GASB Update2015

Brian J. Hemmerle, CPA, CFE

Jeffery W. Patterson, CPA, MBA

February, 2015

About the Presenters

• Brian Hemmerle, CPA, CFE– Henry & Horne, Supervisor, Governmental Services– Graduated from the University of Arizona– Experience in Municipalities, School Districts, State Agencies, Non-Profits &

Industry– Serves on the Board of Directors for the Girl Scouts Arizona Cactus Pine

Council– AICPA, ASCPA, GFOA, GFOAz, AASBO– GFOA Special Review Committee Member

• Jeffery Patterson, CPA, MBA– Henry & Horne, Supervisor, Governmental Services– Graduated from the Utah State University– Experience in School Districts, Charter Schools, Cities, Towns, State

Agencies & Non-Profits– Member of the AICPA, ASCPA, AASBO, GFOAZ– GFOA Special Review Committee Member

About Henry & Horne, LLP

• A valued partner to Arizona’s government and industry clients for over 50 years.

• Members of AASBO, GFOA, and GFOAZ and serve on the GFOA Special Review Committee.

• Serve on boards and committees

• Speaking/training engagements

Seminars

• Quarterly starting in January• Breakfast is always provided for live

presentations and webinars are offered in the same month for the same topics.

• A new topic related to governments each quarter.

• Earn 1 - 2 hour of

Complimentary CPE• Your topic suggestions

are welcome!

Upcoming Topics

• April 2015 – Implementing GASB 68 & 71 in Arizona

• July & October 2015 – Coming Soon!!!– Audit implications

of GASB 68

– Bond Accounting

Today’s Topic

• GASB 68– Accounting and Financial Reporting

for Pensions• GASB 71

– Pension Transition for Contributions Made Subsequent to the Measurement Date

• GASB 69– Government Combinations and

Disposals of Government Operations• Current GASB Projects

GASB Statement

68

GASB Statement 68

• Accounting and Financial Reporting for Pensions– Issued in June 2012– Effective for FYE 2015– Amends GASB Statement 27

GASB Statement 68

• Established standards of financial reporting for defined benefit pension plans and defined contribution pension plans administered through a trust or equivalent arrangement

• Pension includes retirement income and other benefits but does not include postemployment healthcare and termination benefits

Types of Plans

• Single employer plans – involve only one government

• Multiple employer plans – include more than one government• Agent multiple employer plans – separate

accounts maintained for each employer.– PSPRS

• Cost sharing multiple employer plans – governments pool costs.

– ASRS

Background

• Pension benefits originate from exchanges between the employer and employees and are part of the total compensation for employee services

• Pension obligations meet the definition of a liability in Concept Statement 4– Liabilities are present obligations to

sacrifice resources that the government has little or no discretion to avoid

Changes

• Statement 68 changes accounting and financial reporting for employers with regard to:– The amount reported as a liability– The amount reported as pension expense– The discount rate used to calculate the present value of the

obligation

– The method used by the actuary to allocate costs

– The technique used by the actuary to compensate for changes in assumptions and actual results

What about Modified Accrual?

• Liabilities to defined benefit pension plans, as well as liabilities for defined contribution pensions, are normally expected to be liquidated with expendable available resources when amounts due are pursuant to contractual arrangements or legal requirements.– Employers continue to

recognize a pension expenditure based on their contractually required contribution to the plan by function.

– Employers only report a liability if they fail to make the full amount of their contractually required contribution to the plan.

Employer Obligations

• Defined pension benefits originate from exchanges between employer and employee as part of compensation– The cost and obligations associated with pensions should

be recorded as they are earned, not when contributions are made

– The obligation exists now to provide a pension benefit at a future date

Discount Rate

• Statement 68 requires the discount rate to be a single rate that reflects:– The long-term expected rate of return on plan

investments that are expected to used to finance the payment of benefits to the extent that:

• Plan net position is projected to be sufficient to make projected benefit payments, and

• Assets are expected to be invested using a strategy to achieve that return

– A high quality 20-year muni bond index rate or yield on tax exempt GO bonds (AA rated or higher or an equivalent rating) beyond the point at which plan net assets available for pension benefits are projected to no longer be available for long-term investment.

• The plan will determine which method they will use.

Illustrated Measurement Approach

Past service - AAL Future Service

*3) Attribution

*= Current - Service Cost (Normal Cost)

Portion related to past service = Total Pension Liability

25 40 62 82

1) Projected Benefits

2) Discount

Present Value

Timing

Timing

• 3 DIFFERENT DATES– Employers FYE– Measurement date (Net Pension Liability [NPL])

• This date cannot be earlier than the end of the employers prior fiscal year end date.

• All components as of the same date – (Total Pension Liability – Plan Net Position = NPL)

– Actuarial valuation date (of TPL)• This date can be the same as the measurement date

or earlier, but no earlier than 30 months +1 day prior to the employers FYE date.

• The pension plan will tell you what the actuarial valuation date and measurement date are for your applicable fiscal year end.

12/31/12 6/30/13 6/30/14

Measurement Date

Prior FYE

ActuarialValuation Date

Employer FYE

30 months + 1 day

6/30/15

Illustrated Timing Example

• Example

Pension Expense (Measurement period)

Deferred Outflows of Resources

6/30/13 6/30/14

Prior FYE

ActuarialValuation DateEmployer FYE

6/30/15

Measurement Date

Plan FYE

6/30/14

Catch Up Procedures

Illustrated Timing Example

• For FYE June 30:

6/30/13 6/30/14

Prior FYE

ActuarialValuation DateEmployer FYE

6/30/15

Measurement Date

Plan FYE

6/30/14

Catch Up Procedures

Pension Expense (Measurement period) Deferred Outflows of

Resources

6/30/14

ActuarialValuation DateEmployer FYE Measurement

DatePlan FYE

Catch Up Procedures

12/31/14

MeasurementDate

6/30/15 12/31/15

6/30/15

Illustrated Timing Example

• For FYE Dec. 31

6/30/14

ActuarialValuation DateEmployer FYE Measurement

DatePlan FYE

Catch Up Procedures

12/31/14

MeasurementDate

6/30/15 12/31/15

6/30/15

• Employer Contributions made directly by the employer subsequent to the measurement date of the net pension liability and before the end of the employer’s fiscal year should be recognized as a deferred outflow of resources.

GASB Statement 71

Employer Contributions Deferred Outflows of

Resources

6/30/13 6/30/14

Prior FYE

ActuarialValuation Date

Employer FYE

6/30/15

Measurement Date

Plan FYECatch Up Procedures

• Question: – For those deferred contributions which will need

to be tracked between 7/1/2014 – 6/30/2015, what is the determining factor with which we will use to identify those contributions? The pay period end date or actual date the contribution is made to the plan?

• Answer: – Deferred contributions will be based on the

accrual basis of accounting for the pay period end date, and not on the day the contribution was remitted to the plan.

GASB Statement 71

Pension Expense

• Measuring Pension Expense– Before GASBS 68

• Annual contributions expensed to pension expense.

• Essentially equal to the ARC.

Pension Expense

• Measuring Pension Expense– After GASBS 68

• Annual contributions posted to deferred outflows.• The difference between the actual and projected earnings on plan investments

would be deferred and recognized as pension expense over a five-year closed period.

2015 2016 2017 2018 2019 2020 2021 2022 2023Plan

Investments Years Total2015 5 26,000 5,200 5,200 5,200 5,200 5,200 2016 5 (16,000) (3,200) (3,200) (3,200) (3,200) (3,200) 2017 5 27,000 5,400 5,400 5,400 5,400 5,400 2018 5 19,000 3,800 3,800 3,800 3,800 3,800 2019 5 (26,000) (5,200) (5,200) (5,200) (5,200) (5,200)

Amortized Deferred Outflow 5,200 5,200 10,600 14,400 14,400 9,200 9,200 3,800 - Amortized Deferred Inflow - (3,200) (3,200) (3,200) (8,400) (8,400) (5,200) (5,200) (5,200)

Total Amortized 5,200 2,000 7,400 11,200 6,000 800 4,000 (1,400) (5,200)

Deferred Outflow 20,800 15,600 32,000 36,600 22,200 13,000 3,800 - - Deferred Inflow - (12,800) (9,600) (6,400) (24,000) (15,600) (10,400) (5,200) -

Total Deferred 20,800 2,800 22,400 30,200 (1,800) (2,600) (6,600) (5,200) -

Pension Expense

• Measuring Pension Expense– After GASBS 68

• Differences between expected and actual changes in economic and demographic factors (experience) would be deferred and recognized as pension expense over a period equal to the average remaining service periods of active and inactive employees (including retirees).

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024Experience Years Total

2015 8 7,500 938 938 938 938 938 938 938 938 2016 6 (9,000) (1,500) (1,500) (1,500) (1,500) (1,500) (1,500) 2017 7 12,000 1,714 1,714 1,714 1,714 1,714 1,714 1,714 2019 4 6,000 1,500 1,500 1,500 1,500 2020 5 (5,000) (1,000) (1,000) (1,000) (1,000) (1,000)

Amortized Deferred Outflow 938 938 2,652 2,652 4,152 4,152 4,152 4,152 1,714 - Amortized Deferred Inflow - (1,500) (1,500) (1,500) (1,500) (2,500) (2,500) (1,000) (1,000) (1,000)

Total Amortized 938 (563) 1,152 1,152 2,652 1,652 1,652 3,152 714 (1,000)

Deferred Outflow 6,563 5,625 14,973 12,321 14,170 10,018 5,866 1,714 - - Deferred Inflow - (7,500) (6,000) (4,500) (3,000) (5,500) (3,000) (2,000) (1,000) -

Total Deferred 6,563 (1,875) 8,973 7,821 11,170 4,518 2,866 (286) (1,000) -

Pension Expense

• Measuring Pension Expense– After GASBS 68

• Changes in (assumptions) or other inputs that affected measurement of the total pension liability since the prior measurement date would be deferred and recognized as pension expense over a period equal to the average remaining service periods of active and inactive employees (including retirees).

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Assumption Years Total

2015 8 7,500 938 938 938 938 938 938 938 938 2017 7 (9,000) (1,286) (1,286) (1,286) (1,286) (1,286) (1,286) (1,286) 2019 4 12,000 3,000 3,000 3,000 3,000 2021 5 6,000 1,200 1,200 1,200 1,200 1,200 2023 3 (5,000) (1,667) (1,667) (1,667)

Amortized Deferred Outflow 938 938 938 938 3,938 3,938 5,138 5,138 1,200 1,200 1,200 Amortized Deferred Inflow - - (1,286) (1,286) (1,286) (1,286) (1,286) (1,286) (2,952) (1,667) (1,667)

Total Amortized 938 938 (348) (348) 2,652 2,652 3,852 3,852 (1,752) (467) (467)

Deferred Outflow 6,563 5,625 4,688 3,750 11,813 7,875 8,738 3,600 2,400 1,200 - Deferred Inflow - - (7,714) (6,429) (5,143) (3,857) (2,571) (1,286) (3,333) (1,667) -

Total Deferred 6,563 5,625 (3,027) (2,679) 6,670 4,018 6,166 2,314 (933) (467) -

Pension Expense

• Measuring Pension Expense– After GASBS 68

• Changes in (proportion) in the collective net pension liability since the prior measurement date would be deferred and recognized as pension expense over a period equal to the average remaining service periods of active and inactive employees (including retirees).

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Assumption Years Total

2015 8 7,500 938 938 938 938 938 938 938 938 2017 7 (9,000) (1,286) (1,286) (1,286) (1,286) (1,286) (1,286) (1,286) 2019 4 12,000 3,000 3,000 3,000 3,000 2021 5 6,000 1,200 1,200 1,200 1,200 1,200 2023 3 (5,000) (1,667) (1,667) (1,667)

Amortized Deferred Outflow 938 938 938 938 3,938 3,938 5,138 5,138 1,200 1,200 1,200 Amortized Deferred Inflow - - (1,286) (1,286) (1,286) (1,286) (1,286) (1,286) (2,952) (1,667) (1,667)

Total Amortized 938 938 (348) (348) 2,652 2,652 3,852 3,852 (1,752) (467) (467)

Deferred Outflow 6,563 5,625 4,688 3,750 11,813 7,875 8,738 3,600 2,400 1,200 - Deferred Inflow - - (7,714) (6,429) (5,143) (3,857) (2,571) (1,286) (3,333) (1,667) -

Total Deferred 6,563 5,625 (3,027) (2,679) 6,670 4,018 6,166 2,314 (933) (467) -

Pension Expense

• Items to be immediately expensed– Pension benefits earned during the

reporting period (service cost or normal cost)

– Interest cost on the total pension liability

– Changes in benefit terms that affect the total pension liability

– Long-term expected rate of return on pension plan investments

Pension Expense

• Summary of Changes in Expense

Source of Change in the Net Pension Liability Expense Deferral Expense DeferralService Cost Immediate None Immediate NoneInterest on the Total Pension Liability Immediate None Immediate NoneProjected Investment Earnings Immediate None Immediate NoneChanges in Benefit Terms Immediate NoneDifferences between Projected and Actual Earnings

Expense over 5-year closed period

Differences between Assumed and Actual Economic and Demographic Factors (Experience)Changes in AssumptionsOther Changes in the Net Pension Liability Immediate None

Before 68 After 68

Initial period amount

Initial period amount

Amortization over a period

up to 30 years (closed

or open)

Expense over average remaining service period of

actives and inactives

Total Pension Liability

Plan Fiduciary

Net PositionNet Pension

Liability(a) (b) (a) - (b)

Balance at 6/30/2017 2,853,455$ 2,052,589$ 800,866$ Changes for the year:

Service Cost (Normal Cost) 73,034 73,034 Interest 219,345 219,345 Differences between expected and actual experience (37,539) (37,539) Net investment income 196,154 (196,154) Contributions - Employer 79,713 (79,713) Contributions - Employee 31,451 (31,451) Benefit payments, including refunds of employee contributions (119,434) (119,434) - Administrative expense (3,373) 3,373 Other changes 8 (8)

Net changes 135,406 184,519 (49,113) Balance at 6/30/2018 2,988,861 2,237,108 751,753$

Increase (Decrease)

Example Accrual Based Entry

• Contributions from Employer subsequent to the measurement period are not reflected in the NPL but rather as a debit to deferred outflows.

• It is then recognized as a reduction of NPL in the subsequent measurement period as a credit to deferred outflows and a debit to the NPL.

Debits (Credits)

(a) - (b)Balance at 6/30/2017 (800,866)$ -$ 47,321$ (27,000)$ 83,054$ -$ 272,834$ (72,418)$ Changes for the year:

Service Cost (Normal Cost) (73,034) 73,034

Interest (219,345) 219,345 Differences between expected and actual experience 37,539 (37,539)

Amortization of Experience Diffs - 3,454 (13,994) 10,540

Amortization of Assumption Changes - 20,101 (20,101)

Net investment income 196,154 (158,625) (37,529)

Amortization of investment earnings difference - 29,155 (77,174) 48,019

Contributions - Employer 79,713

Contributions - Employee 31,451 (31,451)

Benefit payments, including refunds of employee contributions -

Administrative expense (3,373) 3,373 Other changes 8 (8) Net changes 49,113 158,378 (13,994) (26,999) (20,101) - (77,174) 10,490

Balance at 6/30/2018 (751,753)$ 158,378$ 33,327$ (53,999)$ 62,953$ -$ 195,660$ (61,928)$

Deferred Outflows of Resources

Deferred Inflows of Resources

Net Pension Liability

Experience Difference Assumption Changes Investment Earnings Diffs

Allocation of Entries

Pension Expense

Deferred Outflows of Resources

Deferred Inflows of Resources

Deferred Outflows of Resources

Deferred Inflows of Resources

Example Accrual Based Entry

Schedule of Employer Allocations (AICPA)

Schedule of Pension Amounts by Employer (AICPA)

TOWN OF NO WHERE, ARIZONA

Governmental Activities

ASSETSCash and cash equivalents 4,500,000$ Accounts receivable, net 600,000 Special assessments receivable 200,000 Due from other governments 900,000 Restricted cash and cash equivalents 800,000 Capital assets

Capital assets not depreciated 18,000,000 Capital assets, net of depreciation 6,000,000

Total assets 31,000,000

DEFERRED OUTFLOWS OF RESOURCESDeferred employer contributions to pensions 73,740 Deferred outf low s of resources related to pensions 291,940

Total deferred outf low s of resources 365,680

LIABILITIESAccounts payable 500,000 Accrued payroll and employee benefits 200,000 Due to other government 50,000 General obligation bonds 248,000 Long-term

General obligation bonds 2,000,000 Net Pension Liability 751,753

Total liabilities 3,749,753

DEFERRED INFLOWS OF RESOURCESDeferred inflow s of resources related to pensions 115,927

Total deferred inflow s of resources 115,927

NET POSITIONNet investment in capital assets 12,500,000 Restricted 2,000,000 Unrestricted 13,000,000

Total net position 27,500,000$

June 30, 2018STATEMENT OF NET POSITION

Note Disclosures

• Assumptions Used in Measurement– Assumption in respect of:

• Salary• Inflation• Postemployment benefit increases• Discount rate

– Different rates, if contemplated for different periods

– Date(s) of experience studies and tables on which significant assumptions are based

Note Disclosures

• Discount Rate – Expected Rate of Return– Expected rate of return on plan

investments– Description of how the expected rate

of return on plan investments was determined, including:• Assumed asset allocation of the portfolio• Best estimate of the long-term expected

rate of return for each major asset class

Note Disclosures

• Discount Rate – Sensitivity Analysis– The effects on the current period net

pension liability of a 1% increase and a 1% decrease in the discount rate.

Note Disclosures

• Significant Plan Disclosures– Annual money-weighted rate of return

(1 year in the notes and 10 years in RSI)

– Changes in the net pension liability

– Net pension liability as of plan year end

RSI 10-Year Schedules

• Changes in the net pension liability• Net pension liability

– Total pension liability, plan net position, net pension liability and

• Plan net position as a percentage of the total pension liability

• Net pension liability as a percentage of covered-employee payroll

RSI 10-Year Schedules

RSI 10-Year Schedules

Available Resources

• GASB Implementation Guides• GASB Website• ASRS Website• Auditor General Website

GASB

GASBS 71

• Pension Transition for Contributions Made Subsequent to the Measurement Date

– Issued November 2013– Effective for FYE 2015

GASBS 71

Debit CreditBeginning Net Position NPL - ECBeginning deferred outflow employer contributions to pension EC

Beginning Net Pension Liability (NPL) NPL

Debit CreditPension Expense (by function) XXDeferred outflows of resources related to pensions XX

Deferred inflows of resources related to pensions XXNet Pension Liability (NPL) Change NPLBeginning deferred outflow employer contributions to pension EC

Debit Credit2015 deferred outflow employer contributions to pension XX

Pension Expense related to employer contributions (by function) XX

Restatement due to change in accounting principle for beginning net pension liability, deferred outflows related to 2014 employer contributions and net position.

To properly state change in net pension liability in fiscal year 2015.

To reclassify for government-wide purposes, the 2015 employer pension contribution to deferred outflows.

• Contributions from Employer subsequent to the measurement period are not reflected in the NPL but rather as a debit to deferred outflows.

• It is then recognized as a reduction of NPL in the subsequent measurement period as a credit to deferred outflows and a debit to the NPL.

Debits (Credits)

(a) - (b)Balance at 6/30/2017 (800,866)$ -$ 47,321$ (27,000)$ 83,054$ -$ 272,834$ (72,418)$ Changes for the year:

Service Cost (Normal Cost) (73,034) 73,034

Interest (219,345) 219,345 Differences between expected and actual experience 37,539 (37,539)

Amortization of Experience Diffs - 3,454 (13,994) 10,540

Amortization of Assumption Changes - 20,101 (20,101)

Net investment income 196,154 (158,625) (37,529)

Amortization of investment earnings difference - 29,155 (77,174) 48,019

Contributions - Employer 79,713

Contributions - Employee 31,451 (31,451)

Benefit payments, including refunds of employee contributions -

Administrative expense (3,373) 3,373 Other changes 8 (8) Net changes 49,113 158,378 (13,994) (26,999) (20,101) - (77,174) 10,490

Balance at 6/30/2018 (751,753)$ 158,378$ 33,327$ (53,999)$ 62,953$ -$ 195,660$ (61,928)$

Deferred Outflows of Resources

Deferred Inflows of Resources

Net Pension Liability

Experience Difference Assumption Changes Investment Earnings Diffs

Allocation of Entries

Pension Expense

Deferred Outflows of Resources

Deferred Inflows of Resources

Deferred Outflows of Resources

Deferred Inflows of Resources

Example Accrual Based Entry

GASB Statement 69

GASB Statement 69

• Government Combinations and Disposals of Government Operations

– Issued December 2013– Effective for FYE 2015

GASB Statement 69

• Establishes accounting and financial reporting standards related to government combination and disposals of government operations.

• Previously no GAAP for the government environment. Governments had been using APB Opinion No. 16, Business Combinations

GASB Statement 69

• There are three types of government combinations– Government merger– Government acquisition– Transfer of operations

GASB Statement 69

• Government merger – combination of legally separate entities in which no significant consideration is exchanged.

• Government acquisition – combination of legally separate entities in which there is significant consideration exchanged.

• Transfer of operation – combination of operations without significant consideration.

GASB Statement 69

• Consideration can include:– Financial and/or nonfinancial assets

such as cash, investments, or capital assets

– The assumption of liabilities, but does not include the assumption of negative net position

– Potential transfer of cash or other assets that are contingent upon specified future events

GASB Statement 69

• Government merger – combination of legally separate entities in which no significant consideration exchanged

• Two or more are now one– Items should be recorded at carrying

value as of the merger date– No revaluations– Test for impairment– Transactions between the parties are

eliminated

GASB Statement 69

• Government acquisition - combination of legally separate entities in which there is significant consideration exchanged– Items should be recorded at market-

based entry price (acquisition value)– If consideration value is greater than

acquisition value, difference is recorded as deferred outflow (goodwill)

GASB Statement 69

• Transfer of operations – combination of operations without significant consideration– Items should be recorded at carrying

value as of the transfer date– Net position transferred is a special

item

GASB Statement 69

• Disposal– Gain or loss should be recorded as a

special line item– Gain or loss should only include costs

directly related to the disposal of operations

Exposure

Exposure Drafts

• ED-The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments

• ED-Fair Value Measurement and Application

• ED-Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans That Are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68

GAAP Hierarchy

GAAP Levels Reduced to:• Two Authoritative Categories

– GASB Statements• Periodically incorporated in the Codification• Subject to AICPA Rule 203

– Category (b) includes:• GASB Technical Bulletins• GASB Implementation Guides (Q&As)• AICPA literature if specifically cleared by the GASB

• Nonauthoritative

GAAP Hierarchy

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

• Amends Statement No. 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30 1989 FASB and AICPA Pronouncements

• Effective for periods beginning after June 15, 2015, and would be applied retroactively with earlier application permitted

Fair Value Measurement and Application

Highlights• Scope is not limited to investments

– Certain assets and liabilities measured at fair value– Includes derivatives

• Two-part Statement– Measurement– Application

• Note Disclosure requirements

Part I: Fair Value Measurement

• Definition of fair value– 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-apply to assets and liabilities

• Other characteristics of fair value measurement– Market-based– Based on a government’s principal or most

advantageous market

• No fair value option

Part I: Fair Value Measurement

• Valuation Techniques– Apply valuation techniques that best represents fair

value in the circumstances• Market approach• Cost approach• Income approach

– Revisions due to a change in valuation technique is considered a change in accounting estimate

• Fair value hierarchy-– Level 1-quoted prices in active markets for identical assets

or liabilities, most reliable– Level 2-quoted prices for similar assets or liabilities, quoted

prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are observable

– Level 3-unobservable inputs, least reliable

Part II: Fair Value Application

• Definition of an investment– A security of other asset that a government holds

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

• Investment asset– Service capacity– Held primarily for income or profit

• Examples, if the definition of investment is met– Intangible assets– Land and land rights– Real estate– Lending assets– Natural resources assets

Part II: Fair Value Application

• Additional investment-types– Investments that are already measured at fair value– Alternative investments– Equity securities– Co-mingled investment pools that are not government

sponsored

• Investments excluded from scope-not fair valued– Money market investments and participating interest-

earning investment contracts– Investments in 2a7-like pools– Investments in life insurance– Investment in common stock that meet the criteria for

applying the equity method– Non-participating interest earning investment contracts– Unallocated insurance contracts

Postemployment Benefits Other Than Pensions

Highlights• Would revise recognition, measurement,

disclosure requirements for all employers– Liability

• Measured net of OPEB plan’s fiduciary net position• Fully recognized in accrual-basis financial statements

– Changes in the liability• Some recognized as expense in the period of the change• Others recognized as deferred outflows/inflows of resources

with expense recognized over defined future periods

• Would be effective for FYs beginning after December 15, 2016

Postemployment Benefits Other Than Pensions

Scope & Applicability• Provides guidance for defined benefit and defined

contribution OPEB provided through OPEB plans administered through trusts that meet certain criteria and OPEB provided outside of such plans

• Criteria for a trust– Employer/nonemployer contributions irrevocable

– Plan assets dedicated to providing OPEB

– Plan assets legally protected from creditors

• Applies to nonemployer contributing entities that have a legal obligation to make contributions directly to an OPEB plan

Postemployment Benefits Other Than Pensions

Defined Benefit OPEB• Liabilities to the OPEB plan (payables)• Liabilities to employees for OPEB when

administered though an OPEB plan administered as a trust that meets the criteria:– Net OPEB liability– Single/agent employers recognize 100% of net OPEB

liability– Cost-sharing employers recognize proportionate

shares of collective net OPEB liability

Postemployment Benefits Other Than Pensions

Liability: Measurement-Timing• Employer fiscal year-end• Measurement date of net OPEB liability

– As of date no earlier than end of prior fiscal year– Both components (total Liability/plan net position) as

of the same date

• Actuarial valuation date of total OPEB liability– If not measurement date, as of date no more than 30

months prior to FYE– Actuarial valuations as least every 2 years

• Coordination with OPEB plan

Other Projects

Leases• Objective-reexamine issues associated with lease

accounting (Statement 62)• Preliminary Views Comment Period-Estimated

Completion March 2015

Fiduciary Responsibilities• Objective-develop guidance regarding the application of

fiduciary responsibility criteria in deciding whether and how governments should report fiduciary activities in GPEFRs

• Preliminary Views Comment Period-Estimated Completion March 2015

QUESTIONS

Contact us at:HENRY & HORNE, LLP

(480) 839-4900 Ext: 304, 305 or 315

Thank you!