Weaver Firm PPT Template - Basic White 020414 Update 072616.pdf · Update on GASB 68 Re-Visited: Year Two ... Implementation Issues (leading to GASB Statement No 82): ... of covered

GASB Update July 26, 2016

Introduction

Shelby Lackey, CPA

Senior Manager| Weaver

16+ years of experience

Practice emphasis on audits for government and

nonprofit entities

Member, AICPA, TSCPA, GFOA, TASBO and ASBO

Extensive experience with federal single audits and

state single audits

2

Introduction

Greg Peterson, CPA

Senior Manager| Weaver

10+ years of experience

Practice emphasis on audits for government and

commercial entities

Member, AICPA, TSCPA, GFOA, TASBO and ASBO

Extensive experience with federal single audits and

state single audits

3

GASB Implementation Timeline

FY15 FY16 FY17 FY18

68, 71 72 73,74,77

78,79, 80,82

75,81

4

Update on GASB 68 Re-Visited: Year Two

GASB Statement 72 – Fair Value Fair Value Measurement & Application

GASB to Implement in 2017 Standards to be Implemented in 2017

GASB to implement in 2018 Standards to be Implemented in 2018 and beyond…

Overview

5

Update on GASB 68

Revisited (Year 2)

6

Update on GASB 68

We implemented GASB 68 last year

What did we learn?

What do we do now?

7

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjAtKH-wOTNAhXm7oMKHRgADCMQjRwIBw&url=https://memegenerator.net/instance/67011003&psig=AFQjCNG3t4uoPcdldbViDAODnzcW8wOUIw&ust=1468089191730345

Implementation Issues (leading to GASB Statement No 82):

Covered-employee Payroll vs. Covered Payroll

Assumptions

Employer-Paid Member Contributions

Update on GASB 68

8

TRS Schedules will be released in early August

Changes:

Separate Schedule - pension expense calculation

Deferred inflows / outflows of resources – multi layer

Change in proportionate share

Cost-Sharing Plans (TRS)

Update on GASB 68

9

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiMha_m7-TNAhVE9IMKHQtPBTgQjRwIBw&url=http://www.doctorsintraining.com/blog/changes-to-the-usmle-for-2014-and-2015/&bvm=bv.126130881,d.amc&psig=AFQjCNHRhpGV2hAmfEjrxtLYdPqynmXfMg&ust=1468101782271867

Deferred Schedules Deferred Outflows - Difference Between Projected and Actual Earnings

MY 2014 MY 2015 MY2016 MY 2017 Total Ouflows Total Inflows

$ 600 $ 400 $ (300) $ 100

Fiscal Year

2015 120 $ 120 $ -

2016 120 80 200 -

2017 120 80 (60) 200 (60)

2018 120 80 (60) 20 220 (60)

2019 120 80 (60) 20 220 (60)

2020 80 (60) 20 100 (60)

2021 (60) 20 20 (60)

2022 20 20 -

MY = Measurement Year

Update on GASB 68

10

Change in Proportionate Share - TRS

May occur this year

Would recognize net effect of change in District’s proportion on

beginning reported balances (paragraph 58 of GASB 68)

Net effect is recognized in pension expense, amortized over the

expected remaining service lives of all employees

Offset is to deferred inflows / outflows of resources

Update on GASB 68

11

Change in Proportionate Share - TRS

Collective Prior Year Current Year

Amount Prop. Share Prop. Share

8/31/2014 0.19% 0.20% Dr. Cr.

Deferred Outflows 1,373,691 2,610 2,747 137

Deferred Inflows (1,538,565) (2,923) (3,077) 154

Net Pension Liability (6,178,023) (11,738) (12,356) 618

137 {a} 772 {b}

Net change = 635 {b-a}

Remaining service life = 9 {c}

Record as Deferred Outflow 71

Recognize as Pension Expense 564

Change in Proportionate Share

Example:

Update on GASB 68

12

What to remember:

Download TRS Schedules early

Create deferral schedules

Prepare /record entries

Make sure you have everything you need for the footnotes

RSI Schedules: Schedule of Proportionate Share of NPL (MY)

Schedule of Contributions (FY)

Update on GASB 68

13

Footnote Disclosures – include:

Contributions / rate

Actuarial assumptions

Discount rate / sensitivity analysis

Target asset allocation

Proportion (%) and change in proportion

Pension expense

State on-behalf payment

Deferred inflows / outflows and amortization schedule

Update on GASB 68

14

Required Supplementary Information

1) Schedule of District’s Proportionate Share of the NPL

2) Schedule of District’s Contributions

Note: Both RSI schedules present covered payroll and

contributions, but they are not the same numbers….why?

Remember: building towards 10-year schedules

Update on GASB 68

15

RSI Schedule of District’s Proportionate Share of the NPL

10-year schedule (eventually) presenting:

Employer’s % of the collective NPL

Employer’s proportionate share of NPL

Employer’s covered payroll

Employer’s NPL as a % of covered payroll

The Plan’s FNP as a % of TPL

The portion of the non-employer’s proportionate share of the collective NPL that is associated with the employer

Schedule of District’s Contributions

10-year schedule of statutory/contractual amounts compared to

actual contributions (info for all 10 years is available)

Update on GASB 68

16

RSI

Example

ISDs

SCHEDULE OF SAMPLE ISD'S PROPORTIONATE SHARE OF NET PENSION LIABILITY

TEACHERS RETIREMENT SYSTEM

Last Ten Fiscal Years

(Dollar amounts in thousands)

2016 2015

District's Proportion of the

Net Pension Liability (asset) 0.020% 0.019%

District's Proportionate Share of

Net Pension Liability (asset) 1,491$ 1,174$

State's proportionate share of Net

Pension Liability associated with

the Sample ISD 13,419 10,564

Total 14,910$ 11,738$

District's Covered Payroll 11,512 10,412

District's proportionate share of net

pension liability (asset) as a percentage

of its covered payroll 12.95% 11.28%

Plan fiduciary net position as a

percentage of total pension liability 81.38% 83.20%

Update on GASB 68

17

Update on GASB 68

RSI

Example

ISDs

SCHEDULE OF SAMPLE ISD'S CONTRIBUTIONS

TEACHERS RETIREMENT SYSTEM



2016 2015

Statutorially required Contributions 210$ 206$

Actual contributions in relation to

statutorially required contributions (210) (206)

Contribution deficiency (excess) -$ -$

District's Covered Payroll 11,780 10,658

Contributions as a percentage

of District's covered payroll 1.78% 1.93%

18

Implementing GASB 68 - TMRS Eye on GASB

http://www.tmrs.org/GASB_Resources.php

GASB Employer Reporting Guide

Describes Employer Reporting Package

Provides guidance / instruction

Pension Disclosure Requirements Table

Sample Pension Note Disclosure

Update on GASB 68

19



Implementing GASB 68 - TMRS Employer Reporting Package:

Actuarial certification letter

Executive Summary

Info / data for disclosures

Financial Schedules

Actuarial assumptions and plan provisions

Deferred inflows / outflows of resources – amortization schedules

City Portal: SOC 1 Type 2 Report

Census data

Controls over contributions and distributions made by cities

On IT-related controls

Census data file (excel)

Qualifications of Actuary

Update on GASB 68

20

TMRS – Financial Statement

Presentation Financial Statements - Cities’ presentation similar to that of ISDs

Required Supplementary Information (RSI) -

1.Schedule of City’s Net Pension Liability and Related Ratios 10-year schedule (eventually) – present two years

Rolls forward the total pension liability, showing components

Rolls forward fiduciary net position, showing components

Fiduciary net position as a % of total pension liability

Covered payroll / NPL as a % of covered payroll

2.Schedule of City’s Contributions

Update on GASB 68

21

TMRS – City RSI SCHEDULE OF SAMPLE CITY's NET PENSION LIABILITY AND RELATED RATIOS

Texas Municipal Retirement Plan



2016 2015

Total Pension Liability:

Service cost 73,034$ 71,505$

Interest 219,345 207,809

Change in benefit terms - -

Difference between expected and

actual experience (37,539) (15,211) Change in assumptions - -

Benefit payments (119,434) (112,603)

Net change in total pension liability 135,406 151,500

Total Pension Liability-beginning 2,853,455 2,701,955

Total Pension Liability-ending 2,988,861 2,853,455

Plan Fiduciary Net PositionContributions - employer 79,713 86,607

Contributions - nonemployer 31,451 30,550

Net investment income 196,154 (44,099)

Benefit payments (119,434) (112,603) Administrative income (3,373) (3,287)

Other 8 (83)

Net change in plan fiduciary net position 184,519 (42,915)

Plan fiduciary net position -beg 2,052,589 2,095,504

Plan fiduciary net position -beg 2,237,108 2,052,589

City's net pension liability -ending 751,753 800,866

Plan fiduciary net position as a %

of total pension liability 74.85% 71.93%

Covered payroll 449,293$ 436,424$

City's net pension liability as a %

of covered payroll 167.32% 183.51%

Update on GASB 68

22

GASB Statement 72 – Fair Value

Fair Value Measurement & Application

23

Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later

• Defines “fair value” and “investment”

• Requires investments to be measured at fair value, with

certain exceptions

• Addresses acceptable valuation techniques

• Establishes a fair value hierarchy that categorizes the inputs to valuation techniques used to measure fair value into three

levels (level 1, 2, and 3)

• Expands disclosure requirements related to fair value

measurements and the impact of fair value measurements on

a government’s financial position

• Similar to FASB Accounting Standards Codification Topic 820,

Fair Value Measurement

24

“Fair value is 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.”

– “Fair value” is a market based exit-price measurement. – Amount received to sell an asset or paid to transfer a

liability

“An investment is a security or other asset that (a) a government holds primarily for the purpose of income or profit

and (b) has a present service capacity based solely on its

ability to generate cash or to be sold to generate cash.”

– The “investment” designation is made at acquisition and

remains for the life of the asset, even if usage changes

over time.

25


Market – government’s principal market or most advantageous

– Market with the greatest volume and level of activity

– Market that maximizes the amount that would be received to

sell an asset or minimizes the amount that would be paid to

transfer a liability, after taking into account transaction costs

and transportation costs.

Market participants – Buyers and sellers that are in the principal (or

most advantageous) market for an asset or liability and are

independent, knowledgeable, able and willing to enter into a

transaction for asset or liability

Transaction costs – should not be adjusted

Orderly transaction – Assumes exposure to the market for a period

before the measurement date to allow for marketing activities that

are usual and customary for transactions involving such assets or

liabilities, not a forced transaction

Measurement date – date at which fair value of asset or liability is

determined 26



• Valuation techniques:

– Market approach – prices and other relevant information

generated by market transactions

– Cost approach – replace the current service capacity

– Income approach – converts future amounts to a single current amount

27


Fair Value Hierarchy

– Level 1 – quoted market prices for identical assets or

liabilities in active markets

– Level 2 – inputs other than quoted market prices included

in Level 1 that are observable for an asset or liability, either

directly or indirectly

– Level 3 – unobservable inputs for asset or liability

28


Exceptions to fair value measurement:

29

Investments in nonparticipating interest-earning investment contracts Measure using a cost-based measure - GASB 31

Unallocated insurance contracts Report as interest-earning investment contracts – GASB 31/59

Money market investments and participating interest-earning investment contracts that have a remaining maturity at the time of purchase of one year or less and are held by governments other than external investment pools

Measure at amortized cost – GASB 31

Investments held by 2a7-like external investment pools May measure at amortized cost – GASB 31

Synthetic guaranteed investment contracts that are fully benefit-responsive

Measure at contract value - GASB 53

Investments in 2a7-like external investment pools Measure at the net asset value (NAV) per share (or its equivalent) determined by the pool – GASB 59

Investments in life insurance contracts Measure at cash surrender value

Investments in common stock meeting the criteria for the equity method

Apply equity method – GASB 62

Donated capital assets, donated works of art, historical treasures, and similar assets, as well as capital assets that a government receives in a service concession arrangement

Measure at acquisition value – GASB 72


Disclosures should be organized by asset/liability and the

following should be considered for determining level of

detail and disaggregation:

• Nature, characteristic, and risk

• Level of the fair value hierarchy

• This Statement or another Statement specifies a type for

asset/liability

• Objective/mission of government

• Characteristics of government

• Relative significance of assets/liabilities

• Whether separately issued financial statements are available

• Line items presented in statement of net position

30


Disclosures for fair value measurements:

– For recurring and nonrecurring

• Fair value measurement at end of reporting period

• Except for investments that are measured at the NAV per

share (or its equivalent), the level of the fair value hierarchy

within which the fair value measurements are categorized

in their entirety

• Description of valuation techniques

• Change in valuation technique that has a significant

impact on results

31


Disclosures for investments in entities that calculate the net

asset value per share:

– The fair value measurement of the investment type at the

measurement date and a description of the significant

investment

– Estimate of the period over which the underlying assets are

expected to be liquidated by the investees

– Unfunded commitments related to that investment type

– Description of the terms and conditions upon which a

government may redeem investments in the type

– Circumstances in which an otherwise redeemable investment in

the type might not be redeemable (lockup or gate)

32


Disclosures for investments in entities that calculate the net

asset value per share – Cont’d: – Investments that are restricted from redemption as of the government’s

measurement date: the estimate of when the restriction from redemption

might lapse; if an estimate cannot be made, disclose that fact and how

long the restriction has been in effect

– Significant restriction on the ability to sell investments

– If a government determines that it is probable that it will sell an

investment(s) for an amount different from the NAV per share (or its

equivalent): the total fair value of all investments and any remaining

actions required to complete the sale

– Group of investments would otherwise meet the criteria in paragraph 74

but the individual investments to be sold have not been identified

33

GASB to Implement 2017

Standards to be Implemented in 2017

34

No. Title Effective Date - FYE

73 Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68

June 16, 2016/2017

74 Financial Reporting for Postemployment Benefit Plans Other than Pension Plans

June 16, 2017

77 Tax Abatement Disclosures December 16, 2016

78 Pensions Provided Through Certain Multiple-Employer Defined Benefit Pension Plans

December 16, 2016

79 External Investment Pools June/December 16, 2016

80 Blending Requirements for Certain Component Units – an amendment of GASB 14

June 16, 2017

82 Pension Issues – an amendment of GASB 67, 68 and 73 June 16, 2017/June 16, 2018

35

GASB Statements

Statement No. 73

Accounting and Financial Reporting for Pensions

and Related Assets that are not within the Scope of

GASB Statement 68, and Amendments to Certain

Provisions of GASB Statements 67 and 68

36

Statement No. 73 – Pensions Effective FYE June 16, 2016/2017 and later

• Establishes requirements for pensions that are not within the scope of GASB 68, as well as for the assets accumulated for

purposes of providing those pensions.

– Requirements for pensions – effective for fiscal years ending 6/16/17 or later

– Requirements for related assets – effective for fiscal years

ending 6/16/16 or later

• Also amends certain provisions of GASB 67 and 68 for pension

plans and pensions that are within their respective scopes.

– Amendments effective for fiscal years ending 6/16/16 or later

37

Statement No. 73 – Pensions Effective FYE June 16, 2016/2017 and later

For pensions not within the scope of GASB 68:

• Requirements of GASB 73 are similar to those of GASB 68

For pensions within the scope of GASB 68 and pension plans within the

scope of GASB 67:

• GASB 73 amends requirements related to the following:

1. Information that is required to be presented as notes to the 10-year

schedules of required supplementary information about investment-

related factors that significantly affect trends in the amounts reported

2. Accounting and financial reporting for separately financed specific

liabilities of individual employers and nonemployer contributing entities for

defined benefit pensions

3. Timing of employer recognition of revenue for the support of nonemployer

contributing entities not in a special funding situation

38

Statement No. 74

Financial Reporting for Postemployment Benefit

Plans Other than Pension Plans

39

Requirements are similar to GASB 67 (for pension

plans)

• Effective for plans for fiscal years ending June 16, 2017 or

later

Scope includes OPEB plans – Defined Benefit and Defined

Contribution administered through trusts that meet the

following criteria

– Contributions to plan and earnings are irrevocable

– OPEB plan assets are dedicated to providing benefits to

plan members

– OPEB plan assets are protected from creditors of employers

40

Statement No. 74– OPEB Effective FYE June 16, 2017/2018 and later

Required Statements for OPEB Plans

– Statement of Fiduciary Net Position

– Statement of Changes in Fiduciary Net Position

Required Disclosures

– OPEB provided, classes of plan members covered,

composition of plan’s board

– OPEB’s plan investment policies, concentration of

investments, investments exceeding 5% of net position, annual money weighted rate of return

Additional disclosures for single employer and cost

sharing OPEB plan

– Components of OPEB liability and related ratios including

net position as a percent of OPEB liability

41


Required Supplementary Information – All plans

– Money weighted rate of return on OPEB investments

Required Supplementary Information – Single

Employer and Cost Sharing Plans

– Sources of changes in net OPEB liability

– OPEB net position as a percentage of OPEB liability

– Net OPEB liability as a percentage of covered payroll

42


Measurement of Net OPEB Liability

– Total OPEB liability less OPEB plan fiduciary net position

– OPEB liability determined actuarially or alternative

measurement method if fewer than 100 plan members,

active or inactive

– Plan assets that are not administrated through trusts are

accounted for as assets of the employer in an agency

fund

43


Statement No. 77

Tax Abatement Disclosures

44

Statement No. 77 – Tax Abatements Effective FYE December 16, 2016 and later

Requires governments to disclose information about tax abatement programs from both the reporting government and

other governments that reduce the reporting government’s tax

revenues.

• A tax abatement is defined as 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.

45


General Disclosure Principles

• Should distinguish between tax abatements resulting from

agreements that are entered into by the reporting

government and agreements that are entered into by other

governments

• May be provided individually or aggregated

• Organized by each major tax abatement program,

• Organized by the government that entered into the tax

abatement agreement

46


The new disclosures about a government’s own tax

abatement agreements include:

– The purpose of the tax abatement program

– The tax being abated

– The authority under which tax abatements are entered into

– The mechanism by which taxes are abated

– Provisions for recapturing abated taxes

– The types of commitments made by tax abatement recipients

– Dollar amount of taxes abated

– Other commitments made by a government in tax

abatement agreements, such as to build infrastructure

assets

47


The new disclosures about tax abatements that are

entered into by other governments and reduce the

reporting government’s tax revenues include:

– The name of the government entering into the abatement

agreement

– The tax being abated (received and receivable by

government entity)

– Dollar amount of the reporting government’s taxes

abated.

Governments that are legally prohibited from disclosing specific

information should disclose the general nature of the tax

abatement information omitted and the specific source of the legal prohibition.

48

Statement No. 78

Pensions Provided Through Certain Multiple-

Employer Defined Benefit Pension Plans

49

Statement No. 78 – Pensions Effective FYE December 16, 2016 and later

• Amends the scope and applicability of GASB 68 to exclude certain private or

federally sponsored cost-sharing multiple-employer defined benefit pension

plans, and establishes requirements for recognition and measurement of

pension expense, expenditures, and liabilities; note disclosures; and required

supplementary information for such pensions

• Results from the inability to obtain measurements and other relevant data

points needed to comply with GASB 68

• Focuses employer accounting and financial reporting requirements for those

pension plans on obtainable information

50

Statement No. 78 – Pensions Effective FYE December 16, 2016 and later

Recognition and Measurement in Financial Statements

• Economic Resources Measurement Focus

– Pension expense for required contributions

– Payable for unpaid required contributions

• Current Financial Resources Measurement Focus

– Pension expenditures should equal required contributions

associated with pay periods during reporting period

• Notes to Financial Statements

– Name of plan and who administers

– Whether plan issues publicly available report and how to obtain

– Description of benefit terms

– Description of contribution requirements

• Required Supplementary Information

– Required contributions for last 10 years

51

Statement No. 79

External Investment Pools

52

Statement No. 79 – Investment Pools Effective FYE June/December 16, 2016 and later

Existing standards provide that external investment pools may measure their investments at amortized cost for financial

reporting purposes if they follow substantially all of the provisions

of the SEC’s Rule 2a7. Likewise, participants in those pools are

able to report their investments in the pool at amortized cost per share.

• The SEC’s Rule 2a7 regulations were changed in 2014

(effective April 2016)

• Would cause many governments and investments to no longer qualify to measure their investments at amortized cost

GASB 79 replaces the reference in existing GASB literature to Rule

2a7 with criteria that are similar in many respects to those in Rule 2a7 to allow many pools to continue to qualify for amortized cost

accounting.

53


Criteria to elect to measure investments at amortized cost

– Transacts with participants at stable net asset value per share @

$1/share

– Meets portfolio maturity requirements (generally weighted

average maturity of 60 days or less, weighted average life of 120

days or less)

– Meets portfolio quality requirements (rated by NRSRO,

denominated in U.S. dollars with highest rating of short-term

category or long-term equivalent)

– Meets portfolio diversification requirements (no more than 5%

from one issuer)

– Meets portfolio liquidity requirements (to meet reasonable

foreseeable redemptions)

– Meets shadow pricing requirements (net assets per share

calculated at least monthly must be within one-half of1% of net

asset value per share)

54


GASB 79 also establishes additional note disclosure

requirements for governments that participate in

those pools.

• Information about limitations or restrictions on

participant withdrawals

– Redemption notice periods

– Maximum transaction amounts

– Liquidity fees/redemption gates

55

Statement No. 80

Blending Requirements for Certain Component

Units

56

Statement No. 80 – Blending Effective FYE 2017

This Statement requires a component unit to be included in the reporting entity financial statements using the blending method if

the component unit is organized as a not-for-profit corporation in

which the primary government is the sole corporate member, as

identified in the component unit’s articles of incorporation or bylaws, and the component unit is included in the financial

reporting entity pursuant to the provisions in paragraphs 21-37 of

Statement 14, as amended. Financial Accountability

• Appointment of a voting majority

• Imposition of Will

• Financial Benefit to or Burden on a Primary Government

Does not apply to component units addressed in Statement No.

39 – Determining Whether Certain Organizations are Component

Units 57

Statement No. 82

Pension Issues – An Amendment of

GASB Statement Nos. 67, 68, and 73

58

Statement No. 82 – Pension Issues Effective FYE 2017 or later

• Presentation of Payroll Related Measures in


• Selection of Assumptions

• Classification of Employer Paid Member

Contributions

59


• Presentation of Payroll Related Measures in


– Change in definition

– Covered payroll is payroll on which contributions to a

pension plan are based

– Required Supplementary Information should be restated for

all years presented, as practicable

60


• Selection of Assumptions

– Selection of assumptions used to calculate the net pension

liability and related measures

– A deviation, as the term is used in Actuarial Standards of

Practice issued by the Actuarial Standards Board, from the guidance in an Actuarial Standard of Practice should not

be considered to be in conformity with the requirements of

Statement 67, Statement 68, or Statement 73.

– Effective for employer in the first reporting period in which the measurement date of the pension liability is on or after

June 15, 2017 (employer’s pension liability is measured at a

date other than the employer’s most recent fiscal year

end)

– Applied prospectively

61

Statement No. 82 – Pension Issues –

Cont’d Effective FYE 2017 or later

• Classification of Employer Paid Member

Contributions

– Payments made by the employer to satisfy

contribution requirements identified by plan terms

• No. 67 – classified as plan member contributions

• No. 68 – classified as employee contributions, including

for determining cost-sharing employer’s portion

• Recognized in period which contribution is assessed

• Restated for all prior periods as applicable

• Required Supplementary Information should be restated

for all years presented, as practicable

62

Questions?

63

GASB to Implement 2018

Standards to be Implemented in 2018

64

No. Title Effective Date

75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions

Fiscal years beginning after June 15, 2017

81 Irrevocable Split-interest Agreements Fiscal years beginning after December 15, 2016

65

GASB Statements – effective 2018

Statement No. 75 – OPEB

• Addresses accounting and financial reporting by

governmental entities that provide other post employment benefits (OPEB) to their employees or

employees of other governmental units, such as retiree

health insurance, not just those administered by a Trust.

• Establishes standards for recognizing and measuring

liabilities, deferred outflows of resources, deferred inflows

of resources, and expense/expenditures. – Defined benefit OPEB - identifies the methods and assumptions that are

required to be used to project benefit payments, discount projected benefit

payments to their actuarial present value, and attribute that present value

to periods of employee service.

– Defined contribution OPEB - requires recognition of OPEB expense for the

amount of contributions or credits to employees’ accounts that are defined

by the benefit terms as attributable to employees’ services in the period, net

of forfeited amounts that are removed from employees’ accounts

66


• Replaces GASB Statements No. 45, Accounting and

Financial Reporting by Employers for Postemployment

Benefits Other Than Pensions, as amended, and GASB

No. 57, OPEB Measurements by Agent Employers and

Agent Multiple-Employer Plans.

• Similar to GASB 68 for pension accounting and

reporting

• GASB Statement No. 75 (GASB 75) along with

Statement No. 74 significantly change how

governments calculate and report annual costs and

long term obligations associated with OPEB.

67


GASB 75 requirements are defined separately for

OPEB plans administered through a Trust.

• Governments that do not provide OPEB through

a trust meeting the following criteria will report

the total OPEB liability related to their employees.

– Contributions to the OPEB plan from the

government and other entities, as well as earnings

on those contributions, are irrevocable. „

– OPEB plan assets are dedicated to providing OPEB

to the plan members. „

– OPEB plan assets are protected from creditors

68


GASB 75 further defines requirements based on:

• Number of Employees

• Whether OPEB obligations and OPEB plan assets are shared

by the employers:

– Single Employers – OPEB plans in which OPEB is provided to the employees of only one employer

– Agent Employers - OPEB plans in which plan assets are pooled

for investment purposes but separate accounts are maintained

for each individual employer so that each employer’s share of

the pooled assets is legally available to pay the benefits of only

its employees.

– Cost Sharing Employers - OPEB plans in which the OPEB

obligations to the employees of more than one employer are

pooled and plan assets can be used to pay the benefits of the

employees of any employer that provides OPEB through the

OPEB plan.

69


• Net OPEB liability = Total OPEB liability – OPEB

plan’s fiduciary net position

(Total OPEBL liability = portion of the present value of

projected benefit payments to be provided to current active and inactive employees that is attributed to

those employees’ past periods of service (total OPEB

liability), less the amount of the OPEB plan’s fiduciary net

position.)

• Total OPEB liability generally required to

determined through an actuarial valuation every

two years with more frequent valuations or

calculations encouraged.

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Valuation of total OPEB liability:

• Alternative method may be used in place of an

actuarial valuation to determine value of the liability

if less than 100 (active and inactive) employees

• If no actuarial valuation or calculation - total OPEB

liability is required to be based on update

procedures to roll forward amounts from an earlier

actuarial valuation or alternative measurement

method calculation (performed as of a date no

more than 30 months and 1 day prior to the

employer’s most recent fiscal year-end)

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Projection of benefit payments:

• Must be based on claims costs, or age-adjusted premiums

approximating claims costs, and the benefit terms and legal

agreements existing at the measurement date.

• Required to be discounted to their actuarial present value

using the single rate that reflects

– (1) a long-term expected rate of return on OPEB plan

investments to the extent that the OPEB plan’s fiduciary net

position is projected to be sufficient to make projected benefit

payments and OPEB plan assets are expected to be invested

using a strategy to achieve that return and

– (2) a tax-exempt, high-quality municipal bond rate to the

extent that the conditions for use of the long-term expected

rate of return are not met.

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Projection of benefit payments (cont.):

• Required that the actuarial present value of projected

benefit payments be attributed to periods of employee

service using the entry age actuarial cost method with each period’s service cost determined as a level

percentage of pay.

• If fewer than 100 employees (active and inactive) -

alternative measurement method is an approach that

includes the same broad measurement steps as an

actuarial valuation however, it permits simplification of

certain assumptions.

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Single and Agent Employers

• The net OPEB liability measured as of a date no earlier than

the end of the employer’s prior fiscal year and no later than

the end of the employer’s current fiscal year (the measurement date)

• Changes in the net OPEB liability are reported as OPEB

expense, deferred outflows or deferred inflows or resources

– Most changes in the net OPEB liability should be included in

OPEB expense in the period of the change

– Employer contributions subsequent to the measurement date of

the net OPEB liability which are required to be reported as

deferred outflows of resources.

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Notes to the Financial Statements

– types of benefits provided

– number and classes of employees covered by the benefit terms

– for the current year, sources of changes in the net OPEB liability

– Significant assumptions and other inputs used to calculate the

total OPEB liability

– the date of the actuarial valuation or calculation using the

alternative measurement method used to determine the total

OPEB liability

– information about changes of assumptions or other inputs and

benefit terms

– the basis for determining employer contributions to the OPEB

plan, and information about the purchase of allocated

insurance contracts, if any.

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Determined as of the measurement date, for each of the 10 most recent

fiscal years:

– Sources of changes in the net OPEB liability

– The components of the net OPEB liability and related ratios, including

the OPEB plan’s fiduciary net position as a percentage of the total

OPEB liability, and the net OPEB liability as a percentage of covered-

employee payroll.

– Actuarially determined contribution, contributions to the OPEB plan,

and related ratio, if applicable

– Contribution requirement that is established by statute or contract, if

applicable

– Significant methods and assumptions used in calculating the

actuarially determined contributions, if applicable

– Employer is required to explain certain factors that significantly affect

trends in the amounts reported in the schedules

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Cost-Sharing Employers

• Recognize a liability for its proportionate share of the net OPEB

liability

• Recognize OPEB expense and report deferred outflows of

resources and deferred inflows of resources related to OPEB for its proportionate share

– Effects of the following are to be recognized as expense in a

systematic and rational manner

• a change in the employer’s proportion of the collective net OPEB liability

• differences during the measurement period between certain of the

employer’s contributions and its proportionate share of the total of

certain contributions from employers included in the collective net OPEB

liability are required to be determined.

– Employer contributions to the OPEB plan subsequent to the

measurement date of the collective net OPEB liability also are

required to be reported as deferred outflows of resources related to

OPEB.

77


Cost-Sharing Employers

Notes to the Financial Statements

– Descriptive information about the OPEB plans through which

the OPEB is provided.

– The discount rate and assumptions made in the measurement of their proportionate shares of net OPEB

liabilities

– How contributions to the OPEB plan are determined


10-year schedules containing:

– The net OPEB liability and certain related ratios

– Information about statutorily or contractually required

contributions, contributions to the OPEB plan, and related

ratios, if applicable.

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Defined Benefit OPEB - administered through Trusts

that did not meet the specified criteria

• Employers that provide insured benefits

– premiums are paid by employers while employees are in active

service

– insurance company unconditionally undertakes an obligation to

pay the OPEB of those employees

• Record expense/expenditures equal to the amount of premiums /payments in accordance with the agreement

with the insurance company.

• Disclose arrangement

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Special Funding Situations

• Defined as circumstances in which a nonemployer entity is

legally responsible for providing certain forms of financial

support for OPEB of the employees of another entity.

• Measurement of expenses, deferred outflows and deferred

inflows of resources are similar to Cost-Sharing Employers

• Notes to financial statements - information about the

amount of support provided

• Required Supplementary Information - similar to Cost-Sharing

Employers

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Statement No. 81 – Irrevocable Split-

Interest Agreements

Purpose:

Improves accounting and financial reporting by providing recognition and

measurement guidance for situations in which a government is a beneficiary

of a split-interest agreement.

Define:

A split-interest agreement is an agreement used by donors to provide

resources to two or more beneficiaries. A donor transfers resources to an

intermediary to hold and administer for the benefit of a government and at

least one other beneficiary.

Recognition:

A government recipient recognizes assets, liabilities, and deferred inflows of

resources at the inception of the agreement. Furthermore, GASB 81 requires

recognition of assets representing its beneficial interests in irrevocable split-

interest agreements that are administered by a third party, if the government

controls the present service capacity of the beneficial interests. Revenue is

recognized when the resources become applicable to the reporting period.

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Questions?

82

Documents

Weaver Firm PPT Template - Basic White 020414 Update 072616.pdf · Update on GASB 68 Re-Visited: Year Two ... Implementation Issues (leading to GASB Statement No 82): ... of covered