national state auditors association gasb update the views expressed in this presentation are those...

National State Auditors Association

GASB Update

The views expressed in this presentation are those of Messrs. Attmore and Bean. Official positions of the GASB

are determined only after extensive due process and deliberation.

Current Events

Where Are We Now?

Effective Dates—June 30• June 30, 2009

– Statement 43—Phase III (OPEB plans)– Statement 45—Phase II (OPEB employers)– Statement 49 (Pollution remediation)– Statement 52 (Land held as investments) – Statement 55 (GAAP hierarchy)– Statement 56 (AICPA omnibus)

• June 30, 2010– Statement 45—Phase III– Statement 51 (Intangibles)– Statement 53 (Derivatives)

• June 30, 2011– Statement 54 (Fund balance reporting)

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Accounting and Financial Reporting

for Derivative Instruments

Statement 53

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What Do You Need To Know About Statement 53?

• Derivatives are reported at fair value• Hedge accounting is required to be applied to

qualifying transactions– Changes in fair value would be deferred– Assessment of hedge effectiveness is determined at the

end of the reporting period• Consistent critical terms• Quantitative techniques

– Synthetic instrument– Dollar offset– Regression– Other qualifying quantitative methods

– Deferrals are generally recognized when the hedge is terminated, including no longer being effective

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Statement 54

Fund Balance Reporting and Governmental Fund Type Definitions

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What Do You Need To Know About Statement 54?

• Governmental fund definitions have been clarified

• Fund balance classifications have been restructured

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Fund Type Definitions

• Special revenue—expanded• Capital projects—expanded• Debt service– Paragraph 30 requirements highlighted

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Fund Balance Classifications

• Format based primarily on use of resources versus availability for appropriation

• Format:– Nonspendable—Inventory, long-term receivables– Spendable

• Restricted—Statement 34/36 definition• Committed—Formal action of governing body• Assigned—Similar to designations• Unassigned

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Statements 55 and 56

Governmental Accounting Guidance Found in Other Literature

Sources of Guidance

• American Institute of Certified Public Accountants (AICPA)– Committee on Accounting Procedures—Accounting

Research Bulletins– Accounting Principles Board—Opinions and

Interpretations– Auditing Standards Board—Statements on Auditing

Standards (SASs)• Financial Accounting Standards Board (FASB)—

Statements and Interpretations

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GASB Approach To Incorporating Literature

• Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments

• Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards

• Current Technical Agenda Project—Pre-November 30, 1989 AICPA and FASB literature (discussed later)

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Statement 55• Incorporates GAAP hierarchy guidance found in SAS No. 69,

The Meaning of “Present Fairly in Conformity With Generally Accepted Accounting Principles, basically “as is.”

• Some modifications made to clarify and update the guidance and reflect the government environment– Removed reference to AICPA and FASB standards in the

hierarchy. Once GASB adopts—source is no longer relevant– International Accounting Standards Board (IASB)—other

accounting literature– International Public Sector Accounting Standards Board (IPSASB)

and Federal Accounting Standards Advisory Board (FASAB)—other accounting literature

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Statement 56

• Incorporates guidance found in SASs basically “as is.”– Related party transactions – Subsequent events– Going concern

• Again, modifications were made to clarify and update the guidance and reflect the government environment

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AICPA and FASB Pronouncements

Pre-November 30, 1989 Literature

Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements

• Why November 30, 1989?– FAF reaffirmed jurisdictional arrangement and determined that

subsequent FASB pronouncements should be considered other accounting literature unless specifically adopted by the GASB

– Eliminated “negative” standard setting• Why do this project now?

– Older literature harder to find, may be exacerbated by FASB codification project

– Inconsistencies in practice—what applies, what does not apply• What will be addressed?

– AICPA—Accounting Research Bulletins, Opinions, and Interpretations

– FASB—Statements and Interpretations

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Other Projects

Current Projects—Due Process• Due Process Documents– Pension Accounting and Reporting—ITC– Service Efforts and Accomplishments Reporting—

Voluntary Guidelines– Service Concession Arrangements– Chapter 9 Bankruptcy – Financial Instruments Omnibus—2a7-like pools– OPEB Implementation Issues

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Scope of the Postemployment Benefits Project

• Basic approach– Funding base with parameters– Liability driven– Something in between

• How the actuarial liability should be measured– Salary projects– Discount rate

• Plan reporting• Cost sharing allocations for employers

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SEA Proposals• Suggested guidelines for voluntary reporting• Essential components of SEA reports– Purpose and scope– Major goals and Objectives– Key measures of SEA performance– Discussion and analysis of results and challenges

• Qualitative Characteristics of SEA performance information

• Effectively communicating SEA performance information

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Service Concession Arrangement Proposals

• Who should report the capital in a service concession arrangement—transferor versus the operator?– The transferor determines or regulates what services the

operator is required to provide and how the operator is required to provide them with the property, to whom the operator is required to provide them, and the price ranges or rates that can be charged for services;

– The transferor is entitled to—through ownership, beneficial entitlement, or otherwise—significant residual interest in the property at the end of the arrangement.

• When should upfront payments be recognized?– Generally, over the life of the agreement.

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Other Current Projects—Not Ready for Prime Time

• Concepts Statements– Recognition and Measurement Attributes

• Statement 14 Reexamination

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Why The Conceptual Framework Is Important

• The “Map Quest” or “Google Earth” of standards• Most recent concepts statement, Elements of Financial

Statements, already has had an affect on standards– Intangible assets– Derivative instruments

• Recognition and Measurement Attributes will do the same– Governmental funds—what belongs in a fund for financial

reporting purposes– Fair value (remeasured value) versus historical cost (initial

value)

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Statement 14 Reexamination

• Fiscal dependency—is it enough?• Misleading to exclude criteria for inclusion• Blending versus discrete presentation• Criteria for major component units• Fiduciary activities• Disclosures

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Research Agenda

• Economic Condition Reporting• Electronic Financial Reporting• Fair Value Measurement• Government Combinations• Interpretation 1—Demand Bonds

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Calling All Issues

• Agenda is full; however, emerging issues still need to be addressed– GASB is not fishing for issues

• If you have identified an issue that you believe warrants the GASB’s attention, please submit that issue via email to director@gasb.org

• Agenda reviewed three times a year the GASB

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Questions?

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Telephone—(203) 847-0700Web site—www.gasb.org