A three- month treasury note is probably more liquid than a backhoe, but probably less liquid than money in a checking account. Bonds, pensions, and even vacation benefits are often long term items. When bonds or other debt securities are sold, there is usually a principle amount , or the amount to be paid at maturity. This is information that GASB has determined to be an essential part of financial reporting and should be reported with, but not a part of, the financial statements. A number of companies assign a risk level to the bonds or debt issued by a government.
Risk means the likelihood of default or nonpayment.
The lower the risk of nonpayment, the lower the interest the government must pay. Some rating agencies give a AAA rating to the least risky government bonds. Retained earnings is a phrase that is more commonly used in business financial reporting. However, it is used in government when a government has operations that are to be accounted for in a fashion similar to business financial reporting. These operations are referred to a proprietary funds .