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