Recent Significant GASB Pronouncements. William Feng, Chief Accountant October 2018

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1 1d. GASB Review 1d.

2 Recent Significant GASB Pronouncements William Feng, Chief Accountant October

3 What is GASB? Governmental Accounting Standards Board (GASB) is the independent organization that establishes accounting and financial reporting standards for U.S. state and local governments that follow Generally Accepted Accounting Principles (GAAP). Its mission is to promote financial reporting that provides useful information to public officials, administrators, investors, taxpayers, and others who use financial reports. Accomplishes its mission by regularly issuing pronouncements or standards. 1

4 Standards Setting Process 1. GASB identifies a topic or problem 2. Conducts research 3. Narrow focus and formulate idea for new standard 4. Issue document for public comment 5. Deliberate based on comments and feedback 6. Issue final standard 7. Education and implementation 2

5 GASB Statements Through the Years Pension GASB 25: Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans [Effective fiscal year (FY) 1997] GASB 27: Accounting for Pensions by State and Local Governmental Employers (Effective FY 1998) GASB 50: Pension Disclosures (Effective FY 2008) GASB 67: Financial Reporting for Pension Plans (Effective FY 2014) GASB 68: Accounting and Financial Reporting for Pensions (Effective FY 2015) 3

6 GASB Statements Through the Years Other Post Employment Benefits (OPEB) GASB 43: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (Effective FY 2007) GASB 45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (Effective FY 2008) GASB 74: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (Effective FY 2017) GASB 75: Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (Effective FY 2018) 4

7 GASB 67 Major requirements Total Pension Liability (TPL) is the actuarial present value of projected benefit payments that is attributed to past periods of plan member service. For financial reporting purpose, the entry age actuarial cost method is the only allowable cost method. Discounting projected benefit payments using a blended rate of the longterm expected rate of return on pension plan investments and a municipal bond index rate, if necessary. Net Pension Liability (NPL) equals the TPL less the plan s fiduciary net position (at market value). Schedule indicating the sources of change in NPL. 5

8 GASB 67 Major requirements (cont.) NPL sensitivity disclosure. Annual money weighted rate of return: expresses investment performance, net of pension plan investment expense, adjusted for the changing amounts actually invested. Inputs to the internal rate of return calculation should be determined at least monthly. 6

9 GASB 68 Major requirements Employer is required to recognize a liability equal to the NPL. The NPL is required to be measured as of a date no earlier than the end of the employer s prior fiscal year. Pension expense recognized each year primarily results from the changes in NPL, with the exception of: i. changes of economic and demographic assumptions ii. differences between expected and actual non-investments experience iii. differences between the projected earnings on pension plan investments and actual experience 7

10 GASB 68 Major requirements (cont.) Standardize amortization period: (i) & (ii) over a closed period equal to the average of the expected remaining service lives of all employees that are provided with benefits through the pension plan. (iii) over a closed period of five years. Incorporate most disclosures under GASB 67. 8

11 GASB 74 Major requirements Principles and methodology mirror GASB 67. Projected benefit payments should be based on claims costs, or ageadjusted premiums approximating claims costs. Projected benefit payments also should include taxes or other assessments expected to be imposed on benefit payments. Net OPEB liability (NOL) sensitivity disclosure factoring in changes in healthcare cost trend rates. 9

12 GASB 75 Major requirements Principles and methodology mirror GASB 68. Employer is required to recognize a liability equal to the NOL. Incorporate most disclosures under GASB

13 Financial Statements Examples State of New Jersey Pensions FY 2013 Financial Statements 11

14 Financial Statements Examples State of New Jersey Pensions FY 2013 Financial Statements 12

15 Financial Statements Examples State of New Jersey Pensions FY 2014 Financial Statements 13

16 Financial Statements Examples State of New Jersey Pensions FY 2014 Financial Statements 14

17 Financial Statements Examples State of New Jersey Pensions FY 2014 Financial Statements 15

18 WPERP FY 2017 Financial Statements Financial Statements Examples 16

19 WPERP FY 2017 Financial Statements Financial Statements Examples 17

20 Financial Statements Examples DWP Power System FY 2014 Financial Statements 18

21 Financial Statements Examples DWP Power System FY 2014 Financial Statements 19

22 Financial Statements Examples DWP Power System FY 2017 Financial Statements 20

23 Summary Matrix 21

24 QUESTIONS? THANK YOU 22

25 Notes

26 Notes