Governmental Accounting Standards Board (GASB) Updates. Summary of GASB Updates

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1 Governmental Accounting Standards Board (GASB) Updates Effective Dates Recently Issued GASB Standards June 30, 2013 GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements* GASB Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34 GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements* GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position* * Effective as of the previous December 31, however effective as of June 30, for the State of Illinois. 1

2 Effective Dates Recently Issued GASB Standards June 30, 2014 GASB Statement No. 65, Items Previously Reported as Assets and Liabilities* GASB Statement No. 66, Technical Corrections 2012 an amendment of GASB Statements No. 10 and No. 62* GASB Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25 GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees * Effective as of the previous December 31, however effective as of June 30, for the State of Illinois. Effective Dates Recently Issued GASB Standards June 30, 2015 GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 GASB Statement No. 69, Government Combinations and Disposals of Government Operations* * Effective as of the previous December 31, however effective as of June 30, for the State of Illinois. 2

3 GASB Statement No. 60 Service Concession Arrangements (SCAs) Public-Private Partnership in which: The transferor conveys to an operator the right and related obligation to provide services to the public through the operation of a capital asset, in exchange for significant consideration. The operator is compensated through fees from third parties. The transferor has the ability to determine the services provided by the operator, to whom these services are available and the prices charged for the services. The transferor is entitled to ownership or other significant residual interest in the service utility of the facility at the end of the arrangement. Examples: Parking Garages, Parking Meters, Roads and Bridges GASB Statement No. 61 The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34 Provides amendments to GASB Statement No. 14, The Financial Reporting Entity relating to component and blended component units: Increases emphasis on financial relationships (i.e. financial benefit or burden) between the primary government and the potential component unit when determining to include or exclude a potential component unit within the financial statements. Refocuses and clarifies the blending requirements for component units within the primary government financial statements. Improves the recognition of ownership interests (i.e., joint ventures, component units, investments). Expands footnote disclosures emphasizing the reasons for including a component unit. 3

4 GASB Statement No. 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements Primary objective is to directly incorporate the applicable provisions in FASB and AICPA pronouncements issued before November 30, 1989 into the state and local government accounting and financial reporting standards. Guidance on 29 topics is brought into the GASB literature GASB Statement No. 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position Addresses presentation issues associated with the new financial position elements created in Concepts Statement No. 4 (assets, liabilities, deferred outflows of resources, deferred inflows of resources, and net position). Deferred Outflows of Resources and Deferred Inflows of Resources should only be used as specifically required in authoritative GASB pronouncements: GASB No. 53 Derivative Instruments GASB No. 60 Service Concession Arrangements GASB No. 65 Items Previously Reported as Assets and Liabilities GASB No. 68 Accounting and Financial Reporting for Pensions GASB No. 69 Government Combinations and Disposals of Government Operations 4

5 GASB Statement No Definitions: Deferred outflow of resources a consumption of net assets by the government that is applicable to a future period. Has a natural debit balance and is reported in a separate section following assets. Deferred inflow of resources An acquisition of net assets by the government that is applicable to a future reporting period. Has a natural credit balance and is reported in a separate section following liabilities. Net position The residual of all elements presented in a statement of financial position. Net position components include Net investment in capital assets Restricted Unrestricted Reporting Requirements Statement of Net Position (Government-Wide Financials) Balance Sheet (Governmental Fund Financials) Assets Deferred Outflows of Resources Liabilities Deferred Inflows of Resources Net Position Assets Deferred Outflows of Resources Liabilities Deferred Inflows of Resources Fund Balance 5

6 Reporting Requirements (cont.) Footnote Disclosures Governments should provide details of different types of deferred amounts in the notes to the financial statements if the deferred inflows/outflows consist of multiple components on the face of the financial statements. An explanation in the notes is needed if the amount reported for a component of net position is significantly affected by the difference between deferred inflows or outflows and their related assets or liabilities. GASB Statement No. 65 Items Previously Reported as Assets and Liabilities Objective is to determine whether certain transactions previously reported as assets and liabilities should continue to be reported as such or should instead be reported as: A deferred outflow of resources, or An outflow of resources (expense/expenditure), or A deferred inflow of resources, or An inflow of resources (revenue). 6

7 GASB Statement No. 65 Reporting Examples Deferred Outflows of Resources (debit balance) Grants paid in advance of meeting timing requirements Deferred amounts from refunding of debt (debits) Cost to acquire rights to future revenues (intra-entity) Deferred loss from sale-leaseback Deferred Inflows of Resources (credit balance) Grants received in advance of meeting timing requirement Taxes received in advance Deferred amounts from refunding of debt (credits) Proceeds from sales of future revenues (GASB No. 48) Deferred gain from sale-leaseback Regulatory credits Unavailable revenue in governmental funds GASB Statement No. 65 Reporting Examples Assets Grants paid in advance of meeting eligibility requirements (other than timing) Rights to future revenues acquired from outside the reporting entity Prepayments Pension asset (Plan net assets exceed total liability) Regulatory assets (capitalized incurred costs) Liabilities Derived tax revenue received in advance Premium revenues (risk pools) Grants received in advance of meeting eligibility requirements (other than timing) Resources received in advance of an exchange transaction Refunds imposed by a regulator 7

8 GASB Statement No. 65 Reporting Examples Outflows of Resources (Expense/Expenditure) Debt issuance costs (other than insurance) Initial costs incurred by lessor in an operating lease Acquisition costs for risk pools Loan origination costs Inflows of Resources (Revenue) Loan origination fees Commitment fees (after exercise or expiration) GASB Statement No. 66 Technical Corrections 2012 an amendment of GASB Statements No. 10 and No. 62 Resolves conflicting guidance surrounding differences in Statements No. 54 and No. 10 regarding the reporting of risk financing activities Resolves differences between Statements No. 62 and No. 13 regarding the reporting of certain operating lease transactions and No. 48 regarding the reporting of the acquisition of a loan or group of loans 8

9 GASB Statement No. 67 Financial Reporting for Pension Plans an amendment of GASB Statement No. 25 Scope is limited to defined benefit and defined contribution pension plans administered through trusts that meet certain criteria Few changes from Statement 25 for financial statement recognition Notes/RSI changes primarily to reflect changes in measurement of liabilities of employers GASB Statement No. 68 Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 Scope is limited to pensions provided through trusts that meet certain criteria Excludes all OPEB Applies to employers and nonemployers contributing entities that have a legal obligation to make contributions directly to a pension plan Revised recognition, measurement, and disclosure requirements for all employers Liability is measured net of pension plan s fiduciary net position and is fully recognized in accrual-basis financial statements Liability changes: some recognized as expense in the period of the change, others recognized as deferred outflows/inflows of resources with expense recognized over defined future periods 9

10 GASB Statement No. 69 Government Combinations and Disposals of Government Operations Scope includes Combinations in which no consideration is provided Government mergers Transfers of operations Combinations in which consideration is provided Government acquisitions Disposal of government operations GASB Statement No. 70 Accounting and Financial Reporting for Nonexchange Financial Guarantees Requires a government that extends a nonexchange financial guarantee to recognize a liability when it is more likely than not that the government will be required to make a payment on the guarantee Requires a government that has issued an obligation guaranteed in a nonexchange transaction to recognize revenue to the extent of the reduction in its guaranteed liabilities. 10