Agenda / Learning Objectives

Audit and Accounting Update: Navigating Uncharted Waters Tyler Bernier, CPA, CHFP August 18, 2016 Agenda / Learning Objectives Understand significant FASB and GASB Standards changes Consider the effects on financial reporting Review practical application considerations Identify organizational impacts GET EXCITED ABOUT ACCOUNTING!! 1

FASB FASB Recently Issued or Effective Standards and Proposed Guidance Revenue Recognition Leases Financial Instruments Pushdown Accounting Services Received from Affiliates Discontinued Operations Interest (Deferred Financing Costs) Internal Use Software Cloud Computing Extraordinary Items Net Asset Value per Share Going Concern Inventory Equity Method Investments Private Company Council (PCC) Standards 2

Revenue Recognition ASU 2014-09 Revenue from Contracts with Customers (Topic 606) Core Principle An entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled for those services Revenue Recognition Step 1 Identify Contract Step 2 Identify Performance Obligation(s) Step 3 Determine Transaction Price Step 4 Allocate Transaction Price to Performance Obligation(s) Step 5 Recognize Revenue as Performance Obligation(s) is Satisfied 3

Revenue Recognition For all public entities annual reporting periods beginning after December 15, 2017, including interim periods within that period, early adoption NOT permitted** For all other entities Annual reporting period beginning after December 15, 2018, limited early adoption allowed, but no earlier than public entities** Retrospective Application Required, with certain practical expedients **Approval of 1 year deferral from original pronouncement (next slide) Revenue Recognition ASU 2015-14 One year deferral of implementation dates ASU 2016-08 Clarifications to principal vs agent gross vs net ASU 2016-10 Performance obligations and licensing ASU 2016-12 Clarifications narrow scope improvements 4

Revenue Recognition Health Care Entities Issue # Description of Implementation Issue 1 Consideration of the following regarding self-pay balances, including co-pays and deductibles: Application of step 1 in determining if there is a contract Application of step 3 in determining the transaction price considering allowances/discounts and implicit price concessions 1a Implicit price concessions 2 Application of the portfolio approach to contracts with patient 3 Continuing care retirement communities (CCRC): Identifying and satisfying the performance obligation(s) and recognizing the monthly/periodic fees and nonrefundable entrance fees under Type A or life care contracts for CCRCs 4 CCRC: Identifying the performance obligation(s) and recognizing the performance obligation(s) to provide future services and use of facilities 5 Significant financing component CCRC contracts and patient and third party payor amounts in arrears 6 Disclosure requirements for health care entities 7 Accounting for contract costs 8 Consideration of third party payor settlement estimates Revenue Recognition Impacts / Considerations Changes in revenue streams / timing of recognition (delays/deferrals) Modifications to contracts and agreements Existing and future Contract/agreement templates Information Technology System capabilities G/L Accounting Software Contract/Customer/Revenue Cycle Software Staffing Needs Preparation, Implementation, On-going accounting and monitoring Tax versus GAAP variances Debt covenant impacts Financial statement users education Etc., Etc., Etc. 5

Leases Lease a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration The use of an identified asset is either explicitly or implicitly specified The customer controls the use of the identified asset Leases 2 Types of Leases - Lessee Financing* Most equipment and vehicles I/S Approach Amortization expense (asset) Interest expense (liability) SCF Approach Cash paid for principal and interest Operating* Most land and/or buildings I/S Approach Rent expense (amortization + interest) Straight-line basis SCF Approach Cash paid for lease * Both types require an asset and liability on the balance sheet 6

Leases For all public entities** annual reporting periods beginning after December 15, 2018, including interim periods within that period For all other entities annual reporting period beginning after December 15, 2019 Early adoption is permitted for all entities Modified retrospective transition **Including NFPs that have conduit debt Leases Impacts / Considerations Additional assets and liabilities on the balance sheet Potentially significant amount of time identifying and recording existing lease contracts Need for staffing or technology to track leases on an on-going basis Allows for different leasing options as treatment will be same if over 1 year Potential financial ratio impacts: Decreases debt service coverage ratio (negative) Increases long-term debt to capitalization ratio (negative) Increases days cash on hand (positive) 7

Financial Instruments ASU 2016-01: Financial Instruments Overall For public business entities, effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years For all other entities, effective for fiscal years beginning after December 15, 2018, and interim periods beginning after December 15, 2019 may early adopt for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years Earlier application is only allowed for 2 provisions Cumulative-effect adjustment as of beginning of fiscal year of adoption prospectively for investments without readily determinable fair values Financial Instruments Significant Provisions Equity investments at fair value (FV) Change in FV recognized in net income If no readily determinable FV cost minus impairment, plus or minus any changes resulting from observable price changes Unrealized change in value disclosure Qualitative assessment of equity investment impairment Change in FV of a liability (using FV option) guidance Eliminate requirement of NFPs that issue conduit debt or have greater than $100M in assets to disclose the FV of financial instruments not measured at FV 8

Financial Instruments Significant Provisions (continued) FV of financial instruments measured at amortized cost disclosure: Eliminate this requirement for nonpublic entities For public entities, eliminate requirement to disclose the methods and assumptions used in this estimate Require separate presentation of financial assets and financial liabilities by measurement category and form Evaluate a valuation allowance on a deferred tax asset related to available for sale securities Financial Instruments Impacts / Considerations Elimination of fair value of financial instruments disclosures Eliminates requirement to assess equity investments in an unrealized loss position and the related disclosures Adds qualitative assessment for impairment of investments consideration Change in assessment of cost method investments limited impact expected Still required to track unrealized changes in value of equity investments No longer allowed to recognize unrealized gains and losses on equity investments outside the performance indicator Will force separate tracking and assessments of debt and equity investments 9

Pushdown Accounting ASU 2014-17: Business Combinations (Topic 805): Pushdown Accounting Effective 11/18/14 for all entities to make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. Policy election Applies to separate financial statements of an acquired entity and its subsidiaries upon the occurrence of an event in which an acquirer obtains control of the acquired entity Acquired = public or nonpublic Acquirer = individual or entity Pushdown Accounting Impacts / Considerations Similar basis of accounting for acquirer and acquiree Fresh start accounting for acquiree Policy election = management can choose the best course Additional disclosures Complexity in determining the values to apply 10

Services Received from Personnel of an Affiliate ASU 2013-06: Not-for-Profit Entities (Topic 958): Services Received from Personnel of an Affiliate Effective for fiscal years beginning after June 15, 2014 Early adoption permitted Modified retrospective approach Services Received from Personnel of an Affiliate Recipient NFP entity recognizes services received from personnel of an affiliate that directly benefits the recipient NFP entity when not charged separately Measured at the cost recognized by the affiliate If value is distorted, election to the fair value of that service Foundation 11

Services Received from Personnel of an Affiliate Impacts / Considerations Improved transparency and comparability in stand-alone, or separately reported, nonprofit organizations Requirement to track or estimate the cost of providing the service, even if an intercompany/eliminated activity (if reporting separately) Discontinued Operations ASU 2014-08: Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity Qualifying threshold Current GAAP Component of an entity that comprise operations and cash flows that can be clearly distinguished Component could range from an asset group to a reportable segment Revised GAAP A component of an entity or group of components that has been disposed of by sale, disposed of other than by sale or is classified as held for sale that represents a strategic shift that has or will have a major effect on an entity s operations and financial results or An acquired business or nonprofit activity that is classified as held for sale on the date of the acquisition. 12

Discontinued Operations Effective Dates Public business entity Fiscal years beginning on or after December 31, 2014 All others Fiscal years beginning on or after December 31, 2015 Early adoption permitted (only for disposals not previously reported) Prospective application Discontinued Operations Impacts / Considerations Items reported as D.O. are a BIG deal now Expanded disclosures identifying D.O. and impacts Business segments disposed of or held for sale that do not represent a strategic shift in operations are no longer specifically identified Comparative financial statements? Forecasting 13

Interest Debt Issuance Costs ASU 2015-03: Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs Effective for fiscal years beginning after December 15, 2015 Early adoption permitted Retrospective application (including disclosure of impacts) Interest Debt Issuance Costs Debt issuance costs are now a direct deduction from the carrying amount of the related debt (liability) versus a deferred charge (asset) Similar to treatment of debt premiums and discounts Required to disclose carrying amount of debt liability Amortization of debt issuance costs now required to be reported within interest expense 14

Interest Debt Issuance Costs Impacts / Considerations Improvement in certain financial metrics capitalization ratio, debt-to-equity ratio, etc. Simplifies reporting by including all related items (debt, premiums, discounts, issuance costs) in the same balance Very slight negative impact to debt service coverage ratio as interest expense is in the numerator and denominator and generally DSC ratio is above 1.0 (unless amortization of previous issuance costs was recorded to interest already) Potentially requires re-mapping of accounts within general ledger Internal Use Software ASU 2015-05: Intangibles Goodwill and Other Internal-Use Software For public business entities, effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016 15

Internal Use Software Early Application is Permitted either: Prospectively to all arrangements entered into or materially modified after the effective date OR Retrospectively Separate disclosure requirements depending on implementation choice above Internal Use Software Relates to Fees paid by a customer in a cloud computing arrangement Determining whether the arrangement includes a software license Cloud computing arrangements: Software as a service Platform as a service Infrastructure as a service Other hosting arrangements 16

Internal Use Software Impacts / Considerations Intended to simplify and clarify accounting treatment for these narrow-scope transactions Specific guidance, rather than needing to interpret existing guidance or create analogies to other transactions Implementation election - management can choose the best course Seemingly more difficult to support a software license in a contract Complexity in determining whether a software license exists Extraordinary Items ASU 2015-01: Income Statement Extraordinary and Unusual Items (Subtopic 225-20) Effective for fiscal years beginning after December 15, 2015 Early adoption permitted 17

Extraordinary Items NO more extraordinary items Unusual in nature and infrequent in occurrence No longer separated from income from continuing operations Separately classified, presented and disclosed Net Asset Value per Share ASU 2015-07: Fair Value Measurement (Topic 820): Net Asset Value per Share For public business entities, effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, effective for fiscal years beginning after December 15, 2016 Early application is permitted 18

Net Asset Value per Share Investments measured at net asset value per share using the practical expedient Remove the requirement to categorize within the fair value hierarchy (Levels 1, 2 and 3) Removes requirement for certain disclosures for investments eligible to use NAV measurement only required for those that are actually measured at NAV Net Asset Value per Share Impacts / Considerations Improved disclosure of investments by removing investments measured at net asset value per share Reduced disclosures required 19

Going Concern ASU 2014-15: Presentation of Financial Statements Going Concern (Subtopic 205-40) Management should evaluate going concern Period extended to one year after the financial statements are issued/available to be issued. Increased disclosures around management s plans Going Concern Instead, auditors are responsible for assessing management s assertion of an entity s ability to continue as a going concern under AU-C 570. Effective annual period ending after December 15, 2016 Early adoption permitted 20

Going Concern Impacts / Considerations Management is now responsible Required to complete and document assessment More substantial plan of action needed Additional disclosures One year timeline moved out Entities with significant uncertainties? Potential for increase in modified opinions Inventory ASU 2015-11: Inventory (Topic 330) Effective for fiscal years beginning after December 31, 2016 Early adoption permitted Prospective application Inventory measured at FIFO or average cost (NOT LIFO) Lower of cost and net realizable value Net realizable value the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Loss in period it occurred Damage, physical deterioration, obsolescence, changes in prices, etc. 21

Inventory Impacts / Considerations No change if using LIFO - Consideration of whether to continue current policy if using other than LIFO Potential for losses recorded sooner Net realizable value seemingly easier than market value Need process for determining net realizable value and when to apply Equity Method Investments ASU 2016-07: Investments Equity Method and Joint Ventures (Topic 323) Effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early application is permitted. Prospective application no disclosures required at transition 22

Equity Method Investments Applicable to investments that become qualified for the equity method as a result of an increase in the level of ownership or degree of influence Eliminates requirement to adjust the investment on a step-by-step basis as if the equity method was used prior Add the cost of acquiring the interest to the current basis Adopt the equity method upon qualification Previously available for sale investment: unrealized gains or losses must be recognized in earnings immediately Equity Method Investments Impacts / Considerations Simplified accounting guidance for changes to the equity method Immediate recognition of difference in basis and equity value of investment (if not considered an available for sale security prior) could be a gain or loss Immediate recognition of cumulative unrealized position if investment was previously considered an available for sale security could be a gain or loss 23

PCC Standards THE GREAT DEBATE a need for 2 sets of standards?: Big GAAP Large, publicly traded companies Little GAAP Smaller, non-public companies Creation of the Private Company Council (PCC) due to: Increasing complexity of standards High costs of implementation - with limited usefulness Increasing support and pressure from financial professionals PCC Standards PCC Standards may be used by Private Companies Does NOT include: Public business entities* Not-for-profit entities Employee benefit plans PCC Standards are merely acceptable alternatives for private companies to follow, not required for private companies. *ASU 2013-12 created a standard definition of PBE s 24

PCC Standards ASU 2014-02 Intangibles Goodwill and Other (Topic 350): Accounting for Goodwill Current GAAP Amortization not allowed Testing for impairment at least annually Complex two-step testing, if indication of impairment exists PCC Alternative Amortization for a period of 10 years or less Testing for impairment only when a triggering event occurs Simplified one-step test Effective for annual periods beginning after December 15, 2014 early adoption allowed PCC Standards ASU 2014-03 Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps Simplified Hedge Accounting Approach Current GAAP Recognize interest rate swaps as either assets or liabilities at fair value Complexity in hedge accounting treatment and on-going compliance Volatility in swap s fair value may impact the income statement PCC Alternative Allows hedge accounting without extra detail of effectiveness testing, etc. Allows measurement at settlement value Hedge accounting mitigates income statement volatility Effective for annual periods beginning after December 15, 2014 early adoption allowed 25

PCC Standards ASU 2014-07 Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements Current GAAP Requires consolidation of the lessor entity by a private company lessee using the VIE consolidation model PCC Alternative Option not to apply VIE guidance (no consolidation) when conditions exist: Lessor and private company lessee are under common control A leasing arrangement exists Substantially all activity relates to the leasing activity The leased asset provides sufficient collateral for the lessor s debt Effective for annual periods beginning after December 15, 2014 early adoption allowed PCC Standards ASU 2014-18 Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination Current GAAP Identifiable intangible assets are recognized separate from goodwill Challenges in identifying, separating, and valuing PCC Alternative Option to no longer recognize certain intangibles separate from goodwill: Customer-related intangibles unless capable of being licensed or sold separately Non-competition agreements Effective for annual periods beginning after December 15, 2015 early adoption allowed 26

PCC Standards ASU 2016-03 Intangibles Goodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810), Derivatives and Hedging (Topic 815) Remove effective dates from previously issued PCC standards and make them all effective immediately. Remove preferability assessment the first time an accounting alternative is elected. Extend transition guidance for all issued PCC standards indefinitely. PCC Standards Impacts / Considerations Simplifies considerations/contracting related to these specific transactions Initial hedging of interest rate swaps Valuation reports for intangibles, including goodwill Reduced cost and complexity in on-going analysis Impairment testing Hedge effectiveness VIE considerations Improved income statement matching of revenues and expenses Reduction in income statement volatility Understanding potential variances when reviewing seemingly similar organizations May impact future transactions Acquisition by a public entity Changes in organization, disqualifying PPC application 27

Other Exposure Drafts (PASUs) Notes to financial statements Government assistance (except NFPs) disclosures Definition of a Business Fair value disclosures Defined benefit plan expense classification and disclosure updates Cash flow statement classification adding all types of cash Update goodwill impairment testing GASB 28

GASB Recently Issued or Effective Standards Statement Topic Effective Date Statement 68 Accounting for Pensions Employer s fiscal years beginning after June 15, 2014 Statement 71 Pension Transition Fiscal years beginning after June 15, 2014 Statement 72 Fair Value Measurement Periods beginning after June 15, 2015 Statement 73 Accounting for Pensions not within the scope of Statement 67 or 68 and amendments to 67 and 68 Multiple effective dates fiscal years beginning after June 15, 2015, 2016 Statement 74 OPEB plans Fiscal years beginning after June 15, 2016 Statement 75 OPEB plans Fiscal years beginning after June 15, 2016 GASB Recently Issued or Effective Standards Statement Topic Effective Date Statement 76 GAAP Hierarchy Periods beginning after June 15, 2015 Statement 77 Tax Abatement Periods beginning after December 15, 2015 Statement 78 Multiple-Employer Pensions Periods beginning after December 15, 2015 Statement 79 External Investment Pools Periods beginning after June 15, 2015, except certain provisions which are effective for periods beginning after December 15, 2015 Statement 80 Component Units - Blending Periods beginning after June 15, 2016 Statement 81 Split-Interest Agreements Periods beginning after December 15, 2016 Statement 82 Pension Amendments Periods beginning after June 15, 2016 29

Pension Plans: Employer Accounting GASB 68 Accounting and Financial Reporting for Pensions GASB 71 Pension Transition for Contributions Made Subsequent to the Measurement Date GASB 73 Accounting and Financial Reporting for Pensions Amendments to Certain Provisions of GASB Statements 67 and 68 Effective for FYs beginning after June 15, 2015 Early Application encouraged GASB 82 Pension Issues an amendment of GASB Statements No. 67, 68, and 73 Effective for FYs beginning after June 15, 2016 Early Application encouraged Pension Plans: Employer Accounting Established new accounting and financial reporting requirements for governments Similar to existing FASB guidance for pensions, sort of Relates to defined benefit pension plans (not 401k, 403b, etc. or other defined contribution plans) Singleemployer Agentemployer Costsharing Addresses measurement and reporting in financial statements, not how gov ts approach pension funding 30

Pension Plans: Employer Accounting Total Pension Liability Projecting future benefit payments for current and former employers and their beneficiaries and taking present value Measuring pension liability: Actuarial valuation as a date no earlier than the employer s prior fiscal year end (the measurement date) Must reflect significant changes up to measurement date Pension Liability Net Assets Available For Payments Net Pension Liability/ Asset Pension Plans: Employer Accounting Pension Expense = Changes in Net Pension Liability/Asset Recognized Immediately (Expense) Benefits earned during the year Interest on the total pension liability Changes in benefit terms Recognized in Future Periods (Deferred Outflow and Inflow of Resources) Changes in assumptions and differences between assumptions and actual experience expensed systematically and rationally over the average remaining years of employment of employees Projected earnings on plan investments Changes in plan net position from other than investments Difference between the expected and actual earnings on plan investments expensed systematically and rationally over a 5-year closed period 31

Pension Plans: Employer Accounting Impacts / Considerations Potential for HUGE liabilities recorded on the balance sheet Potential for large income statement impacts from year-to-year based on market, assumption, and other changes both positive and negative Complex accounting treatments actuarial estimates, timing differences (deferred inflows and outflows of resources) Reliance on Plan for information (often State run) and potentially not complete information Additional audit procedures required for external audit including potentially testing of Plan information (beneficiaries, demographic information, contributions, etc.) Treatment from Medicare for costs is similar to current FASB based on expenses incurred versus actuarial changes Business Combinations GASB 69 Government Combinations and Disposals of Government Operations Effective for FYs beginning after December 15, 2013 Prospective application Acquisition Some similarities to NFP merger guidance 32

Business Combinations Merger Combination of legally separate entities in which no signification consideration is exchanged Financial Reporting Merger Date - As of beginning of reporting period in which the merger occurred Carryover valuation based on financial reporting values from merging entities Business Combinations Acquisition Gov t combination in which a gov t acquires another entity (or operations) in exchange for consideration that is significant Financial Reporting Acquisition Date - the date the acquiring gov t obtains control of or is obligated for the respective assets / liabilities Measured at acquisition value Expense acquisition costs 33

Business Combinations Transfer of Operations Operations (not separate legal entities) are transferred to an existing or new entity in which no significant consideration is given Financial Reporting Effective Date - Date the transferee gov t obtains control Carryover valuation based on financial reporting values from transferor entity Business Combinations Disposals of Operations Reported as a special item in the period the disposal occurs as of the transfer / sale date 34

Business Combinations Impacts / Considerations Clarification of treatment of business combinations Potential complexity in determining type of combination Difficulty in assessing acquisition value Ease of applying carryover value Fair Value GASB 72 Fair Value Measurement and Application Effective for FYs beginning after June 15, 2015 Early application encouraged Fair Value 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 Exit price Input Levels (similar to FASB reporting) 35

Fair Value Measurement techniques Market Approach Cost Approach Income Approach Techniques should be applied consistently, maximize use of relevant observable inputs, and minimize use of unobservable inputs NAV per share for alternative investments allowed Fair Value Impacts / Considerations Improved comparability with similar FASB entities same treatment Potential complexity in determining valuations Significant new disclosures Should not result in many changes as most items were already at some type of fair value 36

Other Pensions GASB 73 Accounting and Financial Reporting for Pensions and Related Assets that are Not within the Scope of GASB Statement 68 Effective for FYs beginning after June 15, 2015 (plans) and June 15, 2016 (assets accumulated) Early application encouraged GASB 78 Pensions Provided Through Certain Multiemployer Defined Benefit Pension Plans Effective for FYs beginning after December 15, 2015 Early application encouraged Other Pensions GASB 73 extends GASB 68 requirements to all pension plans (68 is specifically noted to be pension assets in trust) Measurement requirements Disclosures Includes guidance on defined contribution plans When an employer is required to make defined contributions Additional disclosure requirements 37

Other Pensions GASB 78 amends GASB 68 requirements to exclude pension plans that: Not a state or local government pension plan Provides benefits to government and non-government employees Has no predominant government employer (individually or collectively) Establishes requirements for recognition and measurement of these plans. Other Pensions Impacts / Considerations Only impacts defined contribution plans that have a legal obligation to make contribution payments to employees Separate reporting standards for a very narrow scope of multiple-employer defined benefit pension plan Additional disclosure requirements or clarifications of disclosures required Scope of statement incorporates all pension plans within Statement 68 (see impacts on previous slides) 38

OPEB Plans - Plan GASB 74 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans Effective for FYs beginning after June 15, 2016 Early application encouraged OPEB Plans - Plan Establishes new accounting and financial reporting requirements for Other Postemployment Benefit Plans (OPEB) Defined benefit and defined contributions Administered through trusts and meet certain criteria Criteria Contributions to the OPEB plan and earnings are irrevocable Plan assets are dedicated to members in accordance with benefit terms Plan assets are legally protected from creditors 39

OPEB Plans - Plan Defined benefit OPEB plans that are not administered through a trust, but that meet criteria Defined contribution OPEB plans administered through a trust that meet specific criteria OPEB Plans - Plan Impacts / Considerations Clarifies financial reporting requirements for OPEB plans providing decision-useful information to users Clarifies accounting for assets held for OPEB plan not meeting criteria noted Additional disclosure requirements or clarifications of disclosures required Additional information may need to be tracked or identified to complete requirements 40

OPEB Plans - Employer GASB 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Effective for FYs beginning after June 15, 2017 Early application encouraged Establishes standards for recognizing and measuring: Liabilities Deferred outflows of resources Deferred inflows of resources Expenses/expenditures Biennial actuarial valuations required for ALL plans OPEB Plans - Employer Guidance differs between OPEB funded through a trust and OPEB not funded through a trust Accounting and disclosures are extensive either way Actuarially determined OPEB liability Methods and assumptions required for: Projection of benefit payments Discount projected benefit payments Attribute value to periods of employee services Required use of ASOP No. 6 assumptions Potential change from prior allowable methods 41

OPEB Plans - Employer Impacts / Considerations Clarifies accounting and financial reporting requirements for employers of OPEB plans Additional disclosure requirements related to how and why the liability changed from year-to-year Biennial actuarial studies now required for all plans Potentially required to change methodology of actuarially measuring the Total OPEB Liability Changes in measurement assumptions may change amounts reported Increased tracking of deferred inflows and outflows recognized over a period of time GAAP Hierarchy GASB 76 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments Effective for FYs beginning after June 15, 2015 Early application encouraged Retroactive application GASB GAAP Hierarchy GASB Statements (Category A) GASB Technical Bulletins, GASB Implementation Guides, and literature of the AICPA cleared by GASB (Category B) 42

Investment Pools GASB 79 Certain External Investment Pools and Pool Participants Effective for FYs beginning after June 15, 2015 with some delayed implementation provisions under periods beginning after December 15, 2015 Early application encouraged Prospective application Passed in response to an SEC rule change in April Investment Pools Establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost Qualification requirements (needs to meet all) Transacts with its participants at a stable net asset value per share (for example, $1.00) Portfolio maturity weighted avg maturity under 60 days Portfolio quality presents minimal credit risk Portfolio diversification no concentrations (>5%) Portfolio liquidity hold liquid assets for expected redemptions Shadow price required to calculate a shadow price based on FV of investments on a monthly basis 43

Investment Pools Impacts / Considerations Allows certain investment pools to be measured at amortized cost after the SEC rule change Expanded disclosure requirements Blended Component Units GASB 80 Blending Requirements for Certain Component Units (amends GASB 14) Reporting periods beginning after June 15, 2016 Early application encouraged Retroactive application by restating financial statements for all periods presented 44

Blended Component Units Establishes a blending requirement for component units Amends/clarifies GASB 14 Entities organized as not-for-profit corporations Primary government is the sole corporate member as identified in the articles of incorporation or bylaws Generally, these were treated as discrete component units historically Specifically notes that public hospitals may be impacted Blended Component Units Impacts / Considerations Requires certain NFP entities to be blended, rather than discretely presented New accounting and disclosure requirements from previous treatment Retroactive application requires financial statement restatement 45

Other GASB Exposure Drafts Leases Fiduciary Activities Certain Asset Retirement Obligations Disclosure This presentation is presented with the understanding that the information contained does not constitute legal, accounting or other professional advice. It is not intended to be responsive to any individual situation or concerns, as the contents of this presentation are intended for general information purposes only. Viewers are urged not to act upon the information contained in this presentation without first consulting competent legal, accounting or other professional advice regarding implications of a particular factual situation. Questions and additional information can be submitted to your Eide Bailly representative, or to the presenter of this session. 46

Questions? Tyler Bernier, CPA, CHFP Partner 405.858.1210 tbernier@eidebailly.com 47