State Association of County Auditors GASB Update The views expressed in this presentation are those of Mr. Sundstrom. Official positions of the GASB are determined only after extensive due process and deliberation.
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State Association of County Auditors
GASB UpdateThe views expressed in this presentation are those of Mr. Sundstrom. Official positions of the GASB are determined only after extensive due process and deliberation.
Effective Dates—FYE June 30
2014- Statement 65—Assets and Liabilities—Reclassification and
Recognition- Statement 66—Technical Corrections- Statement 67—Pension Plans- Statement 70—Nonexchange Financial Guarantees
2015- Statement 68—Pension Accounting for Employer and
Nonemployer Contributing Entities- Statement 69—Government Combinations and Disposals of
Government Operations- Statement 71—Pension Transition for Contributions Made
Subsequent to the Measurement Date
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Pensions
Statement 68Accounting and Financial Reporting for Pensions
Statement 67Financial Reporting for Pension Plans
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Scope and Applicability
Defined benefit and defined contribution pensions provided through trusts that meet the following criteria:- Employer/nonemployer contributions irrevocable- Plan assets dedicated to providing pensions- Plan assets legally protected from creditors
Excludes all OPEB Applies to employers and nonemployer contributing
entities that have a legal obligation to make contributions directly to a pension plan
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Types of Pension Plans
Defined Benefit- Single employer- Agent multiple employer- Cost-sharing multiple employer
Defined Contribution
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Defined Benefit Pensions
Liabilities to the pension plan (payables) Liabilities to employees for pensions
- “Net pension liability” (NPL) Total pension liability (TPL), net of pension plan’s fiduciary net position
– TPL = actuarial present value of projected benefit payments attributed to past periods
– Fiduciary net position as measured by pension plan- Single/agent employers recognize 100 percent of NPL- Cost-sharing employers recognize proportionate shares of
collective NPL
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What Can Be Done?
Determine level of assistance that will be provided by the pension plan regarding the implementation of Statement 68
Determine what additional allocations need to made by the government- Primary government—business-type activities (enterprise
funds) - Component units
Become familiar with AICPA white papers (recommended practices) on pensions
Education—clean opinion or not- Legislative bodies- Media- Public
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GASB Efforts to Support Implementation
Two Implementation Guides- Pension plan implementation guide released in June 2013- Employer and nonemployer contributing entity
implementation guide released in January 2014 Outreach to all 50 states
- Identify implementation issues- Provide technical support
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Three Things That You Need To Know
2014
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Statement 65Items Previously Reported as Assets and Liabilities
Effective for Periods Beginning After December 15, 2012
Statement 65
GASB Standards identify all deferred inflows of resources and deferred outflows of resources- Debt refundings- Nonexchange transactions—timing requirements
Debt issuance costs, except any portion related to prepaid insurance costs, should be recognized as an expense in the period incurred.
Deferred inflows and deferred outflows apply to governmental funds- Availability period
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Statement 66Technical Corrections—2012
Effective for Periods Beginning After December 15, 2012
Statement 66
Statement 13- Statement 62 guidance on leases
Statement 48- Statement 62 guidance on Purchase of a loan or group of loans Servicing fees related to mortgage loans
Statement 10- Statement 54 guidance on special revenue funds Risk financing pools
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Statement 70Nonexchange Financial Guarantees
Effective for periods beginning after June 15, 2013
Statement 70
Scope- Based the same definition of nonexchange that is found in
Statement 33 Excludes exchange and exchange-like transactions
Recognition When qualitative factors and historical data, if any, indicate that
it is more likely than not that a payment will be made on an extended nonexchange financial guarantee, the event should recognize a liability
Measurement- Amount equal to the discounted present value of the best
estimate of the future outflows expected to be incurred as a result of the guarantee
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2015
Statement 69Government Combinations and Disposals of Operations
Effective for Periods Beginning After December 15, 2013
Statement 69
Mergers and transfers- Assets, liabilities, and deferrals should be reported at carrying
values Presumption of GAAP
Acquisitions- Assets, liabilities and deferrals should be reported at
acquisition value—a market-based entry price- Exceptions—pensions, OPEB, pollution remediation
Disposals (sales and transfers)- Gains and losses reported as special items
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Current Technical Agenda
Fair Value—Measurement and Application Fiduciary Responsibilities GAAP Hierarchy Leases Postemployment Benefits
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Fair Value
Fair Value Definition- The price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
Investment Definition- A security or other asset that a government holds primarily for
the purpose of income or profit and its present service capacity is based solely on its ability to generate cash or to be sold to generate cash
Disclosures—amendments based on current FASB standards (including fair value hierarchy—levels 1-3)
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Fiduciary Responsibilities
Fiduciary definition—A government that controls assets either:- As a trustee for the sole benefit of its own employees or recipients other than the
financial reporting entity, or- For which it does not have administrative or direct financial involvement over the
assets used to provide benefits to individuals that are not part of its citizenry, or organizations or other governments that are not part of the financial reporting entity..
Fiduciary activities continue to be reported as basic financial statements
Custodial funds- An expanded fund type be established that includes any fiduciary arrangement
that is not governed by a formal trust agreement or equivalent arrangement Funds previously classified as agency funds Trust funds for which there is no trust agreement or equivalent arrangement
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GAAP Hierarchy
Reduce GAAP Hierarchy from four levels to two levels- Level 1—GASB Statements- Level 2—GASB Technical Bulletins and Implementation
Guides and AICPA pronouncements cleared by the GASB Nonauthoritative—further clarifies role of concepts
statements Requires broader public exposure of comprehensive
implementation guide
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Leases
Single approach—right of use- No classification of leases into operating/capital or other
categories- Potentially develop some exceptions- Underlying assumption that leases are financings
Practicality exception—short-term lease- Lease that, at the beginning of the lease, has maximum
possible term under the contract, including any options to extend, of 12 months or less
Lessor—working with FASAB
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Postemployment Benefits
Three Exposure Drafts- Other Postemployment Benefits (OPEB)—Plans- OPEB—Employers- Pensions—Plans that are not qualifying trusts
OPEB proposals based on new pension standards Certain modifications made, including provision for
healthcare trend rates
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Questions?
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Web site—www.gasb.org
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