Bill Text: MO HB327 | 2013 | Regular Session | Introduced
Bill Title: Changes the laws regarding nonexchange financial guarantees
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2013-05-17 - Referred: Government Oversight and Accountability(H) [HB327 Detail]
Download: Missouri-2013-HB327-Introduced.html
FIRST REGULAR SESSION
97TH GENERAL ASSEMBLY
INTRODUCED BY REPRESENTATIVE BARNES.
1163H.01I D. ADAM CRUMBLISS, Chief Clerk
AN ACT
To amend chapter 108, RSMo, by adding thereto one new section relating to nonexchange financial guarantees.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Chapter 108, RSMo, is amended by adding thereto one new section, to be known as section 108.1075, to read as follows:
108.1075. 1. As used in this section, the following terms shall mean:
(1) “Government”, the governing body of any political subdivision in this state as defined in section 70.120 or any department or entity of state government that participates in a nonexchange financial guarantee;
(2) “Make public” or “publicly disclose”, make available for public inspection according to the requirements of section 610.023;
(3) “More likely than not”, a likelihood of more than fifty percent;
(4) “Nonexchange financial guarantee”, a financial guarantee extended to cover an obligation of a legally separate entity, which guarantee requires the guarantor to indemnify a third-party obligation holder, under specified conditions;
2. The provisions of this section shall apply to financial statements of all entities of state government and all political subdivisions that participate in nonexchange financial guarantees.
3. This section does not apply to guarantees related to special assessment debt within the scope of Governmental Accounting Standards Board Statement No. 6, Accounting and Financial Reporting for Special Assessments as of January 1, 2013.
4. A government that has extended a nonexchange financial guarantee shall consider and make public qualitative factors in assessing the likelihood that the government will make a payment in relation to the guarantee, including but not limited to the following:
(1) Initiation of the process of entering into bankruptcy or a financial reorganization;
(2) Breach of a debt contract in relation to the guaranteed obligation, including but not limited to a failure to meet rate covenants, failure to meet coverage ratios, or default or delinquency in interest or principal payments; and
(3) Indicators of significant financial difficulty, including but not limited to:
(a) The failure to transfer deposits from debt service funds to paying agents or trustees;
(b) The draw on a debt service reserve fund;
(c) The initiation of the process by a creditor to intercept receipts to make a debt service payment;
(d) Debt holder concessions;
(e) Significant investment losses;
(f) Loss of a major revenue source;
(g) Significant increase in noncapital disbursements in relation to operating or current revenues; or
(h) Commencement of financial supervision by another government.
5. When a government extends similar guarantees to more than one individual or entity, the government shall consider and make public applicable qualitative factors in relation to the issuers in the group of individuals or entities or shall consider relevant historical data to assess the likelihood that the government will make a payment in relation to those guarantees. A government that has historical data on the default frequency of a group of guarantees shall consider that data in relation to its outstanding guarantees to assess the likelihood that it will make a payment on one or more of the guarantees within the group.
6. When qualitative factors or historical data indicate that it is more likely than not that a government will make a payment on nonexchange financial guarantees it extended, the government shall recognize a liability and an expense in financial statements prepared using the economic resources measurement focus and make public such a change in finances. The amount recognized shall be the best estimate of the discounted present value of the future outflows expected to be incurred as a result of the guarantee. If there is no best estimate of the future outflows expected to be incurred but a range of estimated future outflows can be established in which no amount within that range appears to be a better estimate than any other amount, the minimum amount in that range shall be recognized.
7. When qualitative factors or historical data indicate that it is more likely than not that a government will make a payment on nonexchange financial guarantees it extended, the government shall recognize a fund liability and an expenditure in financial statements prepared using the current financial resources measurement focus to the extent the liability is normally expected to be liquidated with expendable available financial resources and shall make the information public. Liabilities for nonexchange financial guarantees extended are expected to be liquidated with expendable available financial resources when payments are due and payable on the guaranteed obligation.
8. When a government is required to repay a guarantor for payments made on the government’s obligations, the government shall reclassify that portion of its liability for the guaranteed obligation as a liability to the guarantor and shall make the reclassification information public. The government that issued the guaranteed obligation shall continue to report the obligation as a liability until all or a portion of the liability is legally released, including but not limited to when a plan of adjustment is confirmed by the court in the case of bankruptcy. Interest expense or expenditures reported shall be reduced by the interest-related payments made by the guarantor that are not required to be repaid.
9. When a government is legally released as an obligor from its own obligations and from any liability to the guarantor, the government shall recognize revenue to the extent of the reduction of guaranteed liabilities.
10. A government that extends nonexchange financial guarantees shall publicly disclose the following information about the guarantees by type of guarantee:
(1) A description of the obligations that are guaranteed identifying:
(a) The legal authority and limits for providing financial guarantees;
(b) The relationship to the entities issuing the obligations that are guaranteed;
(c) The length of time of the guarantees; and
(d) A description of arrangements for recovering payments from the issuers of the obligations that are guaranteed;
(2) For guarantees extended that have been recognized as liabilities in the financial statements, a brief description of the timing of recognition and measurement of the liabilities and a table presenting the changes in recognized guarantee liabilities, including the following:
(a) Beginning-of-year balances;
(b) Increases, including initial recognition and adjustments increasing estimates;
(c) Guarantee payments made and adjustments decreasing estimates; and
(d) End-of-year balances;
(3) The amount of outstanding guarantees; and
(4) For outstanding guarantees in which indemnification payments have been made:
(a) Cumulative amounts that have been paid; and
(b) Amounts expected to be recovered.
11. A government that has outstanding obligations that have been guaranteed by another entity shall publicly disclose the following information about the guarantees by type of guarantee:
(1) The name of the entity providing the guarantee;
(2) The amount of the guarantee;
(3) The length of time of the guarantee;
(4) The amount paid by the entity extending the guarantee on obligations of the government during the current reporting period;
(5) The cumulative amount paid by the entity extending the guarantee on outstanding obligations of the government;
(6) A description of requirements to repay the entity extending the guarantee; and
(7) The amount required to repay the entity providing the guarantee.
12. The provisions of this section are effective for periods beginning after August 28, 2013. In the first accounting period that this section is applied, changes made to comply with this section shall be treated as an adjustment of prior accounting periods, and financial statements presented for the periods affected shall be restated. If restatement of the financial statements for prior periods is not practical, the cumulative effect of applying this section shall be reported as a restatement of beginning net position, or fund balance or fund net position, as appropriate, for the earliest accounting period restated. In the first accounting period that this section is applied, the financial statements shall disclose the nature of the restatement and its effect.
13. The requirements for disclosure of cumulative amounts in subsections 10 and 11 of this section may be applied prospectively. If applied prospectively, the disclosure shall state the date through which the cumulative amounts are determined.
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