Transcript Accounting Update

GASB Update
GFOAz 43rd
Annual Conference
March 8, 2007
Tucson
Phoenix
Flagstaff
Presented by
Corey Arvizu, CPA
Heinfeld, Meech & Co.
www.heinfeldmeech.com
Retroactive Reporting of Infrastructure
 Effective for fiscal year 2007 for phase
2 governments
 Phase 3 governments are not required
to retroactively report general
infrastructure
 Discussions with your auditor and/or
consultant should have begun
 Standard provides for various
estimation methods for valuing the
infrastructure
Net Assets Restricted
by Enabling Legislation
 Effective for fiscal year 2006
 Intended to prevent blanket
determinations
 External party can compel the
government to abide by the
internally created restriction
 Matter of professional judgment
 Net assets restricted by enabling
legislation should be disclosed in the
notes
Net Assets Restricted
by Enabling Legislation
 Example disclosure for pledged revenues:
Note 10: Net Assets
The government-wide statement of nets assets
reports $10,758, 421 of restricted assets, of
which $3,124,021 is restricted by enabling
legislation.
Other Postemployment Benefits
 Effective for fiscal year 2008 for phase one
governments
•Implementation follows GASB No. 34 format
 Perform an actuarial study of OPEB prior to
required implementation
 Study may be performed up to two years prior
to the beginning of the implementation year
 Plan and budget for costs of actuarial study
 Ensure governing body and other parties are
aware of the financial impact of benefits plans
Other Postemployment Benefits
Employment Period
Retirement
$15,000 of future benefits
Benefits Period
Allocate future benefits to service period
Other Postemployment Benefits
 Implicit Rate Subsidy:
 Employer provides healthcare benefits to
active employees and retirees
 Blended premium rate of $240 for all
participants
 Employer pays 100% of premium for active
employees
 Employer pays 0% of premium for retirees
 Group based (age adjusted) premiums –


$200 for active employees, $400 for retirees
The employer has committed to subsidize the
retiree benefit with an indirect cash outlay

$400 actual group rate - $240 paid by retiree = $160
subsidy
Other Postemployment Benefits
 Required note disclosures -
•Plan description and funding policy
•Annual OPEB cost and Net OPEB
obligation schedule
Three-year OPEB cost schedule
Funded status and funding progress
Actuarial methods and assumptions
Three-year schedule of funding
progress as required supplementary
information
•
•
•
•
Other Postemployment Benefits
 Annual OPEB cost and Net OPEB
Obligation Schedule
Annual required contribution
Interest on net OPEB obligation
Adjustment to annual required contribution
Annual OPEB cost (expense)
Contributions made
Increase in net OPEB obligation
Net OPEB obligation - beginning of year
Net OPEB obligation - end of year
$
$
60,231
3,565
(2,946)
60,850
(24,689)
36,161
64,815
100,976
Other Postemployment Benefits
 Three-year OPEB Cost Schedule
Fiscal
Year
Ended
June 30
2010
2011
2012
Annual
OPEB Cost
$
50,124
56,748
60,850
Percentage
of Annual
OPEB Cost
Contributed
40.9%
38.0%
40.6%
Net OPEB
Obligation
$
29,628
64,815
100,976
Other Postemployment Benefits
 Actuarial Methods and Assumptions
Actuarial valuation date
Actuarial cost method
Amortization method
Remaining amortization period
Asset valuation method
Actuarial assumptions:
Investment rate of return
Projected salary increases
Healthcare inflation rate
June 30, 2011
Entry age
Level percentage
of pay, open
20 years
5-year smoothed
market
5.8%
4.9-7.5%
12% initial
5% ultimate
Other Postemployment Benefits
 Required Supplementary Information Three-year Schedule of Funding Progress
Actuarial
Valuation
Date
June 30,
Actuarial
Value of
Assets
Actuarial
Accrued
Liability
2009
2010
2011
-0-0-0-
$ 581,802
608,254
636,997
Unfunded
AAL (UAAL)
$
581,802
608,254
636,997
Funded
Ratio
0.00%
0.00%
0.00%
Covered
Payroll
$
572,879
564,860
581,435
UAAL as a
Percentage
of Covered
Payroll
101.6%
107.7%
109.6%
Sales and Pledges of Receivables
 Effective for fiscal year 2008
 Assumes all “sales” transactions are
borrowings, or pledges, unless certain
criteria are satisfied
 Control based checklist determines
sale of receivable and revenues
 Revenue from sale should typically be
recognized over duration of agreement
 Note disclosure required for pledged
revenues
Sales and Pledges of Receivables
 Example disclosure for pledged revenues:
Note 10: Utility Revenues Pledged
The City has pledged future water customer revenues, net of
specified operating expenses, to repay $5.7 million in water
system revenue bonds issued in December 2003. Proceeds
from the bonds provided financing for the construction of the
17th Street filtration plant. The bonds are payable solely from
water customer net revenues and are payable through 2028.
Annual principal and interest payments on the bonds are
expected to require less than 22 percent of net revenues. The
total principal and interest remaining to be paid on the bonds
is $8,849,250. The total principal and interest paid for the
current year and total customer net revenues were $470,250
and $2,612,500.
Intangible Assets
 Exposure draft issued in December
 Issues addressed in draft -
•Characteristics
•Classified as capital assets
•When to capitalize
•Internally generated software
•Possible indefinite useful lives for
certain assets
•Retroactive implementation
 Effective for fiscal year 2010
Pension Disclosures
 Exposure draft issued in December
 Align pension disclosures with OPEB
disclosures
•GASB 25 and 27 with GASB 43 and 45
 Funded status will be a required note
disclosure
 Reference in notes to RSI if funding
progress presented as such
 Will require slight modifications to
ASRS and public safety notes
Derivatives
 Exposure draft to be issued April 2007
 Examples –
•Interest rate lock
•Futures contract
•Variable-rate management agreement
 GASB characteristics –
•Little or no initial investment
•Can be settled early with cash payment
 Typically a debt instrument for
governments
 Disclosures will be “risk” based
Fund Balance Reporting
 Exposure draft to be issued June 2007
 GASB position and arguments -
•Most utilized element of governmental
financial information
•Users want to clearly identify discretionary
resources
•Governments report reserved fund balance
that should be unreserved
•Provide method to categorize components
of fund balance
•Original guidance provided in NCGA
Statement No. 1
 Fiscal year 2010 effective period?
Fund Balance Reporting
Transportation
Capital
Capital
General Fund Projects Fund Projects Fund
Resources legally restricted:
Capital projects
Transportation projects
Palm Lane bridge project
Resources intended use:
Capital projects
Transportation projects
Toltec bridge project
Reserved
Reserved
Reserved
Designated
Designated
Designated
Unreserved
Reserved
Reserved
Unreserved
Unreserved
Reserved
Undesignated Undesignated
Designated Undesignated
Designated
Designated
Fund Balance Reporting,
Part I - Definitions
 Expect narrow definition of special
revenue funds
 Enhances definitions of debt service
and capital projects funds
 Encumbrances must be appropriated
to be reported as reserved
 Term “legally limited” will likely
appear as additional guidance
Fund Balance Reporting,
Part II – Reporting Models
 Model A –
•New definitions to be primary
change
Limited other revisions or changes
to current model
Fund perspective drives reporting
Detail of designation presumed to
be reported in the notes
•
•
•
Fund Balance Reporting,
Part II – Reporting Models
 Model B –
•Three balance sheet categories
•Revised language – reserved and
unreserved terms no longer used
Distinguishes between resources available
for appropriation and those not available
Not available = reserved but narrower
Note disclosure required for “committed”
fund balance
•
•
•

Legally limited and intended use (designated)
Fund Balance Reporting,
Part II – Reporting Models
 Model C –
•Three balance sheet categories
•Revised language – reserved and
unreserved terms no longer used
Uses the terms restricted, unrestricted,
and assigned
More detailed information on balance
sheet
•
•

No note disclosure requirement specified
•General Fund is the only fund with
unrestricted and unassigned fund balances
Model A
Model B
Capital
Projects
Fund
Fund Balances:
Reserved for:
School construction
Other capital projects
Unreserved:
Designated, reported in:
Capital projects funds
Undesignated, reported in:
Capital projects funds
Total fund balances
301,000
101,000
201,000
401,000
1,004,000
Model C
Capital
Projects
Fund
Fund Balances:
Available for appropriation:
Committed to specific uses:
School construction
Public pool
City Hall renovation
Other capital projects
Available for purposes
of the fund, reported in:
Capital projects funds
Total fund balances
301,000
121,000
60,000
121,000
401,000
1,004,000
Capital
Projects
Fund
Fund balances:
Restricted for:
School construction
Other capital projects
Unrestricted:
Assigned to:
Public pool
City hall renovation
Other capital projects
Total fund balances
301,000
51,000
121,000
60,000
471,000
1,004,000
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Other GASB Projects and Agenda Items
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Service efforts and accomplishments
Electronic financial reporting
Intergovernmental dependency
Public/private partnerships
Component units
Accounting for leases
Popular reporting
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27
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Lead the Way
“Governments should lead by
example, we should be as good
or better than those we are
regulating.”
David M. Walker,
Comptroller General of the United States
Thank You!
Corey Arvizu
(520) 742-2611 ext. 101
[email protected]
Tucson
Phoenix
Flagstaff
www.heinfeldmeech.com