The Governmental Accounting Standards Board (GASB) has been very active over the last year issuing a number of final pronouncements and due process documents including Statement No. 68, Accounting and Financial Reporting for Pensions, which revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits. This session reviewed the recent pronouncements from GASB.
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• Issued Modifies GASB S-53, Accounting and Financial Reporting for Derivative Instruments • Issued in July 2011• Effective for fiscal years ending June 30, 2012 and thereafter• Continuation of effective hedge after replacement of a swap
counterparty• Specifies criteria to be met to continue to apply hedge
GASB STATEMENT NO. 65Items Previously Reported As Assets And Liabilities
• Issued in March 2012• Effective for fiscal years ending December 31, 2013 and
thereafter• GASB Concepts Statement No. 4 limits use of terms “deferred
outflows” and “deferred inflows” of financial resources to those instances specifically identified in GASB pronouncements
• Consider implementing with GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position
• GASB Statement No. 25 and No. 27• Allowed the use of 5 different actuarial cost methods• Amortization over at most 30 years (after initial 10 years)• Assets generally at fair value• Net Pension Obligation/Asset (NPO/NPA)
• Current pension project• Research agenda in January 2006• Five roundtable discussions in 2007• Current project agenda in April 2008• Invitation to Comment (ITC) March 2009• Preliminary Views (PV) June 2010• Exposure Draft (ED) July 2011• Final Pronouncements June 2012
• “The final statements relate to accounting and financial reporting, not to how governments approach the funding of their pension plans. Pension funding is a policy decision made by government officials”
• GASB has “divorced” accounting for pension from funding of pensions
GASB STATEMENT NO. 68Accounting And Financial Reporting For Pensions
• Issued June 2012• Accounting and financial reporting for defined benefit pensions and
defined contribution pensions provided to employees and volunteers of state and local government employers plans • Employer reporting• Special funding non-employer situations
• Employer and employee contributions related to current employees, active and inactive
• Based on five year history• Payments to existing retirees and future retirees (currently
active or inactive)• Net position > benefit payments – IRR• Otherwise blended rate impacted by borrowing rate• IMRF will perform this calculation for you
GASB STATEMENT NO. 68 • Report net pension liability (NPL) in all accrual based financial
statements• Changes in the NPL recognized as pension expenses in the current
period except for:• Difference between projected and actual investment rate of
return – amortize over closed 5 years• Differences between expected and actual economic or
demographic assumptions and/or changes in these assumptions– closed period reflecting remaining service lives
• Differences not reported as pension expense of the current period are reported as deferred outflows or deferred inflows of resources related to pensions
GASB STATEMENT NO. 68• Notes to financial statements
• Total of all• Pension liabilities• Pension assets• Deferred inflows/outflows of resources related to pensions• Pension expense/expenditure for the period• Unless fully disclosed on face of financial statements
GASB STATEMENT NO. 68• Notes to financial statements
• Contribution Requirements• Employee• Employer• Authority for changing• Basis for determining employer contributions• Contribution $ or % of covered payroll
• Reference to pension plan separate financial statements• And how to obtain separate report • IMRF’s separate report does not contain individual employer
GASB STATEMENT NO. 68• Notes to financial statements
• Discount rate (continued)• Bond index rate incorporated, if applicable• Period of projected benefit payments each rate applies to• Assumed asset allocation of the portfolio
• Long-term real rate of return for each asset class• RRR Arithmetic or geometric means
• Impact on net pension liability of 1% swing higher and lower in discount rate
• Cash flow assumptions• Long-term expected rate of return
GASB STATEMENT NO. 68• Notes to financial statements
• Schedule of changes in net pension liability• Beginning balance of total pension liability, the plans fiduciary
net assets and the net pension liability • Service cost• Interest on total pension liability• Changes of benefit terms• Differences between actual and expected experience• Changes in assumptions or other inputs• Contributions from employer/non-employer contributor• Contributions from employees
GASB STATEMENT NO. 68• Notes to financial statements
• Schedule of changes in net pension liability• Plan net investment income• Benefit payments• Refunds• Administrative expenses• Other changes in net pension liability, disclosed separately
• Spikes• Retroactive benefits
• Ending balance of total pension liability, plan fiduciary net position and net pension liability
GASB STATEMENT NO. 68• Notes to financial statements
• Measurement date of net pension liability, date of actuarial valuation used to calculate total pension liability, and if roll forward procedures were used
• Brief description of changes in assumptions • Description of changes in benefit terms• Pension expense recognized in the period• Deferred inflows/outflows related to pensions
GASB STATEMENT NO. 68• Notes to financial statements
• Deferred inflows/outflows related to pensions• Changes due to expected/actual experience• Changes in assumptions or other inputs• Net difference between projected and actual investment
experience• Employer contributions to the plan subsequent to the
measurement date of the net pension liability (if not the employer’s fiscal year end)
GASB STATEMENT NO. 68• Notes to financial statements
• Schedule of deferred inflows/outflows related to pensions by year for 5 years and in the aggregate thereafter that will be recognized in pension expenses
• Schedule that will be recognized as a reduction of the net pension liability
GASB STATEMENT NO. 68• Required supplementary information
• Schedule reporting• A-Total pension liability• B-Plans fiduciary net position• C-Net pension liability• D-B as a % A• E-Covered payroll• F-C as a % of E
GASB STATEMENT NO. 68• Required supplementary information
• If employer contributions are not actuarially determined• A-Statutory or contractually required contribution• B-Actual contributions• C-A-B• D-Covered payroll• E-B/A as a % of D
GASB STATEMENT NO. 69• A government acquisition is a government combination in which a
government acquires another entity, or the operations of another entity, in exchange for the payment of significant consideration. The acquired entity or operation becomes part of the acquiring government’s legally separate entity.
GASB STATEMENT NO. 69• A transfer of operations is a government combination involving the
operations, rather than a combination of legally separate entities, and in which no significant consideration is exchanged. • A transfer of operations is either a transfer of operations to a
continuing government or • A transfer of operations to form a new government.