American Accounting AssociationGovernment and Nonprofit Section

GASB Update

The views expressed in this presentation are those of Mr. Bean. Official positions of the GASB are determined only after extensive due process and deliberation.

First a Thank You!

Also a Request

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Gil Crain Memorial Research Grant

Previous recipients include:

• Suzanne Lowensohn, Colorado State

• Rebecca Bloch, Fairfield• Byron Henry, Bowie State

University• Wie Yusuf and Meagan

Jordan, Old Dominion• Judith Harris, Karen

McKenzie and Randall Rentfro, Nova Southeastern

• Kathryn Jervis, Rhode Island

• Nolan Kido, Hawai’i at Manoa

• Saleha Khumawala and Dan Neely, Houston

• Craig Shoulders, North Carolina at Pembroke

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Service to the GASB

Sue Convery and Suzanne Lowensohn (Comprehensive Implementation Guide)

Paul Copley and Bob Freeman (Recognition and Measurement Attributes)

Catherine Plante (OPEB) Jackie Reck (GASAC and Recognition and Measurement) Smitty (GAAP Hierarchy) Daniel Smith and Odd Stalebrink (GASAC)

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On to the Blue Covers

Implementation of New Standards 2014- Statement 65—Assets and Liabilities—Reclassification and

Recognition- Statement 66—Technical Corrections- Statement 67—Pension Plans- Statement 70—Nonexchange Financial Guarantees

2015- Statement 68—Pension Accounting for Employer and

Nonemployer Contributing Entities- Statement 69—Government Combinations and Disposals of

Government Operations- Statement 71—Pension Transition for Contributions Made

Subsequent to the Measurement Date

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Suggestions For Consideration—Top Teaching Topics

Statement 65Items Previously Reported as Assets and Liabilities

Effective for Periods Beginning After December 15, 2012

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Statement 65—Top Teaching Topics

Deferred inflows of resources and deferred outflows of resources- Origin—Concept Statement 4

Interperiod equity focused (objectives of financial reporting)- First operationalized in Statement 63

GASB standards identify all deferred inflows of resources and deferred outflows of resources- Debt issuance costs, except any portion related to prepaid

insurance costs, should be recognized as an expense in the period incurred.

- Deferred inflows and deferred outflows apply to governmental funds Availability period

Statement 66Technical Corrections—2012

Effective for Periods Beginning After December 15, 2012

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Statement 66—Top Teaching Topics

None! GASB housekeeping- Primarily cleaning up (clarifying) Statement 62

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Statement 68Accounting and Financial Reporting for Pensions

Statement 67Financial Reporting for Pension Plans

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Pensions—Top Teaching Topics

Full liability being brought on the face of the financial statements- Move away from the funding approach (APB Opinion 8, NCGA

Statement 6, GASB Statement 27)

Career-long relationship between employer and employee and interperiod equity—liability calculation- Discount rate- Entry-age cost method- Level percentage of projected pay

Interperiod equity—expense recognition- Changes in fair value- Certain actuarial gains and losses

Statement 69Government Combinations and Disposals of Operations

Effective for Periods Beginning After December 15, 2013

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Statement 69—Top Teaching Topics

Mergers and transfers—role of interperiod equity and cost of services- Assets, liabilities, and deferrals should be reported at carrying

values

Acquisitions- Assets, liabilities and deferrals generally should be reported at

acquisition value—a market-based entry price (not fair value)

Statement 70Nonexchange Financial Guarantees

Effective for periods beginning after June 15, 2013

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Statement 70—Top Teaching Topics

Based the same definition of nonexchange that is found in Statement 33

Excludes exchange and exchange-like transactions Transactions that may fall between the cracks

Recognition Contingent liability recognition is based for the first time in

GASB literature on a “more likely than not” approach

Concepts Statement 6

Measurement of Elements

of Financial Statements

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Concepts Statement 6—Top Teaching Topics

Conceptual framework- Concepts- Framework for application

Measurement approaches- Initial amount (including adjustments)

More suitable for assets that are used directly in providing services. - Remeasured amount

More suitable for assets that will be converted to cash (financial assets) and liabilities for which there is uncertainty about the timing and amount of payments.

Measurement attributes- Historical cost- Fair value- Replacement costs (including acquisition value)- Settlement value (with counterparties)

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Current Technical Agenda

Fair Value—Measurement and Application Fiduciary Activities GAAP Hierarchy Leases Postemployment Benefits

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Fair Value—Top Teaching Topics

Fair Value Definition—same as the FASB and IASB- 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.

Investment Definition—Application of fair value- A security or other asset that a government holds primarily for

the purpose of income or profit and its present service capacity is based solely on its ability to generate cash or to be sold to generate cash

Disclosures—amendments based on current FASB standards (including fair value hierarchy—levels 1-3)

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Fiduciary Responsibilities—Top Teaching Topics

What belongs in the fiduciary classification- In the reporting entity or not (control of assets)- Governmental and business-type activities versus fiduciary

activities (who is the beneficiary)

Trust versus custodial- Investment trust and private-purpose

Fiduciary activities continue to be reported as basic financial statements- Accountability notion

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GAAP Hierarchy—Top Teaching Topics

Reduce GAAP Hierarchy from four levels to two levels- Level 1—GASB Statements- Level 2—GASB Technical Bulletins and Implementation

Guides and AICPA pronouncements cleared by the GASB

Nonauthoritative—further clarifies role of concepts statements

Requires broader public exposure of comprehensive implementation guide

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Leases—Top Teaching Topics

Single approach—right of use- No classification of leases into operating/capital or other

categories- Underlying assumption that leases are financings - Could develop some exceptions

Lessor—symmetrical approach- Working with FASAB

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Postemployment Benefits—Top Teaching Topics

Three Exposure Drafts- Other Postemployment Benefits (OPEB)—Plans- OPEB—Employers- Pensions—Not covered by Statements 67 and 68

OPEB proposals based on same basic principles of the new pension standards

Certain modifications made, including provision for healthcare trend rates

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Questions?

Web site—www.gasb.org