Municipal bond analysts calculate a variety of ratios when analyzing the creditworthiness of governmental debt issuers. Many of these ratios include asset and liability amounts, such as assets divided by liabilities, liabilities divided by net position, and liabilities divided by revenues. What do you think the effect wason ratio analysis when governments implemented GASB Statement 65? Please explain your answer.

Main Question: What is the opinion on this student's response? Please see below.

I'm not sure what the effect of GASB Statement 65 was on the workload of analysts but the following are possibilities. Scenario 1: The change may have increased the workload for analysts. Instead of calculating with just assets and liabilities they may perform calculations with and without deferred inflows / outflows of resources added to the asset or liability. The same may be said about inflows of resources and outflows of resources. They may apply judgement to the deferrals and decide if they should or should not be included based on the substance of the transaction. Most calculations are a matter of plugging numbers into a spreadsheet or a program so not sure how much more work it could really amount to. It may have posed some additional work for programmers who had to consider the various types of deferrals and impacts they could have on ratios and decision making. Scenario 2: Analysts may have always been skeptical of some items being lumped into assets and liabilities on the financial statements. Now that deferrals are called out , and specified in GASB Concepts Statement No. 65, their work is easier. Overall analysis may have improved because the deferred resources and inflows and outflows of resources can be assessed individually. The conservative view would be to just use stated assets and liabilities. Deferrals may provide some flex with ratios, or the opportunity to fine tune predictive modeling. In any case GASB 65 made it clear the items that would be in deferrals and that they were neither assets or liabilities.