The playbook breaks assets down into three buckets based on how easy they are to price:

• Level 1: Market-based pricing (stocks, bonds, actively traded securities).
• Level 2: Indirect market inputs (interest rates, credit spreads).
• Level 3: Unobservable inputs (private equity, infrastructure, real estate).

The goal? Keep the numbers honest and make financial statements more useful for investors, auditors, and government finance teams.

Holding Up or Breaking Down?

The PIR report confirms that GASB 72 is largely doing its job, but there are a few bumps in the road:

• Mission Accomplished: The review confirmed that GASB 72 cleaned up valuation inconsistencies, making it easier to compare numbers across government entities. It also nudged public-sector accounting closer to private-sector methods.
• Fair Value Data Is Useful: Municipal bond analysts are all over these disclosures, 76% say they use them to size up credit risk. That’s a win for transparency.
• Level 3 Valuations Are Still a Headache: The PIR noted that Level 3 valuations declined by 18% between 2020 and 2024 as more governments turned to standardized discounted cash flow models, but challenges remain.
• Disclosures Are Too Much: Nearly 34% of financial analysts reported that Level 3 disclosures lack sufficient detail, calling for enhanced sensitivity analyses to improve decision-making.

Government Financial Reporting Cash or Crash

For finance professionals, here’s what to keep an eye on:

• Costs Have Stabilized: Now, compliance costs remain steady, and automation tools are making fair value standard reporting more manageable.
• Audit Timelines: The PIR confirmed that GASB 72 hasn’t caused significant delays in financial reporting. Audits and disclosures remain on track, but expect continued scrutiny on valuation methodologies.
• Third-Party Valuation: The report highlighted that some governments lean heavily on external custodians for valuation data. If you’re in auditing or compliance, double-check that assumptions and methodologies are rock-solid and can withstand regulatory scrutiny.

Less Fluff, More Clarity

While GASB 72 is holding strong, tweaks could be coming. The new Concepts Statement No. 7 could cut down on excessive disclosures while making sure the important stuff stays front and center. Also, expect more chatter around:

• Climate risk adjustments: Some infrastructure assets could get new fair-value treatment based on environmental factors.
• Crypto reporting: Digital assets are creeping into government portfolios, and there’s no clear rulebook yet.

Final Thought

For now, GASB 72 is here to stay, and the PIR confirms it’s doing what it was meant to do. But as government finance gets more complex, staying ahead of reporting updates is key. If the past few years have taught us anything, it’s that the numbers never stop moving, and neither should we. Stay in the know with the latest financial news and insights—subscribe to our newsletter and never miss a beat!