GASB Standards Effective for 2014

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1 Overview This paper provides an overview of the final standards issued by the Governmental Accounting Standards Board (GASB) effective in 2014, as well as an update on outstanding proposals and active projects. Final Governmental Accounting Standards & Concept Statements The following is a table of accounting standards with effective dates in 2014, applicable to governmental entities (excluding technical corrections). GASB Statement No. 68 Standard Description Effective Date Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 (Issued June 2012) Statement No. 69 Government Combinations and Disposals of Government Operations (Issued January 2013) Statement No. 70 Accounting and Financial Reporting for Nonexchange Financial Guarantees (Issued April 2013) Requires recognition of the entire net pension liability attributable to the governmental entity and provides for a more comprehensive measure of pension expense for employer and governmental nonemployer contributing entity financial reports; requires new note disclosures and required supplementary information Provides specific accounting and financial reporting guidance for government combinations and disposals of government operations and new disclosure requirements Requires a government extending nonexchange financial guarantees to recognize a liability when qualitative factors and historical data indicate it is more likely than not the government will be required to make a payment on the guarantee For periods beginning after June 15, 2014 (June 30, 2015, fiscal-year financial statements); early application is encouraged Effective for government combinations and disposals occurring in financial reporting periods beginning after December 15, 2013, and should be applied on a prospective basis; early application is encouraged Effective for financial reporting periods beginning after June 15, 2013; earlier application is encouraged

2 GASB Statement No. 71 Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68 (Issued November 2013) Addresses an issue regarding application of the transition provisions of Statement No. 68; the issue relates to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government s beginning net pension liability Effective simultaneous with the provisions of Statement No. 68 for periods beginning after June 15, 2014 (June 30, 2015, fiscal-year financial statements); early application is encouraged Concepts Statement Concepts Statement No. 6: Measurement of Elements of Financial Statements (Issued March 2014) Description This concepts statement establishes two measurement approaches used in financial statements: Initial transaction date-based measurement (initial amount) Current financial statement date-based measurement (remeasured amount) The four measurement attributes established by the statement are historical cost, fair value, replacement cost and settlement amount. Exposure Drafts, Preliminary Views Open for Comment or Deliberation The following chart includes proposed standards open for comment or deliberation. GASB will determine the effective dates of the proposed standards after considering feedback on the open projects. Topic & Title Description Status Fair Value Measurement and Application (Issued May 2014) Review and consider alternatives for further development of the definition of fair value, the methods used to measure fair value, the applicability of fair value guidance to investments and other items currently reported at fair value and potential disclosures about fair value measurements Comments due August 15, 2014; final standard, 1Q15 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments (Issued February 2014) Prioritizes the guidance state and local governments follow when preparing financial statements in accordance with GAAP; the proposal would reduce the authoritative GAAP hierarchy to two categories from four under GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments Comments due December 31, 2014; the proposed guidance would be effective for periods beginning after June 15, 2015; early adoption would be permitted; final standard, 2Q15 2

3 Implementation Guide No. 20XX-1 (Issued December 2013) Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB Employer Exposure Draft) (Approved May 2014; expected to be issued mid-june 2014) Since the authoritative status of the GASB Implementation Guides would be elevated under the GAAP hierarchy proposal, GASB also exposed for comment Implementation Guide No. 20XX-1, which is an aggregation of all implementation guidance issued to date Proposes significant changes to how a government would calculate its OPEB liability and annual expense, including: Discounting projected OPEB payments Use of a single actuarial cost allocation method, the entry age actuarial cost method Immediate recognition of additional components of OPEB expense More extensive note disclosures and required supplementary information Comments due December 31, 2014; the proposed guidance would be effective for periods beginning after June 15, 2015; early adoption would be permitted; Final standard, 2Q15 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (OPEB Plan Exposure Draft) (Approved May 2014; expected to be issued mid-june 2014) Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans That Are Not Administered through Trusts That Meet Specified Criteria, and Amendments to Certain Provisions of GASB Statements 67 and 68 (Approved May 2014; issued June 2014) Addresses financial reports of defined benefit OPEB plans administered through trusts meeting certain criteria; also details proposed note disclosure requirements for defined contribution OPEB plans Proposes requirements for pensions and pension plans not administered through a trust meeting specified criteria 3

4 Preliminary Views: Economic Condition Reporting: Financial Projections (Issued November 29, 2011) Considers whether guidance or guidelines should be provided for additional information about economic condition, particularly financial projections, as part of general purpose external financial reporting (GPEFR), including risks associated with a government s intergovernmental financial dependencies Sought comments on GASB s current and preliminary views on reporting financial projections and related narrative discussions by governmental entities Comments were due March 16, 2012; project remains on hold until later in 2014 Project Agenda Items In addition to proposed standards, GASB s technical plan for the second third of 2014 includes the following projects: Topic Description GASB Schedule (subject to change) Fiduciary Responsibilities (added to agenda September 2013) Leases (added to agenda April 2013) Tax Abatement Disclosures (added to agenda December 2013) Irrevocable Charitable Trusts (added to agenda December 2013) Intends to develop guidance regarding application of fiduciary responsibility criterion in deciding how governments should report fiduciary activities in their generalpurpose external financial reports Re-examines lease accounting issues and will provide a basis for GASB to consider whether current operating leases meet definitions of assets or liabilities Disclosure guidance for governments that granted tax abatements as defined a reduction of or exemption from taxes, offered by a government to a specific taxpayer, typically for the purpose of spurring economic development Research to consider whether additional guidance is needed and, if so, support deliberations over developing specific accounting and financial reporting standards Preliminary views, 4Q14 Exposure draft, 4Q15 Final statement, 3Q16 Preliminary views, 4Q14 Exposure draft, 1Q16 Final statement, 4Q16 Exposure draft, 4Q14 Final standard, 3Q15 Exposure draft, 2Q15 Final standard, 1Q16 4

5 Conceptual Framework: Recognition (added to agenda December 2005) Develop recognition criteria for if and when information should be reported in state and local governmental financial statements On hold If you have questions or need additional information, contact your BKD advisor. Contributor Anne Coughlan Director