Investment Income - Interest & Fair Value Changes (GASB 31)
Recording investment income for governmental funds including interest earned and fair value changes on investments per GASB 31, with unique government-specific classification of investment-type assets.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Investments - Fair Value Adjustment | Asset (+) | 48,500.00 | - |
| Interest Receivable | Asset (+) | 22,000.00 | - |
| Investment Income - Interest | Revenue (+) | - | 22,000.00 |
| Investment Income - Net Change in Fair Value | Revenue (+) | - | 48,500.00 |
💡 Accountant's Note
Under GASB 31, governments measure most investments at fair value with changes recognized in income each period — similar to trading securities under GAAP. This applies to U.S. Treasury securities, agency securities, commercial paper, money market funds, and municipal bonds. Unlike private entities (where unrealized gains often go to OCI), governments recognize ALL fair value changes in revenue. This creates income volatility that surprises users accustomed to private sector investment accounting.
Practitioner & Systems Framework
💻 ERP Architecture
Obtain fair values from the investment custodian (safekeeping institution or LGIP — Local Government Investment Pool) as of the financial statement date. GASB 40 requires disclosure of investment credit risk, concentration risk, and interest rate risk. Many small governments pool their investments through state-managed LGIPs that provide daily fair value calculations.
⚠️ Audit Flags
Auditors confirm investment fair values against independent pricing sources (Bloomberg, Refinitiv). GASB 72 (Fair Value Measurement) requires governments to classify investments into a Level 1/2/3 hierarchy and disclose the hierarchy in the notes. Investment policy compliance (permitted investment types, maturity limits, concentration limits) is also tested.
📄 Required Documentation
Investment custodian statements at fiscal year-end, investment pool account statements, fair value pricing documentation, investment policy, GASB 40/72 disclosure workpapers, investment committee minutes.
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