Transcript Colorado

National State Auditors
Association
GASB Update
The views expressed in this presentation are those of Chairman
Vaudt and Mr. Bean. Official positions of the GASB are determined
only after extensive due process and deliberation.
© Copyright 2014 by Financial Accounting Foundation, Norwalk, CT
Hot Button Issues
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Pension implementation
2-a-7-like investment pools
Financial reporting model reexamination
FAF policy on GASB scope
Jurisdiction
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Pension Implementation
 GASB has issued two new pension implementation guides
in the past year
- Plan—June 2013
- Employer—January 2014
 The guides are key components of the GASB toolkits that
can be accessed on the website
 Auditing issues
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2-a-7-like Investment Pools
 SEC proposal—significantly reduces the application of
amortized cost-based measures
 Stakeholder reaction—unintended consequences,
especially for government investment pools
 Potential alternatives
- No standards-setting action
- Develop criteria (types of securities held and maturity limits) to
replace 2-a-7 for the application of amortized cost-based
measures
 GASB
 Third-party with GASB input
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Financial Reporting Model Reexamination
 Added to the agenda in August 2013
 Staff research roundtables held in October 2013
 Preparer survey now being conducted
- Auditor and user surveys are being developed
- Individual interviews will be scheduled based on the survey
results
 Research scheduled to be completed by June 2015
 What will the outcome be?
- Stay tuned
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FAF Policy on GASB Scope
 Policy issued in November 2013 recognizes:
- GASB’s independence as a standards-setter
- Trustees’ role in determining the scope of the GASB
- The need to reach the appropriate balance (if the Trustees’
authority is exercised)
 Potential standards setting activities are tentatively
classified:
- Group 1 topics—clearly in scope
- Group 3 topics—clearly out of scope
- Group 2 topics—additional consultation required before a
subject is added to the GASB’s technical agenda
 Pre-agenda research
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Jurisdiction
 Arrangement established in 1984
- FASB –private and not-for-profits
- GASB—state and local governments
 Standards setting powers
- FASB—SEC
- GASB—State governments
 Jurisdiction challenged in 1989
- Special entities change proposed by FAF Board of Trustees
- States considered withdrawing support
 Jurisdiction arrangement reaffirmed November 30, 1989
 Some are now raising this issue again
- From the FAF President’s desk
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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
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Three Things That You Need To Know
Statement 65
Items Previously
Reported as Assets
and Liabilities
Effective for Periods
Beginning After December 15,
2012
Statement 65—Three Things
 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
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Statement 66
Technical Corrections—
2012
Effective for Periods
Beginning After December 15,
2012
Statement 66—Three Things
 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
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Statement 70
Nonexchange
Financial Guarantees
Effective for periods
beginning after June 15,
2013
Statement 70—Three Things
 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
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Statement 67
Financial Reporting for Pension
Plans
Statement 68
Accounting and Financial
Reporting for Pensions
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Pensions—Three Things
 Planning—never too soon
 Allocation
- Primary government
- Component units
 Education
- Oversight bodies, including legislature
- Media
- Public
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Statement 69
Government
Combinations and
Disposals of Operations
Effective for Periods Beginning
After December 15, 2013
Statement 69—Three Things
 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
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Current Technical Agenda
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Fair Value—Measurement and Application
Fiduciary Responsibilities
GAAP Hierarchy
Irrevocable Charitable Trusts
Leases
Postemployment Benefits
Tax Abatement Disclosures
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Fair Value—Three Things
 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)
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Fiduciary Responsibilities—Three Things
 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 that includes any fiduciary
arrangement that is not governed by a formal trust agreement
or equivalent arrangement
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GAAP Hierarchy—Three Things
 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 and includes prevalent practice
 Requires broader public exposure of comprehensive
implementation guide
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Irrevocable Charitable Trusts—Three Things
 Currently not reflected in governmental financial statements
 Project will define irrevocable charitable trusts and establish
accounting and financial reporting guidance
 Exposure Draft scheduled for May 2015
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Leases—Three Things
 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—symmetry with lessee accounting
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Postemployment Benefits—Three Things
 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
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Tax Abatement Disclosures—Three Things
 Definition
- A reduction in taxes that results from an agreement between
one or more governmental entities and an individual taxpayer
in which:
 One or more governmental entities forgo tax revenues that the taxpayer
otherwise would have been obligated to pay and
 The taxpayer promises to take a specific action that contributes to
economic development or otherwise benefits the government(s) or its
citizens.
 Specific note disclosures
 Amount
 Timing of abatement
 Compliance with agreement
 Due process
- Exposure draft scheduled to be released in October 2014
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Proposed Effective Dates
 Fair Value—periods beginning after June 15, 2015
 OPEB Plan—periods beginning after December 15, 2015
 OPEB Employer—periods beginning after December 15,
2016
 Pension “Nonqualified” Trusts—periods beginning after
June 15, 2016
 Irrevocable Charitable Trusts
 Tax Abatement—To be determined
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What Is Next?
 Issues being deliberated
- Specific note disclosures
 Amount
 Timing of abatement
 Compliance with agreement
 Due process
- Exposure draft scheduled to be released in October 2014
 Final Statement—August 2015
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Definition
 A reduction in taxes that results from an agreement
between one or more governmental entities and an
individual taxpayer in which:
- One or more governmental entities forgo tax revenues that the
taxpayer otherwise would have been obligated to pay and
- The taxpayer promises to take a specific action that
contributes to economic development or otherwise benefits the
government(s) or its citizens.
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Questions?
Web site—www.gasb.org
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