Transcript GASB Update Chris Deweese, CPA, Member Suttle & Stalnaker, PLLC Today’s Discussion GASB Update GASB Statement No.

GASB Update
Chris Deweese, CPA, Member
Suttle & Stalnaker, PLLC
Today’s Discussion
GASB Update
GASB Statement No. 51
GASB Statement No. 53
GASB Statement No. 54
Other GASB Statements
GASB Exposure Drafts/Future Projects
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GASB Statement No. 51
GASB Statement No. 51
Intangibles
 Effective for FYE 6/30/10
 Establishes accounting requirements and
presentation of intangibles for financial reporting
purposes.
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GASB Statement No. 51
Intangibles
 Intangible assets possess all of the following
characteristics
 Lack of physical substance
 Nonfinancial nature
 Initial useful life extending beyond a single reporting
period
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GASB Statement No. 51
Intangibles assets include:
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
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


Easements,
Water rights,
Timber rights,
Patents,
Trademarks, and
Computer software.
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GASB Statement No. 51
Intangible assets should be classified as
capital assets:
 Assets that are explicitly excluded from the scope
of the standard, such as capital leases, should
follow existing relevant authoritative guidance.
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GASB Statement No. 51
Intangible assets only reported in Statement of Net
Assets if identifiable
Specific approach for intangible assets that are
internally generated (e.g., patents or copyrights)
Accounting and reporting for internally generated
software
Guidance for amortization of intangibles
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GASB Statement No. 51
Intangibles acquired or created primarily for
obtaining profit should be reported as investments.
Intangibles must be “identifiable” or “separable” – it
can be sold, rented, transferred, etc.
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GASB Statement No. 51
Examples include: patents, copyrights, and, most
commonly, software
Three criteria for such assets to be capitalized
Objective and service capacity of asset has been
determined
Feasibility of project has been demonstrated
Intention to continue and complete project has
been demonstrated
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GASB Statement No. 51
Management must also authorize and commit
funding for software project before outlays may be
considered capitalizable
Thus, capitalization period begins with
authorization and commitment to project
Capitalization period ends with substantial
completion (i.e., software is ready for use)
Activities in pre- and post-capitalization phases
should be expensed
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GASB Statement No. 51
Useful life for amortization should equal service
capacity expectation not to exceed length of
contractual provisions
Intangibles with indefinite useful lives should not be
amortized
This may change, assuming an impairment has
not occurred, if conditions convert a useful life to
a definite period
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GASB Statement No. 51
Implementation guide clarifications for intangibles
Websites (if it meets the criteria for internallygenerated software...there is a VERY HIGH BAR
here)
Interest capitalization requirements, if applicable,
do apply to intangible projects just like they do for
tangible projects
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GASB Statement No. 51
Purchased/licensed software that is not internally
generated is an intangible
Example...5 year licensing agreement
Intangible asset offset by commitment of obligation
to pay
No amortization of an intangible with an indefinite useful
life
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GASB Statement No. 53
GASB Statement No. 53
Derivatives
 Effective for FYE 6/30/10
 Include interest rate & commodity swaps, interest
rate locks, options (caps, floors, and collars),
swaptions, forward contracts, and futures
contracts
 GASB establishes the accounting and financial
reporting requirements
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GASB Statement No. 54
GASB Statement No. 54
Fund Balance

Effective for FYE 6/30/11

Traditional three component model (reserved,
unreserved-designated, unreserved) replaced
with the five new components.
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GASB Statement No. 54
Under GASB 54 fund balances should be
reported in classifications that:
“comprise a hierarchy based primarily on the
extent to which the government is bound to
honor constraints on the specific purposes for
which amounts in those funds can be spent”
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GASB Statement No. 54
Two initial distinctions in GASB Statement
No. 54
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Non-spendable

Spendable
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GASB Statement No. 54
Non-spendable

Cannot be spent with cash
 Inventories
 Prepayments
 Long-term receivables

Legally or contractually required to remain intact
 Permanent fund principle
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GASB Statement No. 54
Spendable

Can be spent, but may have restrictions – such
as:
 Restricted
 Committed
 Assigned
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GASB Statement No. 54
Restricted

Same definition as in Statement No. 46
 Externally imposed by creditors
 debt covenants
 Grantors
 Contributors
 Imposed by law through constitutional provisions or
enabling legislation and has legal enforceability
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GASB Statement No. 54
Committed

Can only be used for specific purposes imposed
by formal action of the governments highest level
of decision making authority (governing board or
board of directors)
 Can only be changed by the same type of action (law,
ordinance, resolution)
 Should occur prior to year end, but can occur after
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GASB Statement No. 54
Assigned

Can be constrained by intent
 Should be expressed by governing body, a committee or
an official that can assign assets (can be delegated by
the Board to another level of management)
 Includes all remaining amounts NOT in the general fund
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GASB Statement No. 54
Unassigned
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Includes only unrestricted, uncommitted,
unassigned amounts in the general fund ONLY
 General fund should be the only fund that reports a
positive unassigned amount
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If a NON-general fund balance is negative after restricted,
committed, assigned, then:
 Reduce assigned and if that goes to zero
 Then you have negative unassigned
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GASB Statement No. 54
Disclosure

The following must be disclosed in the summary of
significant accounting policies
 Committed
 Who is the highest level of decision making authority
 What action is required to establish commitment
 Assigned
 Who can assign
 What is the policy for assignment
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GASB Statement No. 54
Encumbrances

Disappear from the face of the financial statements, other
than what is already restricted, committed, or assigned

Disclose encumbrances in the notes to the financial
statements
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GASB Statement No. 54
What about stabilization amounts/rainy day funds.
Formal establishment of “rainy day” or “contingency” funds
to only be used in certain specified circumstances
Only appropriately categorized as restricted or committed
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GASB Statement No. 54
Presentation (aggregated approach)
Fund balances:
•
•
•
•
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Non-spendable
Restricted
Committed
Assigned
Unassigned
– Total fund balances
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GASB Statement No. 54
Presentation (disaggregated approach)
Fund balances:
• Non-spendable
– Inventory
– Endowment fund
• Restricted
– Debt service reserve
– School construction
– Capital projects
– Other purposes
• Committed
– Education
– Economic stabilization
• Assigned
– Library acquisitions
– Text books
– Capital projects
• Unassigned
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GASB Statement No. 54
Governmental Fund Type Definitions
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Special revenue fund – used to account for and report the
proceeds of specific revenue sources that are restricted or
committed to expenditure for specified purposes other than
debt service or capital projects.
Capital projects fund – used to account for and report
financial resources that are restricted, committed, or
assigned to expenditure for capital outlays including the
acquisition or construction of capital facilities and other
capital assets.
Debt service, permanent and general fund – definition
unchanged
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Other GASB Statements
GASB Statement No. 55
GAAP Hierarchy
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Implementation – Effective upon issuance

Established the GAAP hierarchy within GASB
literature
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GASB Statement No. 56
Codification of reporting standards previously
in audit standards
 Implementation – Effective upon issuance
 Purpose
 Related Parties
 Going Concern
 Subsequent Events
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GASB Statement No. 57
OPEB Measurements by Agent Employers
and Agent Multiple-Employer Plans
 Effective for FYE June 30, 2012
 Clarifies the use of the alternative measurement
method for OPEB plans as defined in GASB 45
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GASB Statement No. 58
Accounting and Financial Reporting for
Chapter 9 Bankruptcies
 Effective for FYE June 30, 2010
 Provides guidance to governments who have
petitioned the court for bankruptcy
 Liabilities are to be re-measured in accordance with
the approved bankruptcy plan when approved
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GASB Exposure Drafts/
Future Projects
Accounting Developments – Looking Forward
GASB 14 and GASB 34 amendment
Exposure draft issued March 2010
This will impact how governments are
consolidated
Expected to be finalized in late fall / early winter
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Accounting Developments – Looking Forward
GASB and FASB Codification
Exposure draft issued January 2010
This is a follow-up project to the recent FASB
project in which the codification was created
Expected to be finalized in late fall
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Questions?
Contact Information:
Chris Deweese, CPA, Member
Suttle & Stalnaker, PLLC
1411 Virginia Street, East, Suite 100
Charleston, WV 25301
(304) 343-4126
(304) 415-4827 (cell)
[email protected]
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