Preliminary documents recently issued by the General Accounting Standards Board (GASB) address how state and local governments might be required to report the value – and change in value – of derivatives.

GASB defines derivatives as “often complex financial arrangements where two parties agree to make payments to each other.” Derivatives often carry a degree of risk because they can be highly leveraged, with little or no up-front investment – and because of their complexity.

For the first time, users will be able to use an online comment form via the GASB web site to submit input on the proposed requirements. Analysts, issuers, investors and other interested parties are invited to comment on the proposed standards. Public hearings and a user roundtable are also scheduled to take place this summer.

A “Plain-Language Article” recently added to the GASB web site explains the proposed regulations – and derivatives in general – in terms that are less legal and technical in nature. Because these “plain-language” materials were developed specifically for users of financial statements, they include clear explanations and definitions, and are, in general, easier to understand.