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GASB Update—The Past, Present,and FutureThe views expressed in this presentation are those of the GASB Chairman, Vice Chairman,
and Director. Official positions of the GASB on accounting matters are determined only after
extensive due process and deliberation.
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The PastThe Creation of the GASB
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The Antonio YearsStatements 1-28
The First Board
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A strong and independent GASB- Rule 203- Five-year review
Conceptual framework- Objectives of financial reporting- Service efforts and accomplishments
Financial reporting entity Pension standards Developing the basic underpinnings of the new model
The Top Five Accomplishments
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Five-year review- Survival of the GASB- Birmingham, Raleigh, or Norwalk
Moving past Statement 11Second Board
Biggest Challenges
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The Allen Years
Statements 29-45
Financial reporting model- Statement 34
Other Postemployment Benefits (OPEB) standards Staking out the governmental model
- Nonexchange transactions- Capital asset impairment- Interpretation 6—Modified accrual
Fair value reporting for investments Moving the Board from five to seven members
- Member with NASC background- Member with financial statement user background
Top Five Accomplishments
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Financial reporting model Service efforts and accomplishments
Biggest Challenges
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The Attmore Years
Statements 46-71
New pension standards Conceptual framework
- Communication methods- Elements- Measurement
Derivatives reporting Deferred inflows and deferred outflows Suggested guidelines
Top Five Accomplishments
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Call for the GASB’s demise Financial projections—scope of authority
Biggest Challenges
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The Vaudt YearsStatements 72-???
Current Board Members
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Seventy-seven Statements- Fifty-six Statements still are effective or will be effective
Thirty-four Statements considered broad (for example, Statements 14, 34, 68, 75) Twenty-two Statement considered narrow (for example, Statements 13, 41, 58, 69)
GASB-31 Years of Excellence in Standards Setting
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Statement 72
Fair Value Measurement
And Application
What: new standards for mergers, acquisitions, and transfers and disposals of operations
Why: becoming more common, but no government-specific guidance
When: fiscal years ending December 31, 2014 and later
What: Statement establishes how fair value should be measured and applied to elements of financial statements – and what should be disclosed
Why: The GASB receives a large volume of questions about fair value; the standards have not been broadly addressed previously
When: Statement 72 issued February 2015; effective for reporting periods beginning after June 15, 2015
Fair Value
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.
An exit price
Other characteristics of fair value measurement Market-based Based on a government’s principal or most advantageous
market
Fair Value – MEASUREMENT
Definition of an investment A security or 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
Assets and liabilities that meet the definition of an investment generally should be measured at fair value
Fair Value – APPLICATION
Statement 74Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
Statement 75Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
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Other postemployment benefits – all postemployment benefits promised to employees other than pensions
Principally, retiree health insurance – but also life insurance, disability, legal services, and other benefits
Includes: Payments made to insurance
companies on behalf of retirees, Payments directly to retirees, and Subsidizing retiree premiums by
allowing them to be insured in the same group as active employees
What is OPEB?
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OPEB Reporting—Key Provisions
Mirrors pension standards Measurement may increase size of
long-term obligation and annual cost for OPEB
Recognize the net liability on the face of the financial statements
Present more extensive note disclosures and supporting schedules
OPEB Reporting—Key Provisions
Objective: to establish a consistent set of standards for all postemployment benefits—more transparent reporting of the liability and more useful information about the liability and costs of benefits
Implementation dates: periods beginning after June 15, 2016 (plans) and June 15, 2017 (employers)
Other Highlights
Identical in most respects to pension standards in Statements 67 and 68
Recognize net OPEB liability in accrual-basis financial statements
Recognize many portions of change in net OPEB liability as OPEB expense immediately; others deferred and recognized as OPEB expense over shorter periods than previously
Cost-sharing governments and nonemployer contributing entities report proportionate shares of collective net OPEB liability, OPEB expense, and OPEB-related deferrals
Enhanced notes and RSI
OPEB Standards Mirror Pension Standards
Once you know how to implement the pension standards, you will know how to implement the OPEB standards
OPEB has 2 key assumptions subject to sensitivity analyses:
Discount rate +1% and discount rate –1% Healthcare cost trend rate +1% and healthcare cost trend rate –1%
Statement 76The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments
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The GAAP Hierarchy
What: Statement 76 establishes a revised hierarchy of generally accepted accounting principles and exposed the entire Comprehensive Implementation Guide for public comment
Why: The GAAP hierarchy was incorporated (by Statement 55) from the auditing literature essentially “as is”—this project simplifies the hierarchy and explains how to identify the relevant literature within the hierarchy
When: Effective for periods beginning after June 15, 2015
GAAP Hierarchy—Key Provisions
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
Tax Abatement Disclosures: Statement 77
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Tax Abatement Disclosures
What: The Board issued Statement 77, which requires disclosures about a government’s tax abatement agreements
Why: Information about revenues that governments forgo is essential to understanding financial position and economic condition, interperiod equity, sources and uses of financial resources, and compliance with finance related legal or contractual requirements
When: Effective for periods beginning after December 15, 2015
Does not include all transactions that reduce tax revenues Emphasis is on the substance of the arrangement meeting
the definition, not on its name or form Would apply only to arrangements meeting this definition:
- A reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which (a) one or more governments promise to forgo tax revenues to which they are otherwise entitled and (b) the individual or entity promises to take a specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments.
Definition and Scope
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A government would disclose separately (a) its own tax abatements and (b) tax abatements that are entered into by other governments and reduce the reporting government’s taxes
Disclose own tax abatements by major program Disclose those of other governments by the government
and specific tax abated May disclose individual tax abatements above quantitative
threshold established by the government Disclosure would commence in the period in which a tax
abatement agreement is entered into and continue until the tax abatement agreement expires, unless otherwise specified
General Disclosure Principles
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Current Technical Agenda Projects
RedeliberationPV – Leases
PV – Fiduciary Responsibilities
Due Process Stage ED – External
Investment Pools
ED – Irrevocable Spilt-Interest Agreements
ED – Blending Requirements
Earlier Stages Asset
Retirement Obligations
Pension Issues
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GASB Chairman
What is the GASB doing beyond the technical agenda and here is what I see looking into the crystal ball …
Enhancing Communications
GASB Outlook A new form of communication directed at the “C” suite Detailed communications are still available for the techies
Webcasts focused on due process documents Fair value Other postemployment benefits Leases Many more to come
Enhancing Communications
Updated website Timely information on projects Technical inquiry portal Implementation tools
Postretirement Implementation Tools Fact sheets Plain-language articles Podcasts and video discussions of specific provisions Statements Pension Implementation Guide
More to come
Beyond the Agenda: Continuing Priorities
Engaging with GASB stakeholders Encouraging broad participation in our process Conducting regular listening tours
Beyond the Agenda: Improving Relationships
External Meetings with organization execs & congressional leaders in 2013-
2014 and 2014-15o Strengthening already strong relations (NASBA, AICPA, NASACT)o Reintroducing GASB to some (National Governors Association, National
Conference of State Legislatures, Council of State Governments)o Establishing relations with others (National School Boards Association)
Great standards are built with good, open communication and trust
Internal Breaking down silos to increase efficiencyo Boards can leverage off each other
Still need to always recognize why the GASB existso Board and staff expertise in the public sector – a unique environment
Beyond the Agenda: Stakeholder Collaboration
Pension Communications Resource Group Statements 67 & 68o Significant impact on the information available about pension promiseso Learning curve to understand
Stakeholder collaborative efforto Facilitated by GASBo Identify materials already produced and build upon those resourceso Equip state & local governments with a roadmap and resources to
address questions
Pre-Agenda Research Activities
Financial Reporting Model Reexamination Debt Extinguishments Debt Disclosures, including Direct Borrowing Going Concern
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Financial Reporting Model Reexamination
What: In August 2013, the Board decided to begin pre-agenda research examining the effectiveness of the financial reporting model
Why: The GASB is committed to ensuring standards remain effective; most of the requirements of Statement 34 became effective between 2002 and 2004
When: The research was completed0 in July – Board to consider adding project to current agenda in September 2015
Financial Reporting Model Reexamination
Added to the agenda in August 2013 Top priority of GASAC Staff research and roundtables with preparers, auditors and
users conducted in 2013 Separate preparer, auditor, and user surveys conducted in
2014 Interviews with preparers, auditors, and users conducted in
2015 Research complete – preparing papers for Board review
Final Thought
The only ideas that are off of the table are the ones you don’t share with us. So, make sure your ideas are on the table.
We’d love to hear from you!
Questions?
Web site—www.gasb.org
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