Refunding Bonds

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Process Group/Policy Details

Process Group Description

Bond Issuance and Accounting

The process group Bond Issuance and Accounting provides the ability to record entries for accounting events that originate from the issuance of bonds. This group includes governmental and proprietary activity, as well as the original issuance and refunding issuances.

Rationale or background to policy:

CORE utilizes specific event types to record the refunding of bonds. In order to provide consistent and accurate accounting across departments, as the refunding of bonds is infrequent in nature, a common policy is required. This policy does not account for refunding bonds that result in a book gain, as infrequent. Should this occur, the accounting would occur on a JVA document. Otherwise, a JV1Bond document should be used.

Policy Statement:

Departments shall record bond refunding activity in accordance with these procedures within 30 days of closing of the obligation. This includes a requirement to bring the old debt current, using the appropriate event types noted in TA.PO.01, prior to beginning these procedures.

TA.PO.02.1 Refund Bonds

The accounting transactions for the refunding of bonds differ dependent upon whether bonds are issued by a governmental fund or a proprietary fund (including internal service funds). Procedures to record the new issuance can be found in policy TA.PA.01. These procedures include the recording of the removal of the old bonds, removal of unamortized premium/discount, removal of unamortized gain/loss on prior refunds, and recording the gain/loss on refunding as a deferred inflow or outflow of resources, as well as recording the associated year-end entries.

Procedure(s):

TA PR.02.1 – Refund Bonds

Event Type XT05/XT35/XT36/XT37 removes the liability for the retired/defeased bonds and records the refunding gain or loss as a deferred inflow or outflow of resources in the GFAAG. In proprietary funds, Event Type XT06/XT40/XT41/ST42 works similar to government funds to remove the retired/defeased bond liability and records the refunding gain/loss as a deferred inflow or outflow of resources.

TA PR.02.2 – Refunding Bonds (End of Year)

In addition to year-end entries discussed in TA PR.01.4, the refunding gain/loss deferred inflow or outflow must be amortized as a component of interest expense over the shorter of the life of the old debt or new debt. Event Type XT38 records this amortization in the GFAAG, while Event Type XTTBD records this amortization in the proprietary fund.

TA PR.02.3 – Budget Disbursement for the refunding in the General Fund

For governmental funds, the payment to the escrow agent to refund the bonds must be shown as an Other Financing Use in the governmental fund operating statement. This expenditure is offset by expenditure credits in the GFAAG when the retired/defeased debt is removed. Event Type XT43 is used to record this disbursement.