AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) GAFRB Question # 28 Topic 3 Discussion
GAFRB Exam Topic 3 Question 28 Discussion:
Question #: 28
Topic #: 3
If a capital project has an estimated life of 30 years, which financing method is designed to impose the cost of the project on the generation who benefits from it?
Serial bonds mature in installments over the life of the bond (e.g., every year or every few years). This structure allows the cost of repaying the debt to align more closely with the periods in which the capital asset is used — achieving intergenerational equity by spreading the cost over the same span as the asset’s useful life.
Term bonds, zero-coupon bonds, and pay-as-you-go do not align costs with benefits across multiple years in the same way.
Relevant References:
GFOA Best Practices – Debt Management and Capital Planning
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