State Association of County Auditors GASB Update The views expressed in this presentation are those of Mr. Sundstrom. Official positions of the GASB are determined only after extensive due process and deliberation.
Effective Dates FYE June 30 2014 - Statement 65 Assets and Liabilities Reclassification and Recognition - Statement 66 Technical Corrections - Statement 67 Pension Plans - Statement 70 Nonexchange Financial Guarantees 2015 - Statement 68 Pension Accounting for Employer and Nonemployer Contributing Entities - Statement 69 Government Combinations and Disposals of Government Operations - Statement 71 Pension Transition for Contributions Made Subsequent to the Measurement Date 2
Pensions
Statement 67 Financial Reporting for Pension Plans Statement 68 Accounting and Financial Reporting for Pensions 4
Scope and Applicability Defined benefit and defined contribution pensions provided through trusts that meet the following criteria: - Employer/nonemployer contributions irrevocable - Plan assets dedicated to providing pensions - Plan assets legally protected from creditors Excludes all OPEB Applies to employers and nonemployer contributing entities that have a legal obligation to make contributions directly to a pension plan 5
Types of Pension Plans Defined Benefit - Single employer - Agent multiple employer - Cost-sharing multiple employer Defined Contribution 6
Defined Benefit Pensions Liabilities to the pension plan (payables) Liabilities to employees for pensions - Net pension liability (NPL) Total pension liability (TPL), net of pension plan s fiduciary net position TPL = actuarial present value of projected benefit payments attributed to past periods Fiduciary net position as measured by pension plan - Single/agent employers recognize 100 percent of NPL - Cost-sharing employers recognize proportionate shares of collective NPL 7
What Can Be Done? Determine level of assistance that will be provided by the pension plan regarding the implementation of Statement 68 Determine what additional allocations need to made by the government - Primary government business-type activities (enterprise funds) - Component units Become familiar with AICPA white papers (recommended practices) on pensions Education clean opinion or not - Legislative bodies - Media - Public 8
GASB Efforts to Support Implementation Two Implementation Guides - Pension plan implementation guide released in June 2013 - Employer and nonemployer contributing entity implementation guide released in January 2014 Outreach to all 50 states - Identify implementation issues - Provide technical support 9
Three Things That You Need To Know
2014 11
Statement 65 Items Previously Reported as Assets and Liabilities Effective for Periods Beginning After December 15, 2012
Statement 65 GASB Standards identify all deferred inflows of resources and deferred outflows of resources - Debt refundings - Nonexchange transactions timing requirements Debt issuance costs, except any portion related to prepaid insurance costs, should be recognized as an expense in the period incurred. Deferred inflows and deferred outflows apply to governmental funds - Availability period 13
Statement 66 Technical Corrections 2012 Effective for Periods Beginning After December 15, 2012
Statement 66 Statement 13 - Statement 62 guidance on leases Statement 48 - Statement 62 guidance on Purchase of a loan or group of loans Servicing fees related to mortgage loans Statement 10 - Statement 54 guidance on special revenue funds Risk financing pools 15
Statement 70 Nonexchange Financial Guarantees Effective for periods beginning after June 15, 2013
Statement 70 Scope - Based the same definition of nonexchange that is found in Statement 33 Excludes exchange and exchange-like transactions Recognition When qualitative factors and historical data, if any, indicate that it is more likely than not that a payment will be made on an extended nonexchange financial guarantee, the event should recognize a liability Measurement - Amount equal to the discounted present value of the best estimate of the future outflows expected to be incurred as a result of the guarantee 17
2015
Statement 69 Government Combinations and Disposals of Operations Effective for Periods Beginning After December 15, 2013
Statement 69 Mergers and transfers - Assets, liabilities, and deferrals should be reported at carrying values Presumption of GAAP Acquisitions - Assets, liabilities and deferrals should be reported at acquisition value a market-based entry price - Exceptions pensions, OPEB, pollution remediation Disposals (sales and transfers) - Gains and losses reported as special items 20
Current Technical Agenda Fair Value Measurement and Application Fiduciary Responsibilities GAAP Hierarchy Leases Postemployment Benefits 21
Fair Value Fair Value Definition - 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. Investment Definition - A security or other asset that a government holds primarily for the purpose of income or profit and its present service capacity is based solely on its ability to generate cash or to be sold to generate cash Disclosures amendments based on current FASB standards (including fair value hierarchy levels 1-3) 22
Fiduciary Responsibilities Fiduciary definition A government that controls assets either: - As a trustee for the sole benefit of its own employees or recipients other than the financial reporting entity, or - For which it does not have administrative or direct financial involvement over the assets used to provide benefits to individuals that are not part of its citizenry, or organizations or other governments that are not part of the financial reporting entity.. Fiduciary activities continue to be reported as basic financial statements Custodial funds - An expanded fund type be established that includes any fiduciary arrangement that is not governed by a formal trust agreement or equivalent arrangement Funds previously classified as agency funds Trust funds for which there is no trust agreement or equivalent arrangement 23
GAAP Hierarchy Reduce GAAP Hierarchy from four levels to two levels - Level 1 GASB Statements - Level 2 GASB Technical Bulletins and Implementation Guides and AICPA pronouncements cleared by the GASB Nonauthoritative further clarifies role of concepts statements Requires broader public exposure of comprehensive implementation guide 24
Leases Single approach right of use - No classification of leases into operating/capital or other categories - Potentially develop some exceptions - Underlying assumption that leases are financings Practicality exception short-term lease - Lease that, at the beginning of the lease, has maximum possible term under the contract, including any options to extend, of 12 months or less Lessor working with FASAB 25
Postemployment Benefits Three Exposure Drafts - Other Postemployment Benefits (OPEB) Plans - OPEB Employers - Pensions Plans that are not qualifying trusts OPEB proposals based on new pension standards Certain modifications made, including provision for healthcare trend rates 26
Questions? Web site www.gasb.org 27