GASB UPDATE

Presented by: Brian A. Ritschel, CPAManager

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GASB Current Developments

TOPICS GASB New Pronouncements

Statement No. 41, Budgetary Comparison Schedules- Perspective Differences (amendment of GASB No. 34)

Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries

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TOPICS GASB New Pronouncements

Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans

Statement No. 44, Economic Condition Reporting: The Statistical Section (an amendment of NCGA Statement 1)

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TOPICS

Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions

Statement No. 46, Net Assets Restricted by Enabling Legislation (an amendment of GASB No. 34)

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GASB STATEMENT NO. 42

ACCOUNTING AND FINANCIAL REPORTING FOR IMPAIRMENT OF CAPITAL ASSETS

AND FOR INSURANCE RECOVERIES

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EFFECTIVE DATE:Periods beginning after December 15, 2004(Fiscal Year Ending June 30, 2006)Earlier application is encouraged

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Asset impairment is a significant, unexpected decline in the service utility of a capital asset

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Identifying Impairments Events or changes in circumstance that indicate

impairment should be prominent Generally expected to have prompted

discussion by governing board, management, or media

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Common Indicators of Impairment Evidence of physical damage Enact or approval of laws or regulations or

other Environmental factors Technological development or evidence of

obsolescence

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A Change in the manner or expected duration of use of an asset

Construction stoppage

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Impairment Test The magnitude of the decline in service utility

is significant The decline in service utility is unexpected

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Measurement of Impairment Assets that are continuing to be used by the

government: Restoration cost approach for assets with physical

damage Service units approach for legal/environmental

changes, technological obsolescence, and some changes in duration or manner of use

Deflated depreciation replacement cost for some assets with a change in duration or manner of use

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Assets that are not being used and construction stoppage: Lower of carrying value or fair value

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Reporting Impairment Losses As program or operating expense, special item,

or extraordinary item per Statement 34 Disclose general description, amount, and

financial statement classification, if not evident from financial statements

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Temporary Impairments Impairments are assumed to be permanent,

unless Evidence is available to demonstrate impairment is

temporary Temporary impairments should not be recorded

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Insurance Recoveries Net impairment loss with insurance recovery Replacement/restoration of asset is a

separate transaction

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Applies to all insurance recoveries, not only those related to impairment Governmental funds would not report an impairment loss. Insurance recovery would be Other Financing Source. Replacement would be expenditure

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GASB STATEMENT NO. 43

Financial Reporting for Postemployment Benefit Plans

Other Than Pension Plans

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Phases

AnnualRevenues

Periods Beginning

After

June 30FiscalYear

I $ 100 M 12/15/05 2007

II $ 10-100 M 12/15/06 2008

III Under $ 10 M 12/15/07 2009

EFFECTIVE DATE:Earlier application is encouraged

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Uniform Standards of Financial Reporting for Other Postemployment Benefit Plans (OPEB Plans)

Postemployment Benefits “Other Than Pension Benefits” includes (a) Postemployment Healthcare Benefits and (b) Other Types

Objectives

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Approach Follows GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans

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SCOPE

Agreement between Employers and Plan Members and their Beneficiaries in which: Employer contributions to the Plan are

irrevocable Plan Assets are dedicated to providing benefits

to their retirees and their beneficiaries in accordance with the terms of the Plan

Plan Assets are legally protected from creditors of the employer(s) or the Plan administrator

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Statement Provides: Financial reporting of Plan Assets, Liabilities

and Net Assets Disclosure of Actuarial Information about the

funded status and funding progress of the Plan and contributions made to the Plan in comparison to Annual Required Contributions (ARC)

This Statement includes Defined Benefit OPEB Plans and Defined Contribution Plans

Single-Employer, Agent Multiple-Employer or Cost-Sharing Multiple-Employer Plans

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Financial Reporting Framework

The Financial Statements and Required Schedules are: Statement of Plan Net Assets Statement of Changes in Plan Net Assets Schedule of Funding Progress - - Actuarially

determined Funded Status

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Schedule of Employer Contributions - - Contributions made by Employers in relation to the ARC

Notes to the Financial Statements Required Supplementary Information

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Actuarial Valuation

An Actuarial Valuation should be performed at the following minimum frequency: Plans with total membership of 200 or more - -

at least biennially Plans with total membership of fewer than 200

- - at least triennially

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Alternative Measurement Method for Plans with fewer than 100 Members Disclosure in Notes to Financial Statements the

use of this method and all significant assumptions as listed in this Statement

Statement includes calculation methods and default values for use with the Alternative Measurement Method

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GASB STATEMENT NO. 44

Economic Condition Reporting: The Statistical Section

(an amendment of NCGA Statement 1)

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EFFECTIVE DATE:Periods beginning after June 15, 2005(June 30 Fiscal year in 2006)Earlier application is encouraged

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Objectives Amends NCGA Statement 1, Governmental

Accounting and Financial Reporting Principles, regarding the Statistical Section

The Statistical Section presents detailed information, generally in 10-Year trends, to aid users to better understand the Basic Financial Statements and Related Disclosures

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The Statistical Section is a required part of Comprehensive Annual Financial Report (CAFR)

NCGA Statement 1 presented fifteen tables or schedules

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The Statement presents five categories of information as follows: Financial Trends Information

Net Assets Change in Net Assets Governmental Funds

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Revenue Capacity Information Revenue Base Revenue Rates Revenue Payers Property Tax Levies and Collections

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Debt Capacity Information Ratios of Outstanding Debt Ratios of General Bonded Debt Direct and Overlapping Debt Debt Limitation Pledged-Revenue Coverage

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Demographic and Economic Information Demographic and Economic Indicators Principal Employers

Operating Information Government Employees Operating Indicators Capital Assets Pension and OPEB Plans

Narrative Explanations

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GASB STATEMENT NO. 45

Accounting and Financial Reporting by Employers for Postemployment

Benefits Other Than Pensions

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Phases

AnnualRevenues

Periods Beginning

After

June 30FiscalYear

I $ 100 M 12/15/06 2008

II $ 10-100 M 12/15/07 2009

III Under $ 10 M 12/15/08 2010

Note: All component units to implement same year as the primary government

EFFECTIVE DATE:Earlier application is encouraged

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Objectives

Financial Accounting and Reporting for Other Postemployment Benefits (OPEB)

The Approach is consistent with GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers

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Measurement

Single-Employer or Agent Multiple-Employer defined benefit OPEB Plans required to measure and disclose annual OPEB Cost On Accrual Basis of Accounting

Annual OPEB cost would equal employer’s Annual Required Contribution (ARC) with adjustments for Net OPEB obligation, if any

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ARC includes: Normal cost for the year, and Amortization of unfunded actuarial accrued

liabilities (or funding excess) not to exceed thirty years

Actuarial Valuation: Frequency and timing Methods Assumptions

Alternative Measurement Method

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Net OPEB Obligations

Cumulative difference between annual OPEB Cost and Employer’s Contributions to the Plan (including OPEB liability or Asset at Transition)

Employer’s are required to measure Net OPEB Obligation equal to: ARC, Year’s interest on Net OPEB Obligation, and Adjustment to ARC to offset the effect of

actuarial amortization of past under-or over contributions

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Financial Statement Recognition and Disclosure

Employer to recognize OPEB Expenses in Government-Wide, Proprietary and Fiduciary Fund Financial Statements

Net OPEB Obligations are to be displayed as liabilities (or assets) in Government-Wide, Proprietary and Fiduciary Fund Financial Statements

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Disclosures are required: Descriptive information about each Plan,

including funding policy, Contributions made in comparison to annual

OPEB Cost, Change in Net OPEB Obligation, Funded status as of most recent actuarial

valuation date, and Nature of actuarial valuation process and

significant methods and assumptions used

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Required Supplementary Information (RSI) Schedule of funding progress for most recent

actuarial valuation and two preceding valuations, together with notes regarding significant trends affecting the amounts presented

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GASB STATEMENT NO. 46

NET ASSETS RESTRICTED BY ENABLING LEGISLATION

(an amendment of GASB No. 34)

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EFFECTIVE DATE:Periods beginning after June 15, 2005.

(Fiscal Year Ending June 30, 2006) Earlier application is encouraged.

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INTRODUCTION Enhance the usefulness and comparability

of net asset information. Clarify the meaning of Legally

Enforceability. Specify the accounting and financial

reporting requirements.

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SCOPE AND APPLICABILITY

Establishes and modifies requirements related to restrictions of net assets resulting from enabling legislation.

Amends GASB No. 34. Discuss examples of Programs restricted

by enabling legislation.

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DETERMINING LEGAL ENFORCEABILITY

A Government can be compelled by an external party to use resources created by enabling legislation only for the purposes specified by the legislation.

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External Party include citizens, public interest groups or the judiciary.

“Generally, the enforceability of an enabling legislation restriction is determined by professional judgment.”

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CHANGES IN CIRCUMSTANCES

New enabling legislation that replaces the original enabling legislation by establishing new restrictions.

Resources used for a purpose other than those stipulated in the enabling legislation, reevaluate the legal enforceability of the restrictions.

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DISCLOSURE REQUIREMENT

Disclose the amount of net assets at end of reporting period that are restricted by enabling legislation in the notes to the financial statements.

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