Transcript Social Media in Not-for

GASB Update
2015
Brian J. Hemmerle, CPA, CFE
Jeffery W. Patterson, CPA, MBA
February, 2015
About the Presenters
• Brian Hemmerle, CPA, CFE
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Henry & Horne, Supervisor, Governmental Services
Graduated from the University of Arizona
Experience in Municipalities, School Districts, State Agencies, Non-Profits &
Industry
Serves on the Board of Directors for the Girl Scouts Arizona Cactus Pine
Council
AICPA, ASCPA, GFOA, GFOAz, AASBO
GFOA Special Review Committee Member
• Jeffery Patterson, CPA, MBA
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Henry & Horne, Supervisor, Governmental Services
Graduated from the Utah State University
Experience in School Districts, Charter Schools, Cities, Towns, State
Agencies & Non-Profits
Member of the AICPA, ASCPA, AASBO, GFOAZ
GFOA Special Review Committee Member
About Henry & Horne, LLP
• A valued partner to Arizona’s
government and industry clients for over
50 years.
• Members of AASBO, GFOA, and
GFOAZ and serve on the GFOA Special
Review Committee.
• Serve on boards and committees
• Speaking/training engagements
Seminars
• Quarterly starting in January
• Breakfast is always provided for live
presentations and webinars are offered
in the same month for the same topics.
• A new topic related to governments each
quarter.
• Earn 1 - 2 hour of
Complimentary CPE
• Your topic suggestions
are welcome!
Upcoming Topics
• April 2015 – Implementing
GASB 68 & 71 in Arizona
• July & October 2015 –
Coming Soon!!!
–
Audit implications
of GASB 68
–
Bond Accounting
Today’s Topic
• GASB 68
– Accounting and Financial Reporting
for Pensions
• GASB 71
– Pension Transition for Contributions Made
Subsequent to the Measurement Date
• GASB 69
– Government Combinations and
Disposals of Government Operations
• Current GASB Projects
GASB
Statement
68
GASB Statement 68
• Accounting and Financial Reporting
for Pensions
– Issued in June 2012
– Effective for FYE 2015
– Amends GASB Statement 27
GASB Statement 68
• Established standards of financial
reporting for defined benefit pension
plans and defined contribution pension
plans administered through a trust or
equivalent arrangement
• Pension includes
retirement income and
other benefits but does not
include postemployment
healthcare and termination
benefits
Types of Plans
• Single employer plans – involve only
one government
• Multiple employer plans – include
more than one government
• Agent multiple employer plans – separate
accounts maintained for each employer.
– PSPRS
• Cost sharing multiple employer plans –
governments pool costs.
– ASRS
Background
• Pension benefits originate from
exchanges between the employer and
employees and are part of the total
compensation for employee services
• Pension obligations meet
the definition of a liability in
Concept Statement 4
– Liabilities are present obligations to
sacrifice resources that the
government has little or no discretion
to avoid
Changes
• Statement 68 changes accounting
and financial reporting for employers
with regard to:
– The amount reported as a liability
– The amount reported as pension expense
– The discount rate used to calculate the present value of the
obligation
– The method used by the
actuary to allocate costs
– The technique used by
the actuary to
compensate for changes
in assumptions and
actual results
What about Modified
Accrual?
• Liabilities to defined benefit pension plans, as well as
liabilities for defined contribution pensions, are normally
expected to be liquidated with expendable available
resources when amounts due are pursuant to contractual
arrangements or legal requirements.
– Employers continue to
recognize a pension
expenditure based on their
contractually required
contribution to the plan by
function.
– Employers only report a
liability if they fail to make
the full amount of their
contractually required
contribution to the plan.
Employer Obligations
• Defined pension benefits originate
from exchanges between employer
and employee as part of
compensation
– The cost and obligations associated with pensions should
be recorded as they are earned, not when contributions are
made
– The obligation exists now to provide a pension benefit at a
future date
Discount Rate
• Statement 68 requires the discount rate to be a
single rate that reflects:
– The long-term expected rate of return on plan
investments that are expected to used to finance the
payment of benefits to the extent that:
• Plan net position is projected to be sufficient to make projected
benefit payments, and
• Assets are expected to be invested using a strategy to achieve
that return
– A high quality 20-year muni bond index rate or yield
on tax exempt GO bonds (AA rated or higher or an
equivalent rating) beyond the point at which plan net
assets available for pension benefits are projected to
no longer be available for long-term investment.
• The plan will determine which method they will
use.
Illustrated Measurement
Approach
1) Projected Benefits
25
40
62
82
2) Discount
Present Value
Past service - AAL
*
3) Attribution
Future Service
*= Current - Service Cost (Normal Cost)
Portion related to past service =
Total Pension Liability
Timing
Timing
• 3 DIFFERENT DATES
– Employers FYE
– Measurement date (Net Pension Liability [NPL])
• This date cannot be earlier than the end of the
employers prior fiscal year end date.
• All components as of the same date
– (Total Pension Liability – Plan Net Position = NPL)
– Actuarial valuation date (of TPL)
• This date can be the same as the measurement date
or earlier, but no earlier than 30 months +1 day prior to
the employers FYE date.
• The pension plan will tell you what the actuarial
valuation date and measurement date are for
your applicable fiscal year end.
Illustrated Timing Example
• Example
Prior FYE
30 months + 1 day
12/31/12
6/30/13
Employer FYE
6/30/15
6/30/14
Actuarial
Valuation Date
Measurement
Date
Illustrated Timing Example
• For FYE
June 30:
Pension Expense
(Measurement period)
Deferred Outflows of
Resources
Prior FYE
Prior
CatchUp
UpProcedures
Procedures
Catch
6/30/13
6/30/13
6/30/14
6/30/14
6/30/15
6/30/14
6/30/14
Employer
EmployerFYE
FYE
Actuarial
Actuarial
Valuation
ValuationDate
Date
Measurement
Measurement
Date
Date
Plan
Plan FYE
Illustrated Timing Example
• For FYE
Dec. 31
Pension Expense (Measurement period)
Deferred Outflows of
Resources
Measurement
Date
Catch Up Procedures
6/30/14
12/31/14
6/30/15
12/31/15
6/30/15
Employer FYE
Actuarial
Valuation Date
Measurement
Date
Plan FYE
GASB Statement 71
• Employer Contributions made directly by the
employer subsequent to the measurement date of
the net pension liability and before the end of the
employer’s fiscal year should be recognized as a
deferred outflow of resources.
Employer Contributions
Deferred Outflows of
Resources
Employer FYE
Actuarial
Valuation Date
Prior FYE
Measurement
Date
Plan FYE
Catch Up Procedures
6/30/13
6/30/14
6/30/15
GASB Statement 71
• Question:
– For those deferred contributions which will need
to be tracked between 7/1/2014 – 6/30/2015,
what is the determining factor with which we will
use to identify those contributions? The pay
period end date or actual date the contribution is
made to the plan?
• Answer:
– Deferred contributions will be based on the
accrual basis of accounting for the pay period
end date, and not on the day the contribution
was remitted to the plan.
Pension Expense
• Measuring Pension Expense
– Before GASBS 68
• Annual contributions expensed to pension
expense.
• Essentially equal to the ARC.
Pension Expense
• Measuring Pension Expense
– After GASBS 68
• Annual contributions posted to deferred outflows.
• The difference between the actual and projected earnings on plan investments
would be deferred and recognized as pension expense over a five-year closed
period.
2015
Plan
Investments
2015
2016
2017
2018
2019
Years
5
5
5
5
5
2016
2017
2018
2019
2020
2021
2022
2023
5,200
(3,200)
5,200
(3,200)
5,400
5,200
(3,200)
5,400
3,800
5,200
(3,200)
5,400
3,800
(5,200)
(3,200)
5,400
3,800
(5,200)
5,400
3,800
(5,200)
3,800
(5,200)
(5,200)
Total
26,000
(16,000)
27,000
19,000
(26,000)
5,200
Amortized Deferred Outflow
Amortized Deferred Inflow
Total Amortized
5,200
5,200
5,200
(3,200)
2,000
10,600
(3,200)
7,400
14,400
(3,200)
11,200
14,400
(8,400)
6,000
9,200
(8,400)
800
9,200
(5,200)
4,000
3,800
(5,200)
(1,400)
(5,200)
(5,200)
Deferred Outflow
Deferred Inflow
Total Deferred
20,800
20,800
15,600
(12,800)
2,800
32,000
(9,600)
22,400
36,600
(6,400)
30,200
22,200
(24,000)
(1,800)
13,000
(15,600)
(2,600)
3,800
(10,400)
(6,600)
(5,200)
(5,200)
-
Pension Expense
• Measuring Pension Expense
– After GASBS 68
• Differences between expected and actual changes in economic and
demographic factors (experience) would be deferred and recognized as
pension expense over a period equal to the average remaining service
periods of active and inactive employees (including retirees).
2015
Experience
2015
2016
2017
2019
2020
Years
8
6
7
4
5
Total
7,500
(9,000)
12,000
6,000
(5,000)
938
2016
2017
2018
2019
2020
2021
2022
2023
2024
938
(1,500)
938
(1,500)
1,714
938
(1,500)
1,714
938
(1,500)
1,714
1,500
938
(1,500)
1,714
1,500
(1,000)
938
(1,500)
1,714
1,500
(1,000)
1,714
1,500
(1,000)
(1,000)
(1,000)
938
1,714
Amortized Deferred Outflow
Amortized Deferred Inflow
Total Amortized
938
938
938
(1,500)
(563)
2,652
(1,500)
1,152
2,652
(1,500)
1,152
4,152
(1,500)
2,652
4,152
(2,500)
1,652
4,152
(2,500)
1,652
4,152
(1,000)
3,152
1,714
(1,000)
714
(1,000)
(1,000)
Deferred Outflow
Deferred Inflow
Total Deferred
6,563
6,563
5,625
(7,500)
(1,875)
14,973
(6,000)
8,973
12,321
(4,500)
7,821
14,170
(3,000)
11,170
10,018
(5,500)
4,518
5,866
(3,000)
2,866
1,714
(2,000)
(286)
(1,000)
(1,000)
-
Pension Expense
• Measuring Pension Expense
– After GASBS 68
• Changes in (assumptions) or other inputs that affected measurement of
the total pension liability since the prior measurement date would be
deferred and recognized as pension expense over a period equal to the
average remaining service periods of active and inactive employees
(including retirees).
2015
Assumption
2015
2017
2019
2021
2023
Years
8
7
4
5
3
Total
7,500
(9,000)
12,000
6,000
(5,000)
938
2016
938
2017
2018
2019
2020
2021
2022
938
(1,286)
938
(1,286)
938
(1,286)
3,000
938
(1,286)
3,000
938
(1,286)
3,000
1,200
938
(1,286)
3,000
1,200
2023
2024
2025
1,200
(1,667)
1,200
(1,667)
1,200
(1,667)
(1,286)
Amortized Deferred Outflow
Amortized Deferred Inflow
Total Amortized
938
938
938
938
938
(1,286)
(348)
938
(1,286)
(348)
3,938
(1,286)
2,652
3,938
(1,286)
2,652
5,138
(1,286)
3,852
5,138
(1,286)
3,852
1,200
(2,952)
(1,752)
1,200
(1,667)
(467)
1,200
(1,667)
(467)
Deferred Outflow
Deferred Inflow
Total Deferred
6,563
6,563
5,625
5,625
4,688
(7,714)
(3,027)
3,750
(6,429)
(2,679)
11,813
(5,143)
6,670
7,875
(3,857)
4,018
8,738
(2,571)
6,166
3,600
(1,286)
2,314
2,400
(3,333)
(933)
1,200
(1,667)
(467)
-
Pension Expense
• Measuring Pension Expense
– After GASBS 68
• Changes in (proportion) in the collective net pension liability since the
prior measurement date would be deferred and recognized as pension
expense over a period equal to the average remaining service periods of
active and inactive employees (including retirees).
2015
Assumption
2015
2017
2019
2021
2023
Years
8
7
4
5
3
Total
7,500
(9,000)
12,000
6,000
(5,000)
938
2016
938
2017
2018
2019
2020
2021
2022
938
(1,286)
938
(1,286)
938
(1,286)
3,000
938
(1,286)
3,000
938
(1,286)
3,000
1,200
938
(1,286)
3,000
1,200
2023
2024
2025
1,200
(1,667)
1,200
(1,667)
1,200
(1,667)
(1,286)
Amortized Deferred Outflow
Amortized Deferred Inflow
Total Amortized
938
938
938
938
938
(1,286)
(348)
938
(1,286)
(348)
3,938
(1,286)
2,652
3,938
(1,286)
2,652
5,138
(1,286)
3,852
5,138
(1,286)
3,852
1,200
(2,952)
(1,752)
1,200
(1,667)
(467)
1,200
(1,667)
(467)
Deferred Outflow
Deferred Inflow
Total Deferred
6,563
6,563
5,625
5,625
4,688
(7,714)
(3,027)
3,750
(6,429)
(2,679)
11,813
(5,143)
6,670
7,875
(3,857)
4,018
8,738
(2,571)
6,166
3,600
(1,286)
2,314
2,400
(3,333)
(933)
1,200
(1,667)
(467)
-
Pension Expense
• Items to be immediately expensed
– Pension benefits earned during the
reporting period (service cost or
normal cost)
– Interest cost on the total pension
liability
– Changes in benefit terms that affect
the total pension liability
– Long-term expected rate of return on
pension plan investments
Pension Expense
• Summary of Changes in Expense
Source of Change in the Net Pension Liability
Service Cost
Interest on the Total Pension Liability
Projected Investment Earnings
Changes in Benefit Terms
Differences between Projected and Actual
Earnings
Differences between Assumed and Actual
Economic and Demographic Factors
(Experience)
Changes in Assumptions
Other Changes in the Net Pension Liability
Before 68
Expense
Deferral
Immediate
None
Immediate
None
Immediate
None
After 68
Expense
Deferral
Immediate
None
Immediate
None
Immediate
None
Immediate
None
Expense over 5-year
Amortization
closed period
over a period
Initial period
Initial period
Expense over
up to 30
amount
amount
average remaining
years (closed
service period of
or open)
actives and inactives
Immediate
None
Example Accrual Based Entry
Balance at 6/30/2017
Changes for the year:
Service Cost (Normal Cost)
Interest
Differences between expected and actual experience
Net investment income
Contributions - Employer
Contributions - Employee
Benefit payments, including refunds of employee
contributions
Administrative expense
Other changes
Net changes
Balance at 6/30/2018
Increase (Decrease)
Total
Plan
Pension
Fiduciary
Net Pension
Liability
Net Position
Liability
(a)
(b)
(a) - (b)
$ 2,853,455 $ 2,052,589 $ 800,866
73,034
219,345
(37,539)
196,154
79,713
31,451
73,034
219,345
(37,539)
(196,154)
(79,713)
(31,451)
(119,434)
(119,434)
(3,373)
8
3,373
(8)
135,406
2,988,861
184,519
2,237,108
(49,113)
751,753
$
Example Accrual Based Entry
Debits (Credits)
Balance at 6/30/2017
Changes for the year:
Allocation of Entries
Net
Pension
Liability
(a) - (b)
$ (800,866)
Experience Difference
Pension
Expense
$
-
Deferred
Outflows of
Resources
$ 47,321
Assumption Changes
Deferred
Deferred
Inflows of Outflows of
Resources Resources
$ (27,000) $ 83,054
Deferred
Inflows of
Resources
$
-
Investment Earnings Diffs
Deferred
Outflows of
Resources
$ 272,834
• Contributions from Employer subsequent to the
(73,034)
73,034
measurement
period are not reflected in the NPL
Interest
(219,345)
219,345
Differences between expected and but rather as a debit to deferred outflows.
Deferred
Inflows of
Resources
$ (72,418)
Service Cost (Normal Cost)
actual experience
37,539
(37,539)
Amortization of Experience Diffs
-
3,454
Amortization of Assumption Changes
-
20,101
(13,994)
10,540
(20,101)
(158,625)
• It is196,154
then recognized
as a reduction of NPL in the
Amortization of investment earnings
subsequent
measurement period as a credit(77,174)
to
difference
29,155
Contributions - Employer
deferred
outflows and a debit to the NPL.
79,713
Net investment income
Contributions - Employee
Benefit payments, including refunds
of employee contributions
Administrative expense
Other changes
Net changes
Balance at 6/30/2018
31,451
(37,529)
48,019
(31,451)
(3,373)
8
49,113
$ (751,753)
3,373
(8)
158,378
$ 158,378
(13,994)
$ 33,327
(26,999)
$ (53,999)
(20,101)
$ 62,953
$
-
(77,174)
$ 195,660
10,490
$ (61,928)
Schedule of Employer
Allocations (AICPA)
Schedule of Pension Amounts
by Employer (AICPA)
TOWN OF NO WHERE, ARIZONA
STATEMENT OF NET POSITION
June 30, 2018
Governm ental
Activities
ASSETS
Cash and cash equivalents
Accounts receivable, net
Special assessments receivable
Due from other governments
Restricted cash and cash equivalents
Capital assets
Capital assets not depreciated
Capital assets, net of depreciation
Total assets
$
18,000,000
6,000,000
31,000,000
DEFERRED OUTFLOWS OF RESOURCES
Deferred employer contributions to pensions
Deferred outflow s of resources related to pensions
Total deferred outflow s of resources
73,740
291,940
365,680
LIABILITIES
Accounts payable
Accrued payroll and employee benefits
Due to other government
General obligation bonds
Long-term
General obligation bonds
Net Pension Liability
Total liabilities
500,000
200,000
50,000
248,000
2,000,000
751,753
3,749,753
DEFERRED INFLOWS OF RESOURCES
Deferred inflow s of resources related to pensions
Total deferred inflow s of resources
NET POSITION
Net investment in capital assets
Restricted
Unrestricted
Total net position
4,500,000
600,000
200,000
900,000
800,000
115,927
115,927
$
12,500,000
2,000,000
13,000,000
27,500,000
Note Disclosures
• Assumptions Used in Measurement
– Assumption in respect of:
•
•
•
•
Salary
Inflation
Postemployment benefit increases
Discount rate
– Different rates, if contemplated for
different periods
– Date(s) of experience studies and
tables on which significant
assumptions are based
Note Disclosures
• Discount Rate – Expected Rate of
Return
– Expected rate of return on plan
investments
– Description of how the expected rate
of return on plan investments was
determined, including:
• Assumed asset allocation of the portfolio
• Best estimate of the long-term expected
rate of return for each major asset class
Note Disclosures
• Discount Rate – Sensitivity Analysis
– The effects on the current period net
pension liability of a 1% increase and
a 1% decrease in the discount rate.
Note Disclosures
• Significant Plan Disclosures
– Annual money-weighted rate of return
(1 year in the notes and 10 years in
RSI)
– Changes in the net pension
liability
– Net pension liability as of
plan year end
RSI 10-Year Schedules
• Changes in the net pension liability
• Net pension liability
– Total pension
liability, plan net
position, net
pension liability
and
• Plan net position
as a percentage
of the total
pension liability
• Net pension
liability as a
percentage of
coveredemployee payroll
RSI 10-Year Schedules
RSI 10-Year Schedules
Available Resources
•
•
•
•
GASB Implementation Guides
GASB Website
ASRS Website
Auditor General Website
GASB
GASBS 71
• Pension Transition for Contributions
Made Subsequent to the Measurement
Date
– Issued November 2013
– Effective for FYE 2015
GASBS 71
Debit
NPL - EC
EC
Credit
Debit
Credit
Beginning Net Position
Beginning deferred outflow employer contributions to pension
Beginning Net Pension Liability (NPL)
NPL
Restatement due to change in accounting principle for beginning net pension liability, deferred
outflows related to 2014 employer contributions and net position.
Pension Expense (by function)
Deferred outflows of resources related to pensions
Deferred inflows of resources related to pensions
Net Pension Liability (NPL) Change
Beginning deferred outflow employer contributions to pension
To properly state change in net pension liability in fiscal year 2015.
XX
XX
XX
NPL
EC
Debit
Credit
2015 deferred outflow employer contributions to pension
XX
Pension Expense related to employer contributions (by function)
XX
To reclassify for government-wide purposes, the 2015 employer pension contribution to deferred
outflows.
Example Accrual Based Entry
Debits (Credits)
Balance at 6/30/2017
Changes for the year:
Allocation of Entries
Net
Pension
Liability
(a) - (b)
$ (800,866)
Experience Difference
Pension
Expense
$
-
Deferred
Outflows of
Resources
$ 47,321
Assumption Changes
Deferred
Deferred
Inflows of Outflows of
Resources Resources
$ (27,000) $ 83,054
Deferred
Inflows of
Resources
$
-
Investment Earnings Diffs
Deferred
Outflows of
Resources
$ 272,834
• Contributions from Employer subsequent to the
(73,034)
73,034
measurement
period are not reflected in the NPL
Interest
(219,345)
219,345
Differences between expected and but rather as a debit to deferred outflows.
Deferred
Inflows of
Resources
$ (72,418)
Service Cost (Normal Cost)
actual experience
37,539
(37,539)
Amortization of Experience Diffs
-
3,454
Amortization of Assumption Changes
-
20,101
(13,994)
10,540
(20,101)
(158,625)
• It is196,154
then recognized
as a reduction of NPL in the
Amortization of investment earnings
subsequent
measurement period as a credit(77,174)
to
difference
29,155
Contributions - Employer
deferred
outflows and a debit to the NPL.
79,713
Net investment income
Contributions - Employee
Benefit payments, including refunds
of employee contributions
Administrative expense
Other changes
Net changes
Balance at 6/30/2018
31,451
(37,529)
48,019
(31,451)
(3,373)
8
49,113
$ (751,753)
3,373
(8)
158,378
$ 158,378
(13,994)
$ 33,327
(26,999)
$ (53,999)
(20,101)
$ 62,953
$
-
(77,174)
$ 195,660
10,490
$ (61,928)
GASB Statement 69
GASB Statement 69
• Government Combinations and
Disposals of Government
Operations
– Issued December 2013
– Effective for FYE 2015
GASB Statement 69
• Establishes accounting and
financial reporting standards related
to government combination and
disposals of government
operations.
• Previously no GAAP for the
government environment.
Governments had been using APB
Opinion No. 16, Business
Combinations
GASB Statement 69
• There are three types of
government combinations
– Government merger
– Government acquisition
– Transfer of operations
GASB Statement 69
• Government merger – combination of
legally separate entities in which no
significant consideration is exchanged.
• Government acquisition – combination of
legally separate entities in which there is
significant consideration exchanged.
• Transfer of operation – combination of
operations without significant
consideration.
GASB Statement 69
• Consideration can include:
– Financial and/or nonfinancial assets
such as cash, investments, or capital
assets
– The assumption of liabilities, but does
not include the assumption of negative
net position
– Potential transfer of cash or other
assets that are contingent upon
specified future events
GASB Statement 69
• Government merger – combination of
legally separate entities in which no
significant consideration exchanged
• Two or more are now one
– Items should be recorded at carrying
value as of the merger date
– No revaluations
– Test for impairment
– Transactions between the parties are
eliminated
GASB Statement 69
• Government acquisition combination of legally separate
entities in which there is significant
consideration exchanged
– Items should be recorded at marketbased entry price (acquisition value)
– If consideration value is greater than
acquisition value, difference is
recorded as deferred outflow
(goodwill)
GASB Statement 69
• Transfer of operations –
combination of operations without
significant consideration
– Items should be recorded at carrying
value as of the transfer date
– Net position transferred is a special
item
GASB Statement 69
• Disposal
– Gain or loss should be recorded as a
special line item
– Gain or loss should only include costs
directly related to the disposal of
operations
Exposure
Exposure Drafts
• ED-The Hierarchy of Generally Accepted
Accounting Principles for State and Local
Governments
• ED-Fair Value Measurement and Application
• ED-Accounting and Financial Reporting for
Pensions and Financial Reporting for Pension
Plans That Are Not Administered through
Trusts That Meet Specified Criteria and
Amendments to Certain Provisions of GASB
Statements 67 and 68
GAAP Hierarchy
GAAP Levels Reduced to:
• Two Authoritative Categories
– GASB Statements
• Periodically incorporated in the Codification
• Subject to AICPA Rule 203
– Category (b) includes:
• GASB Technical Bulletins
• GASB Implementation Guides (Q&As)
• AICPA literature if specifically cleared by the GASB
• Nonauthoritative
GAAP Hierarchy
• Supersedes Statement No. 55, The Hierarchy
of Generally Accepted Accounting Principles for
State and Local Governments
• Amends Statement No. 62 Codification of
Accounting and Financial Reporting Guidance
Contained in Pre-November 30 1989 FASB and
AICPA Pronouncements
• Effective for periods beginning after June 15,
2015, and would be applied retroactively with
earlier application permitted
Fair Value Measurement
and Application
Highlights
• Scope is not limited to investments
– Certain assets and liabilities measured at fair value
– Includes derivatives
• Two-part Statement
– Measurement
– Application
• Note Disclosure requirements
Part I: Fair Value
Measurement
• Definition of fair value
– 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-apply to assets and liabilities
• Other characteristics of fair value
measurement
– Market-based
– Based on a government’s principal or most
advantageous market
• No fair value option
Part I: Fair Value
Measurement
• Valuation Techniques
– Apply valuation techniques that best represents fair
value in the circumstances
• Market approach
• Cost approach
• Income approach
– Revisions due to a change in valuation technique is
considered a change in accounting estimate
• Fair value hierarchy– Level 1-quoted prices in active markets for identical assets
or liabilities, most reliable
– Level 2-quoted prices for similar assets or liabilities, quoted
prices for identical or similar assets or liabilities in markets
that are not active, or other than quoted prices that are
observable
– Level 3-unobservable inputs, least reliable
Part II: Fair Value
Application
• Definition of an investment
– A security of other asset that a government holds
primarily for the purpose of income or profit and with a
present service capacity that is based solely on its
ability to generate cash or to be sold to generate cash
• Investment asset
– Service capacity
– Held primarily for income or profit
• Examples, if the definition of investment is met
–
–
–
–
–
Intangible assets
Land and land rights
Real estate
Lending assets
Natural resources assets
Part II: Fair Value
Application
• Additional investment-types
–
–
–
–
Investments that are already measured at fair value
Alternative investments
Equity securities
Co-mingled investment pools that are not government
sponsored
• Investments excluded from scope-not fair valued
– Money market investments and participating interestearning investment contracts
– Investments in 2a7-like pools
– Investments in life insurance
– Investment in common stock that meet the criteria for
applying the equity method
– Non-participating interest earning investment contracts
– Unallocated insurance contracts
Postemployment Benefits
Other Than Pensions
Highlights
• Would revise recognition, measurement,
disclosure requirements for all employers
– Liability
• Measured net of OPEB plan’s fiduciary net position
• Fully recognized in accrual-basis financial statements
– Changes in the liability
• 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
• Would be effective for FYs beginning after
December 15, 2016
Postemployment Benefits
Other Than Pensions
Scope & Applicability
• Provides guidance for defined benefit and defined
contribution OPEB provided through OPEB plans
administered through trusts that meet certain criteria and
OPEB provided outside of such plans
• Criteria for a trust
– Employer/nonemployer contributions irrevocable
– Plan assets dedicated to providing OPEB
– Plan assets legally protected from creditors
• Applies to nonemployer contributing entities that have a
legal obligation to make contributions directly to an OPEB
plan
Postemployment Benefits
Other Than Pensions
Defined Benefit OPEB
• Liabilities to the OPEB plan (payables)
• Liabilities to employees for OPEB when
administered though an OPEB plan
administered as a trust that meets the criteria:
– Net OPEB liability
– Single/agent employers recognize 100% of net OPEB
liability
– Cost-sharing employers recognize proportionate
shares of collective net OPEB liability
Postemployment Benefits
Other Than Pensions
Liability: Measurement-Timing
• Employer fiscal year-end
• Measurement date of net OPEB liability
– As of date no earlier than end of prior fiscal year
– Both components (total Liability/plan net position) as of
the same date
• Actuarial valuation date of total OPEB liability
– If not measurement date, as of date no more than 30
months prior to FYE
– Actuarial valuations as least every 2 years
• Coordination with OPEB plan
Other Projects
Leases
• Objective-reexamine issues associated with lease
accounting (Statement 62)
• Preliminary Views Comment Period-Estimated
Completion March 2015
Fiduciary Responsibilities
• Objective-develop guidance regarding the application of
fiduciary responsibility criteria in deciding whether and
how governments should report fiduciary activities in
GPEFRs
• Preliminary Views Comment Period-Estimated
Completion March 2015
QUESTIONS
Contact us at:
HENRY & HORNE, LLP
(480) 839-4900 Ext: 304, 305 or 315
Thank you!