The United States Governmental Accounting Standards Board (GASB) recently introduced new provisions that call for the reporting of money-weighting rates of return, using the internal rate of return (IRR).
The new provision, Statement No. 67 of the Governmental Accounting Standards Board, titled Financial Reporting for Pension Plans, includes the following details.
On page 12, paragraph 30.b.(4) you'll find
And then on page 17:
The document also includes a glossary, with the following definition:
I had been speaking with someone from GASB a few months back, answering his questions as well as offering my views on money-weighting. Obviously, I'm thrilled that they opted to go with this measure, as opposed to time-weighting, which was their original plan.
If you're involved with or support a government pension fund, you'll want to ensure you adhere to these new rules. And, if you're not a government fund, it's still worthwhile to become familiar with them, because money-weighting is catching on!
Note: The Governmental Accounting Standards Board (GASB) is the independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments. Established in 1984 by agreement of the Financial Accounting Foundation (FAF) and 10 national associations of state and local government officials, the GASB is recognized by governments, the accounting industry, and the capital markets as the official source of generally accepted accounting principles (GAAP) for state and local governments.