Transcript GASB Update - California Society of Municipal Finance Officers
GASB Update
California Society of Municipal Finance Officers February 21, 2013 Michelle Czerkawski, GASB Project Manager The views expressed in this presentation are those of the speaker. Official positions of the GASB are determined only after extensive due process and deliberation.
Session Agenda
Board appointments Recently issued Statements ◦ Review of effective dates ◦ Statements effective for 2013 FYEs—key provisions ◦ Statements effective for post-2013 FYEs— brief overview Current-agenda projects
Current Board Members
Member
Bob Attmore, Chair Jim Brown Bill Fish Michael Granof David Sundstrom Jan Sylvis Marcia Taylor
Term Expires
2014 (retiring in 2013) 2017—first term 2016—first term 2015—first term 2014—first term 2017 2015 3
RECENTLY ISSUED STATEMENTS
Effective Dates—FYE June 30
◦ ◦ ◦ 2013 ◦ Statement 60—Service Concession Arrangements Statement 61—Financial Reporting Entity Statement 62—Codification of AICPA & FASB Statement 63—Deferrals Presentation 2014 ◦ Statement 65—Assets & Liabilities—Reclassification & Recognition ◦ ◦ Statement 66—Technical Corrections Statement 67—Pension Plans 2015 ◦ Statement 68—Pension Accounting for Employers & Nonemployer Contributing Entities ◦ Statement 69—Government Combinations & Disposals of Government Operations 5
2013 FYEs: Statement 60
Service Concession Arrangements (SCAs)
Effective for Periods Beginning after December 15, 2011
Definitions
SCAs are a type of public-private or public-public partnership. The term public-private partnership is used to refer to a variety of: ◦ Service arrangements ◦ Management arrangements ◦ SCAs 7
Scope
Transferor conveys to operator right & related obligation to provide public services through the operation of a capital asset in exchange for significant consideration ◦ Examples: Up-front payment, installment payments, new facility, improvements to existing facility Operator collects & is compensated from fees from third parties Transferor determines /has the ability to modify or approve: ◦ What services the operator is required to provide ◦ To whom the operator is required to provide the services ◦ Prices or rates that can be charged for the services Transferor entitled to significant residual interest in the service utility of the facility at end of the arrangement 8
Facilities Associated with SCAs
If new & purchased/constructed by operator or existing that has been improved by the operator ◦ Transferor reports: New facility or improvement—capital asset at fair value when placed in operation Any contractual obligations—liabilities, with deferred inflow of resources 9
Upfront or Installment Payments
Transferor reports: ◦ Up-front payment or present value of installment payments—asset ◦ Any contractual obligations—liabilities, with deferred inflow of resources ◦ Revenue as deferred inflow of resources is reduced Systematic & rational manner Over term of the arrangement Beginning when facility is placed into operation 10
Liabilities—Contractual Obligations
Liabilities at present value if significant & either: ◦ Directly relates to the facility ◦ Relates to ownership of facility or arises from transferor’s responsibility to assure facility remains fit for particular purpose of arrangement Examples: obligations for capital improvements, insurance, maintenance on the facility Relates to transferor commitment to maintain minimum/ specific level of service in connection with operation of facility Examples: providing a specific level of police/emergency services for facility, or providing minimum level of maintenance to areas surrounding facility 11
2013 FYEs: Statement 61
The Financial Reporting Entity—Omnibus
Effective for Periods Beginning after June 15, 2012 12
Significant Effects
Increased emphasis on financial relationships ◦ Raises the bar for inclusion Refocused & clarified requirements to blend certain component units (CUs) Improved recognition of ownership interests ◦ Joint ventures ◦ CUs ◦ Investments 13
Inclusion Criteria
Statement 14 required inclusion if potential CU is fiscally dependant ◦ Primary government has authority over: Budget, or Setting taxes & charges, or Issuing debt Statement 61 adds requirement for a financial benefit or burden before inclusion is required 14
Blending Requirements: Narrowed
Statement 14 requires blending if Primary Government (PG) & CU have “substantively the same” governing body ◦ ◦ Statement 61 modifies that requirement to also include: A financial benefit/burden relationship, or PG has “operational responsibility” for CU PG’s personnel manage activities of CU like a fund, program, or department of the primary government 15
Blending Requirements: Broadened
Include CUs whose total debt outstanding is expected to be repaid entirely or almost entirely by revenues of the PG ◦ Even if the CU provides services to constituents or other governments, rather than exclusively or almost exclusively to the PG 16
Note Disclosures
Clarifies that current disclosures require: ◦ Rationale for including each CU ◦ Whether CU is discretely presented, blended, or included as a fiduciary fund No new disclosures Practical consideration—can aggregate similar CUs for disclosure 17
2013 FYEs: Statement 62
Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements
Effective for Periods Beginning after December 15, 2011 18
Five Classifications
Conflict with or contradict GASB standards ◦ FASB Statement 4—Gain or loss on debt extinguishments ◦ FASB Statement 43—Compensated absences Are not applicable to governments ◦ FASB Statement 84—Convertible debt Rarely applicable (excluded) ◦ FASB Statement 19–Oil & Gas Are applicable to governments ◦ FASB Statement 34—Capitalization of interest Will be addressed in GASB projects (applicable, but excluded) ◦ APB Opinion 16—Business combinations 19
Basic Guidance
Statement 20 is superseded ◦ All applicable pre-11/30/89 standards are contained in the GASB’s codification ◦ All potentially applicable post-11/30/89 non GASB standards will be “other accounting literature” Guidance on 29 topics is brought into the GASB literature 20
Significant Topics
Special & extraordinary items (APB Opinion 30) Comparative financial statements (ARB 43) Related parties (FASBS 57) Prior-period adjustments (FASBS 16 & APB Opinion 9) Accounting changes & error corrections (APB Opinion 20 & FASBI 20) Contingencies (FASBS 5 & FASBI 14) Extinguishments of debt (APB Opinion 26 & FASBS 76) Inventory (ARB 43) Leases (FASBS 13, 22, 98 & FASBI 23, 26, 27) 21
Specialized Topics
Sales of real estate (FASBS 66) Real estate projects (FASBS 67) Research & development arrangements (FASBS 68) Broadcasters (FASBS 63) Cable television systems (FASBS 51) Insurance enterprises (FASBS 60) Lending activities (FASBS 91) Mortgage banking activities (FASBS 65) Regulated operations (FASBS 71, 90, 101) 22
2013 FYEs: Statement 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position Effective for Periods Beginning after December 15, 2011 23
Background
◦ ◦ Concepts Statement 4—five elements in a statement of financial position ◦ Assets ◦ Liabilities Deferred outflows of resources Deferred inflows of resources ◦ Net position Differs from composition required by Statement 34 24
“New” Elements
Deferred outflows of resources ◦ Consumption of net assets by the government that is applicable to a future reporting period ◦ Has a positive effect on net position, similar to assets Deferred inflows of resources ◦ Acquisition of net assets by the government that is applicable to a future reporting period ◦ Has a negative effect on net position, similar to liabilities Net position ◦ Residual of all elements presented in a statement of financial position ◦ = Assets + Deferred Outflows – Liabilities – Deferred Inflows 25
Display Requirements
Deferred outflows of resources reported in a separate section following assets Deferred inflows of resources reported in a separate section following liabilities Net position components ◦ Resemble net asset components under Statement 34 Net investment in capital assets Restricted Unrestricted ◦ Include the effects of deferred outflows & deferred inflows of resources Governmental funds continue to report fund balance 26
Deferred Outflows/Inflows of Resources
Prior standards ◦ Statement 53—Derivative Instruments ◦ Statement 60—Service Concession Arrangements Post-issuance standards ◦ Statement 65—Items Previously Reported as Assets & Liabilities ◦ Statement 68—Pensions ◦ Statement 69—Government Combinations 27
Later FYEs: Statement 65
Items Previously Reported as Assets and Liabilities
Effective for Periods Beginning after December 15, 2012 28
Deferred Inflows of Resources
Grants received in advance of meeting timing requirement Deferred amounts from refunding of debt (credits) Proceeds from sales of future revenues Deferred gain from sale-leaseback “Regulatory” credits 29
Deferred Outflows of Resources
Grant paid in advance of meeting timing requirement Deferred amounts from refunding of debt (debits) Cost to acquire rights to future revenues (intra-entity) Deferred loss from sale-leaseback 30
Outflows of Resources
Debt issuance costs (other than insurance) Initial costs incurred by lessor in an operating lease Acquisition costs for risk pools Loan origination costs 31
Inflows of Resources
Loan origination fees Commitment fees (after exercise or expiration) 32
Later FYEs: Statement 66
Technical Corrections—2012
Effective for Periods Beginning after December 15, 2012 33
Conflicts
Statement 62 with ◦ Statement 13—Leases ◦ Statement 48 Purchase of a loan or group of loans Servicing fees related to mortgage loans Statement 10 with ◦ Statement 54—Risk financing pools 34
Later FYEs: Statement 67
Financial Reporting for Pension Plans
Effective for Fiscal Years Beginning after June 15, 2013 35
Overview
Approved June 2012 Pension plans Few accounting changes Notes/RSI ◦ Changes to reflect new measures of employer liability ◦ Disclosure of annual rate of return Implementation Guide planned for Q2 2013 36
Later FYEs: Statement 68
Accounting and Financial Reporting for Pensions
Effective for Fiscal Years Beginning after June 15, 2014 37
Overview
Approved June 2012 Employer reporting & certain governmental nonemployer contributing entities Changes in liability & expense recognition ◦ Break with funding measures ◦ Similar recognition for all types of employers (single, agent, cost-sharing) Notes disclosure/RSI changes Additional implementation guidance planned for Q1 2014 38
Later FYEs: Statement 69
Government Combinations and Disposals of Government Operations
Effective for Transactions Occurring in Financial Reporting Periods Beginning after December 15, 2013
Scope
Combinations in which no consideration is provided ◦ Government mergers ◦ Transfers of operations Combinations in which consideration is provided ◦ Government acquisitions Disposal of government operations 40
Mergers & Transfers of Operations
Assets & liabilities at carrying values ◦ Presumption of GAAP Reporting ◦ Mergers New entity ◦ ◦ Continuing entity ◦ Transfers of operations Adjustments ◦ Accounting principles, policies, & estimates Capital asset impairment Transaction eliminations 41
Acquisitions
Assets (& liabilities) at acquisition value ◦ Recognition based on GAAP applicable to state & local governments ◦ Market-based entry price measurements ◦ Exceptions Difference between consideration given and net position acquired ◦ “Goodwill”—deferred outflow of resources ◦ Contribution received or reduction of non current assets 42
Note Disclosures— All Combinations
General information ◦ Brief description of the combination & identification of the entities involved ◦ Date of the combination ◦ Primary reasons for the combination 43
Additional Note Disclosures
Mergers & transfers of operations ◦ Carrying values recognized as of the merger date ◦ Description of significant adjustments ◦ Amounts recognized Acquisitions ◦ Brief description of consideration provided ◦ Total amount of net position acquired ◦ Brief description of contingent consideration arrangements
Disposals of Government Operations
Includes all disposals of operations (transfers or sales) ◦ Gains & losses reported as special items Costs associated with disposals of government operations ◦ Consider only costs directly associated with disposal Disclosures ◦ Description of the circumstances leading to the discontinuation ◦ Operations revenues, expense, & non-operating items 45
CURRENT AGENDA PROJECTS
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Projects in Process
Conceptual Framework—Recognition & Measurement Approaches ◦ PV—June 2011 Economic Condition Reporting—Financial Projections ◦ PV—November 2011 Financial Guarantees ◦ ED—June 2012 Fair Value—Measurement & Application GAAP Hierarchy Other Postemployment Benefits 47
RESEARCH AGENDA PROJECTS
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Research Agenda
Electronic Financial Reporting Fiduciary Responsibilities Leases Tax Abatement Disclosures 49
FOR ADDITIONAL INFORMATION/ RESOURCES: WWW.GASB.ORG
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