Question

what is conduit debt? who issues debt through these conduits? Why are governments required to report only in notes to their financial statements, not on their balance sheets?

Answer 1

a conduit debt obligation is a debt instrument issued in the name of a state or local government but is for the benefit of a third party that is primarily liable for the repayment of the debt instrument.

there are at least three parties, involved 1)an issuer 2)a third party obligor ,and 3) a debt holder or a debt trustee.

the issuer and the third party obligor are not within the same financial reporting entity.

issuer should disclose information about conduit debt obligations in the notes to financial statements .disclosure should include:

• a general description of the issuer's conduit debt obligation
• a general description of the issuer's commitment
• the aggregate outstanding principal amount of all conduit debt obligation that share the same type of commitment at the end of the financial reporting period

a brief description of the timing of recognition and measurement of the liability and information about the changes in recognized liability ,.