GASB Statement Eliminates Diversity in Reporting Conduit Debt Obligations

In May 2019, the Governmental Accounting Standards Board (GASB) issued Statement No. 91, Conduit Debt Obligations (Statement 91). The statement introduces a single method for state or local government issuers to report conduit debt obligations, eliminating the option for issuers to report conduit debt obligations as their own liabilities. The change is expected to improve financial reporting by ending significant diversity in reporting practices. 

Key Provisions

Statement 91 defines conduit debt obligations and establishes related standards for recognition, measurement, and disclosures for issuers. The requirements included in the statement apply to the financial statements of all state and local governments.

Definition of a Conduit Debt Obligation

Governments may issue conduit debt obligations to provide financing to governmental or nongovernmental third-party obligors.

For accounting and financial reporting purposes, Statement 91 defines a conduit debt obligation as a debt instrument issued in the name of a state or local government (the issuer) for the benefit of a third party that is primarily liable for repayment of the debt instrument (third-party obligor). A conduit debt obligation must have all of the following characteristics:

  • It involves at least three parties: an issuer, a third-party obligor, and a debt holder or a debt trustee.
  • Its issuer and the third-party obligor aren’t within the same financial reporting entity.
  • The debt obligation isn’t a parity bond of the issuer or cross-collateralized with other debt of the issuer.
  • The third-party obligor or its agent—not the issuer—ultimately receives the proceeds from the debt issuance.
  • The third-party obligor—not the issuer—is primarily responsible for the payment of all amounts associated with the debt obligation (debt service payments).

Recognition and Measurement

Recognition and measurement factors vary based on an issuer’s additional commitments and financial statement preparation.

No Additional Commitments

If an issuer hasn’t made an additional commitment to support debt-service payments, the issuer shouldn’t recognize a conduit debt obligation as a liability and isn’t required to perform an annual evaluation.

Additional Commitments

If an issuer has made an additional commitment to support debt-service payments, the issuer should recognize a liability and expense or fund liability and expenditure if their financial statements are prepared using the economic-resource measurement focus or the current financial-resources measurement focus, respectively.

However, these recognition requirements only apply if qualitative factors indicate it’s more likely than not that the issuer will support one or more debt-service payments for a conduit debt obligation. As long as a conduit debt obligation is outstanding, an issuer that has made an additional commitment should evaluate at least annually whether or not recognition criteria have been met.


Statement 91 also addresses arrangements—often characterized as leases—that are associated with conduit debt obligations. In these arrangements, capital assets are constructed or acquired with proceeds from the conduit debt obligation, and payments from third-party obligors are intended to cover and coincide with the debt-service payments.

Issuers shouldn’t report these arrangements as leases, recognize a liability for the related conduit debt obligations, or recognize a receivable for the payments related to these arrangements.

Disclosure Requirements

Statement 91 requires issuers to disclose general information about their conduit debt obligations, organized by type of commitment. This includes the aggregate outstanding principal amount of the issuers’ conduit debt obligations and a description of each type of commitment.

Issuers that recognize liabilities related to supporting the debt service of conduit debt obligations should also disclose information about recognized amounts and liability changes during the reporting period.

Effective Dates

Statement 91 is effective for reporting periods beginning after December 15, 2020, and early application is encouraged.

The requirements should be applied retroactively by restating financial statements for all prior periods presented. If restatement for prior periods isn’t practicable, the cumulative effect of applying this statement should be reported as a restatement of beginning net position, or fund balance or net position, as applicable, for the earliest period restated.

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For assistance or more information about how Statement 91 may affect your organization, contact your Moss Adams professional.

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