Transcript No Slide Title

GASB UPDATE
Presented by:
Brian A. Ritschel, CPA
Manager
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GASB Current Developments
TOPICS
 GASB New Pronouncements


Statement No. 41, Budgetary Comparison
Schedules- Perspective Differences (amendment
of GASB No. 34)
Statement No. 42, Accounting and Financial
Reporting for Impairment of Capital Assets and
for Insurance Recoveries
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
TOPICS
GASB New Pronouncements


Statement No. 43, Financial Reporting for
Postemployment Benefit Plans Other Than
Pension Plans
Statement No. 44, Economic Condition
Reporting: The Statistical Section (an
amendment of NCGA Statement 1)
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TOPICS


Statement No. 45, Accounting and Financial
Reporting by Employers for Postemployment
Benefits Other Than Pensions
Statement No. 46, Net Assets Restricted by
Enabling Legislation (an amendment of GASB
No. 34)
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GASB STATEMENT NO. 42
ACCOUNTING AND FINANCIAL
REPORTING FOR IMPAIRMENT OF
CAPITAL ASSETS AND FOR INSURANCE
RECOVERIES
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EFFECTIVE DATE:
Periods beginning after December 15,
2004
(Fiscal Year Ending June 30, 2006)
Earlier application is encouraged
6

Asset impairment is a significant,
unexpected decline in the service utility
of a capital asset
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
Identifying Impairments


Events or changes in circumstance that indicate
impairment should be prominent
Generally expected to have prompted
discussion by governing board, management,
or media
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
Common Indicators of Impairment



Evidence of physical damage
Enact or approval of laws or regulations or
other Environmental factors
Technological development or evidence of
obsolescence
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

A Change in the manner or expected duration
of use of an asset
Construction stoppage
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
Impairment Test


The magnitude of the decline in service utility
is significant
The decline in service utility is unexpected
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
Measurement of Impairment

Assets that are continuing to be used by the
government:



Restoration cost approach for assets with physical
damage
Service units approach for legal/environmental
changes, technological obsolescence, and some
changes in duration or manner of use
Deflated depreciation replacement cost for some
assets with a change in duration or manner of use
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
Assets that are not being used and
construction stoppage:

Lower of carrying value or fair value
13

Reporting Impairment Losses


As program or operating expense, special item,
or extraordinary item per Statement 34
Disclose general description, amount, and
financial statement classification, if not evident
from financial statements
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
Temporary Impairments

Impairments are assumed to be permanent,
unless


Evidence is available to demonstrate impairment is
temporary
Temporary impairments should not be recorded
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
Insurance Recoveries


Net impairment loss with insurance recovery
Replacement/restoration of asset is a
separate transaction
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
Applies to all insurance recoveries, not only
those related to impairment Governmental
funds would not report an impairment loss.
Insurance recovery would be Other Financing
Source. Replacement would be expenditure
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GASB STATEMENT NO. 43
Financial Reporting for
Postemployment Benefit Plans
Other Than Pension Plans
18
EFFECTIVE DATE:
Earlier application is encouraged
Phases
I
Annual
Revenues
$ 100 M
II
III
$ 10-100 M
Under $ 10 M
Periods
Beginning
After
12/15/05
12/15/06
12/15/07
June 30
Fiscal
Year
2007
2008
2009
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Objectives
Uniform Standards of Financial Reporting for
Other Postemployment Benefit Plans (OPEB
Plans)
 Postemployment Benefits “Other Than
Pension Benefits” includes (a)
Postemployment Healthcare Benefits and
(b) Other Types

20

Approach Follows GASB Statement No. 25,
Financial Reporting for Defined Benefit
Pension Plans and Note Disclosures for
Defined Contribution Plans
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SCOPE

Agreement between Employers and Plan
Members and their Beneficiaries in
which:



Employer contributions to the Plan are
irrevocable
Plan Assets are dedicated to providing
benefits to their retirees and their
beneficiaries in accordance with the terms of
the Plan
Plan Assets are legally protected from
creditors of the employer(s) or the Plan
administrator
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
Statement Provides:




Financial reporting of Plan Assets, Liabilities
and Net Assets
Disclosure of Actuarial Information about the
funded status and funding progress of the Plan
and contributions made to the Plan in
comparison to Annual Required Contributions
(ARC)
This Statement includes Defined Benefit OPEB
Plans and Defined Contribution Plans
Single-Employer, Agent Multiple-Employer or
Cost-Sharing Multiple-Employer Plans
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Financial Reporting
Framework

The Financial Statements and Required
Schedules are:



Statement of Plan Net Assets
Statement of Changes in Plan Net Assets
Schedule of Funding Progress - - Actuarially
determined Funded Status
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
Schedule of Employer Contributions - Contributions made by Employers in relation to
the ARC
Notes to the Financial Statements
 Required Supplementary Information

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Actuarial Valuation

An Actuarial Valuation should be
performed at the following minimum
frequency:


Plans with total membership of 200 or more - at least biennially
Plans with total membership of fewer than 200
- - at least triennially
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
Alternative Measurement Method for Plans
with fewer than 100 Members


Disclosure in Notes to Financial Statements the
use of this method and all significant
assumptions as listed in this Statement
Statement includes calculation methods and
default values for use with the Alternative
Measurement Method
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GASB STATEMENT NO. 44
Economic Condition Reporting: The
Statistical Section
(an amendment of NCGA Statement 1)
28
EFFECTIVE DATE:
Periods beginning after June 15, 2005
(June 30 Fiscal year in 2006)
Earlier application is encouraged
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Objectives
Amends NCGA Statement 1,
Governmental Accounting and Financial
Reporting Principles, regarding the
Statistical Section
 The Statistical Section presents detailed
information, generally in 10-Year trends,
to aid users to better understand the Basic
Financial Statements and Related
Disclosures

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

The Statistical Section is a required part of
Comprehensive Annual Financial Report (CAFR)
NCGA Statement 1 presented fifteen tables or
schedules
31

The Statement presents five categories of
information as follows:

Financial Trends Information



Net Assets
Change in Net Assets
Governmental Funds
32

Revenue Capacity Information




Revenue Base
Revenue Rates
Revenue Payers
Property Tax Levies and Collections
33

Debt Capacity Information





Ratios of Outstanding Debt
Ratios of General Bonded Debt
Direct and Overlapping Debt
Debt Limitation
Pledged-Revenue Coverage
34

Demographic and Economic Information



Operating Information





Demographic and Economic Indicators
Principal Employers
Government Employees
Operating Indicators
Capital Assets
Pension and OPEB Plans
Narrative Explanations
35
GASB STATEMENT NO. 45
Accounting and Financial Reporting
by Employers for Postemployment
Benefits Other Than Pensions
36
EFFECTIVE DATE:
Earlier application is encouraged
Phases
I
II
III
Annual
Revenues
Periods
Beginning
After
June 30
Fiscal
Year
$ 100 M
12/15/06
2008
$ 10-100 M
Under $ 10 M
12/15/07
12/15/08
2009
2010
Note: All component units to implement same year as the primary government
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Objectives

Financial Accounting and Reporting for
Other Postemployment Benefits (OPEB)

The Approach is consistent with GASB
Statement No. 27, Accounting for Pensions
by State and Local Governmental
Employers
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Measurement

Single-Employer or Agent Multiple-Employer
defined benefit OPEB Plans required to measure
and disclose annual OPEB Cost On Accrual Basis
of Accounting

Annual OPEB cost would equal employer’s Annual
Required Contribution (ARC) with adjustments
for Net OPEB obligation, if any
39

ARC includes:



Actuarial Valuation:




Normal cost for the year, and
Amortization of unfunded actuarial accrued
liabilities (or funding excess) not to exceed
thirty years
Frequency and timing
Methods
Assumptions
Alternative Measurement Method
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Net OPEB Obligations
Cumulative difference between annual
OPEB Cost and Employer’s Contributions
to the Plan (including OPEB liability or
Asset at Transition)
 Employer’s are required to measure Net
OPEB Obligation equal to:




ARC,
Year’s interest on Net OPEB Obligation, and
Adjustment to ARC to offset the effect of
actuarial amortization of past under-or over
contributions
41
Financial Statement Recognition
and Disclosure
Employer to recognize OPEB Expenses in
Government-Wide, Proprietary and
Fiduciary Fund Financial Statements
 Net OPEB Obligations are to be displayed
as liabilities (or assets) in GovernmentWide, Proprietary and Fiduciary Fund
Financial Statements

42

Disclosures are required:





Descriptive information about each Plan,
including funding policy,
Contributions made in comparison to annual
OPEB Cost,
Change in Net OPEB Obligation,
Funded status as of most recent actuarial
valuation date, and
Nature of actuarial valuation process and
significant methods and assumptions used
43

Required Supplementary Information
(RSI)

Schedule of funding progress for most recent
actuarial valuation and two preceding
valuations, together with notes regarding
significant trends affecting the amounts
presented
44
GASB STATEMENT NO. 46
NET ASSETS RESTRICTED BY ENABLING
LEGISLATION
(an amendment of GASB No. 34)
45
EFFECTIVE DATE:
Periods beginning after June 15, 2005.
(Fiscal Year Ending June 30, 2006)
Earlier application is encouraged.
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INTRODUCTION



Enhance the usefulness and comparability
of net asset information.
Clarify the meaning of Legally
Enforceability.
Specify the accounting and financial
reporting requirements.
47
SCOPE AND APPLICABILITY



Establishes and modifies requirements
related to restrictions of net assets
resulting from enabling legislation.
Amends GASB No. 34.
Discuss examples of Programs restricted
by enabling legislation.
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DETERMINING LEGAL
ENFORCEABILITY

A Government can be compelled by an
external party to use resources created
by enabling legislation only for the
purposes specified by the legislation.
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

External Party include citizens, public
interest groups or the judiciary.
“Generally, the enforceability of an
enabling legislation restriction is
determined by professional judgment.”
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CHANGES IN CIRCUMSTANCES


New enabling legislation that replaces the
original enabling legislation by
establishing new restrictions.
Resources used for a purpose other than
those stipulated in the enabling
legislation, reevaluate the legal
enforceability of the restrictions.
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DISCLOSURE REQUIREMENT

Disclose the amount of net assets at end
of reporting period that are restricted by
enabling legislation in the notes to the
financial statements.
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