GASB issues technical bulletin on tobacco settlement proceeds.(News & Numbers)(Governmental Accounting Standards Board)(Brief Ar

The Governmental Accounting Standards Board recently published a new technical bulletin (available online at www.gasb.org), Tobacco Settlement Recognition and Financial Reporting Entity Issues, which addresses accounting by state and local governments in connection with settlements made by U.S. tobacco companies. The comment period ends March 2.

In 1998, the U.S. tobacco industry reached an agreement with state governments, known as the Master Settlement Agreement, releasing tobacco companies from present and future smoking-related claims that had been, or potentially could be, filed by the states. In exchange, the tobacco companies agreed to make annual payments in perpetuity to the states.

The technical bulletin clarifies accounting guidance on whether a tobacco settlement authority that is created to obtain the rights to all or a portion of future tobacco settlement resources is a component unit of the government that created it. In addition, the document clarifies asset and revenue recognition guidance for these transactions for the settling governments and the tobacco settlement authorities.

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