GASB Update. GASB Update. Statement No. 72 1/20/2016. Overview of GASB statements issued in 2015, including: GASB Statements Issued in 2015

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1 GASB Update GASB Update An overview of recently-issued GASB Statements. January 21, 2016 Overview of GASB statements issued in 2015, including: Effective date Applicability Main implications How to prepare 2 GASB Statements Issued in 2015 No. Title Effective Date FYE 72 Fair Value Measurement and Application June 16, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 June 16, 2016/ Financial Reporting for Postemployment Benefit Plans Other than Pension Plans 75 Financial Reporting for Postemployment Benefits Other than Pensions June 16, 2017 June 16, 2018 Statement No. 72 Fair Value Measurement and Application 76 The Hierarchy of Generally Accepted Accounting Principles for June 16, 2016 State and Local Governments 77 Tax Abatement Disclosures December 16, Pensions Provided Through Certain Multiple Employer Defined December 16, 2016 Benefit Pension Plans 79 External Investment Pools June/December 16,

2 Defines fair value and investment Requires investments to be measured at fair value, with certain exceptions Addresses acceptable valuation techniques Establishes a fair value hierarchy that categorizes the inputs to valuation techniques used to measure fair value into three levels (level 1, 2, and 3) Expands disclosure requirements related to fair value measurements and the impact of fair value measurements on a government s financial position Similar to FASB Accounting Standards Codification Topic 820, Fair Value Measurement Fair value is 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. Fair value is an exit-price measurement. An investment is a security or other asset that (a) a government holds primarily for the purpose of income or profit and (b) has a present service capacity based solely on its ability to generate cash or to be sold to generate cash. The investment designation is made at acquisition and remains for the life of the asset, even if usage changes over time. 5 6 Exceptions to fair value measurement: Investments in nonparticipating interest earning investment contracts Measure using a cost based measure GASB 31 Unallocated insurance contracts Report as interest earning investment contracts GASB 31/59 Money market investments and participating interest earning Measure at amortized cost GASB 31 investment contracts that have a remaining maturity at the time of purchase of one year or less and are held by governments other than external investment pools Investments held by 2a7 like external investment pools May measure at amortized cost GASB 31 Synthetic guaranteed investment contracts that are fully benefitresponsive Measure at contract value GASB 53 Investments in 2a7 like external investment pools Measure at the net asset value (NAV) per share (or its equivalent) determined by the pool GASB 59 Investments in life insurance contracts Measure at cash surrender value Investments in common stock meeting the criteria for the equity Apply equity method GASB 62 method Donated capital assets, donated works of art, historical treasures, and Measure at acquisition value GASB 72 similar assets, as well as capital assets that a government receives in a service concession arrangement 7 How to prepare - Reevaluate asset classifications Determine if any income-producing assets meet the new definition of investment requiring measurement at fair value Review valuation methods Prepare for expanded disclosures Fair value measurements and level of the fair value hierarchy Discussion of valuation techniques Additional disclosures regarding investments in certain entities that calculate net asset value per share Upon implementation restate prior periods (if presented and practical) or restate beginning net position/fund balance/fund net position and disclose the restatement. 8 2

3 Statement No. 73 Pensions Effective FYE June 16, 2016/2017 and later Statement No. 73 Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 Establishes requirements for pensions that are not within the scope of GASB 68, as well as for the assets accumulated for purposes of providing those pensions. Requirements for pensions effective for fiscal years ending 6/16/17 or later Requirements for related assets effective for fiscal years ending 6/16/16 or later Also amends certain provisions of GASB 67 and 68 for pension plans and pensions that are within their respective scopes. Amendments effective for fiscal years ending 6/16/16 or later 10 Statement No. 73 Pensions Effective FYE June 16, 2016/2017 and later Statement No. 73 Pensions Effective FYE June 16, 2016/2017 and later For pensions not within the scope of GASB 68: Requirements of GASB 73 are similar to those of GASB 68 For pensions within the scope of GASB 68 and pension plans within the scope of GASB 67: GASB 73 amends requirements related to the following: 1. Information that is required to be presented as notes to the 10-year schedules of required supplementary information about investmentrelated factors that significantly affect trends in the amounts reported 2. Accounting and financial reporting for separately financed specific liabilities of individual employers and nonemployer contributing entities for defined benefit pensions 3. Timing of employer recognition of revenue for the support of nonemployer contributing entities not in a special funding situation How to prepare - Review GASB Statement No. 73 if you have a pension that is not covered by GASB Statement No

4 Statement Nos. 74 and 75 OPEB Effective FYE June 16, 2017/2018 and later Statement Nos. 74 and 75 Financial Reporting for Postemployment Benefit Plans Other than Pension Plans and Financial Reporting for Postemployment Benefits Other than Pensions Requirements are similar to GASB 67 (for pension plans) and GASB 68 (for pensions/employers). GASB 74 - Postemployment Benefit Plans Other than Pension Plans Effective for plans for fiscal years ending June 16, 2017 or later GASB 75 - Postemployment Benefits Other than Pensions Effective for employers for fiscal years ending June 16, 2018 or later 14 Statement No. 76 GAAP Hierarchy Statement No. 76 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments Supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. Reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. 16 4

5 Statement No. 76 GAAP Hierarchy Statement No. 76 GAAP Hierarchy Authoritative GAAP The sources of authoritative GAAP are categorized in descending order of authority as follows: Category A - officially established accounting principles GASB Statements Category B - GASB Technical Bulletins; GASB Implementation Guides; and literature of the AICPA cleared by the GASB If an accounting treatment is not specified by Category A or Category B, first consider accounting principles for similar transactions or events within a source of authoritative GAAP, then may consider non-authoritative sources that do not conflict with or contradict authoritative GAAP Nonauthoritative sources Nonauthoritative accounting literature include: GASB Concepts Statements Pronouncements from other accounting bodies (FASB, IASB, etc.) Practices that are widely recognized and prevalent in state and local government Literature of other professional associations or regulatory agencies; and accounting textbooks, handbooks, and articles Statement No. 77 Tax Abatements Effective FYE December 16, 2016 and later Statement No. 77 Tax Abatement Disclosures Requires governments to disclose information about their own tax abatements separately from information about tax abatements that are entered into by other governments and reduce the reporting government s tax revenues. The new disclosures about a government s own tax abatement agreements include: The purpose of the tax abatement program The tax being abated Dollar amount of taxes abated Provisions for recapturing abated taxes The types of commitments made by tax abatement recipients Other commitments made by a government in tax abatement agreements, such as to build infrastructure assets. The new disclosures about tax abatements that are entered into by other governments and reduce the reporting government s tax revenues include: The name of the government entering into the abatement agreement The tax being abated Dollar amount of the reporting government s taxes abated. 20 5

6 Statement No. 77 Tax Abatements Effective FYE December 16, 2016 and later How to prepare - If applicable, review GASB Statement No. 77 and prepare for additional disclosure requirements. Statement No. 78 Pensions Provided Through Certain Multiple- Employer Defined Benefit Pension Plans 21 Statement No. 78 Pensions Effective FYE December 16, 2016 and later Amends the scope and applicability of GASB 68 to exclude certain private or federally sponsored cost-sharing multiple-employer defined benefit pension plans, and establishes requirements for recognition and measurement of pension expense, expenditures, and liabilities; note disclosures; and required supplementary information for such pensions Results from the inability to obtain measurements and other relevant data points needed to comply with GASB 68 Focuses employer accounting and financial reporting requirements for those pension plans on obtainable information Statement No. 79 External Investment Pools 23 6

7 Statement No. 79 Investment Pools Effective FYE June/December 16, 2016 and later Existing standards provide that external investment pools may measure their investments at amortized cost for financial reporting purposes if they follow substantially all of the provisions of the SEC s Rule 2a7. Likewise, participants in those pools are able to report their investments in the pool at amortized cost per share. The SEC s Rule 2a7 regulations were changed in 2014 (effective April 2016) Would cause many governments and investments to no longer qualify to measure their investments at amortized cost GASB 79 replaces the reference in existing GASB literature to Rule 2a7 with criteria that are similar in many respects to those in Rule 2a7 to allow many pools to continue to qualify for amortized cost accounting. GASB 79 also establishes additional note disclosure requirements for qualifying pools and for governments that participate in those pools. Information about limitations or restrictions on participant withdrawals Questions? Laura Lambert, CPA Partner laura.lambert@weaver.com Sarah Roberts, CPA Senior Manager sarah.roberts@weaver.com 25 7