Governmental
Accounting and
Reporting Update
GFOA Spring Conference
May 3, 2010
Agenda
Federal perspective
 Environment
 Implementation stories
 What is happening now?
 What is waiting?
 Future considerations

Remaining GASB
34/35 Issues /
Inconsistencies
GASB 34 / 35 Issues

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MD&A requirements for BTAs, clarification of
exceptions to general requirements
Grants and contracts, exchange and exchange-like
Federal financial aid, Pell grants, direct lending
Library books
Split-interest agreements
Perkins Loan
Other Issues



Fund raising function used?
Other functions / programs
Matrix presentation for functional and natural
expenses
Federal Perspective
Federal Perspective

IPEDS Technical Review Panel focused on Consistency of reporting (GASB/FASB)
 Need for more useful information


IPEDS changes – Part C Expenses

Optional for FY June 30, 2009, allows for similar
allocation of FASB institutions Operations and Maintenance of Plant
 Depreciation
 Interest Expense

Part C-Expenses and Other Deductions (non
Aligned)
Part C- Expenses and Other Deductions
(Aligned)
Before
After Allocation Change
Allocation
($ in millions)
Instruction
173
197
24
Research
125
143
18
Public Service
68
78
10
Academic Support
35
40
5
Student Services
25
28
3
Institutional Support
27
31
4
Auxiliary Enterprises
81
91
10
Operations and
Maintenance of Plant
35
0
-35
Depreciation
33
0
-33
6
0
-6
608
608
0
Interest Expense
Total
NACUBO AR 2010-1



Issued February, 2010
Offers guidance for public institutions
For IPEDS Reporting only
NACUBO AR 2010-1




Select categories of cost
Review methodologies of cost
Explore availability of date
Consider mission, objectives and practices of
your institution
NACUBO AR 2010-1
The NACUBO APC and NACUBO survey support
the use of the following common allocation
methodologies Direct assignment based on functional category of space
 Assignable square footage
 Salaries and wages, or salaries and wages plus benefits
 Total expenses by function
 Combination of the above

Governmental Reporting
Environment

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Codification of FASB, AICPA, Pre GASB
authoritative
GASB
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Service Efforts and Accomplishments


Concepts
Focus on Accountability
FAF confirmed jurisdictional authority to include in financial
accounting and reporting standards
International Financial Reporting Standards
Watch Out !

New changes – OPEB, Pollution Remediation
Derivatives
Impact on legal restrictions
 Bonds covenants
 Labor / collective bargaining negotiations

FY 2009 Implementation Stories

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Statement 45 – Accounting and Reporting by
Employers for Other Post Employment
Benefits
Statement 49 – Accounting and Financial
Reporting for Pollution Remediation
Obligations
Statement 52 - Land and Other Real Estate Held
as Investments
2009 GASB Implementation Guide – Pell
Grants
What is Happening Now?
Effective FY 2010 –
 Statement 51 – Accounting and Financial
Reporting for Intangible Assets
 Statement 53 – Accounting and Financial
Reporting for Derivative Instruments
 Statement 55 – Hierarchy of GAAP for State
and Local Governments
 Statement 56 – Codification of Accounting and
Financial Reporting Guidance Contained in the
AICPA SAS
What is Happening Now?
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
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Statement 58 – Accounting and reporting for
Chapter 9 Bankruptcies
Concepts Statement 4 – Elements of Financial
Statements
Concepts Statement 5 – Service Efforts and
Accomplishments
2009 GASB Implementation Guide
Statement 51
Accounting for Intangible Assets
Effective for periods beginning after
June 15, 2009 (FY 2010)
Intangible Assets

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Easements
Water rights
Timber rights
Patents
Trademarks
Computer software
Recognition

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Must be identifiable
Specified conditions approach for internally
generated assets (computer software)
Amortization
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Required over useful life
Limited by legal or contractual provisions
May have indefinite life if no limits
Implementation
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Retroactively
GASB 34 - Phase 1 or 2

Assets acquired after June 30, 1980
Except indefinite useful life
 Except internally generated assets

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GASB 34 – Phase 3

Retroactive application encouraged not required
Statement 53
Accounting and Financial Reporting
for Derivatives
Effective for periods beginning after
June 15, 2009 (FY 2010)
Derivatives

Fair Value

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
Derivative instruments are measured on the statement of
net assets at fair value
Fair value changes are reported on the “changes statement”
as investment income
Hedges are an exception 
Changes in fair value are reported on the statement of net
assets as a deferral, charges or credits
Derivatives ?

Interest rate swap

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Basis swap

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Exchange payments based on changes of two variable rates
Swaption

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Variable rate to fixed rate
Fixed rate to variable rate
Gives the purchaser of the option the right but not the
obligation to enter into interest rate swap
Commodity swap

Reduce exposure to a commodity call risk
What is Not a Derivative
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Normal purchase or sale contracts
Loan commitments
Financial Guarantees
Contracts not exchanged – traded (earthquake or weather
derivatives)
Investments (endowments) where underlying asset is a
derivative
Hedge and Hedge Accounting

Requirements

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Association – instrument is associated with a hedgeable item
Substantial offsets – instrument is effective in providing changes
in cash flows or fair values that substantially offset the cash flow
or fair value of a hedgeable item
If the requirements are met, hedge accounting must be
applied.
Accounting is not dependent on documentation
Hedge Accounting

Effectiveness must be evaluated
Qualitative method
 Quantitative method


When a method becomes ineffective in a later
period, another method may be used
Disclosure Requirements
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Significant terms
Risks – credit, interest rate, basis, termination, rollover,
market access, foreign currency
If another evaluation method is used , details must be
provided
Investment derivative requires credit, interest rate,
foreign currency risks
Contingencies
Hedged debt
Synthetic guaranteed investment contracts
Statement 55
Hierarchy of Generally Accepted
Accounting Principles for State
and Local Governments
Effective immediately
Moves the definitions from AICPA Audit Guide
Statement 56
Codification of Accounting and
Reporting Guidance Contained
in the AICPA Statements of
Auditing Standards
Effective immediately
Moves the definitions from AICPA Statement
of Auditing Standards
Statement 59
Accounting and Financial
Reporting for Chapter 9
Bankruptcies
Effective immediately
Addresses bankrupt governmental units under
chapter 9
Concepts Statement 4
Elements of Financial
Statements
Concepts Statement Elements of Financial Statement


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Resource – An item of present service capacity
Assets – Resources the entity presently controls
Liabilities – Present obligations to sacrifice resources or
future resources that the entity has little or no
discretion to avoid
Deferred outflow of resources – A consumption of net
resources by the entity that is applicable to a future
reporting period
Concepts Statement Elements of Financial Statement


Deferred inflow of resources – An acquisition of
net resources by the entity that is applicable to a
future reporting period
Net Position – The residual of all other elements
presented in the statement of financial position
Concepts Statement Elements of Financial Statement



Outflow of resources – A consumption of net
resources by the entity that is applicable to the
reporting period
Inflow of resources – An acquisition of net resources
by the entity that is applicable to the reporting period
Before an item can be reported in a financial statement
it must meet appropriate recognition and measurement
criteria. A separate project will define these criteria.
Concepts Statement 5
Service Efforts and
Accomplishments Reporting
Concepts Statement SEA Reporting
Amended Concept Statement 2
 Clarifies scope limitation “beyond the scope of the GASB”
to exclude –
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Goals and objectives of governmental services
Specific nonfinancial measures or indicators of service
performance
Standards or benchmarks of service performance
Focuses on types of SEA performance measures –


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Measures of service efforts
Measures of service accomplishments
Measures that relate service efforts to service accomplishments
What is Waiting?




Effective FY12 GASB 54 - Fund Balance Reporting and
Governmental Fund Type definitions
GASB 57 – OPEB Measurements by Agent
Employers and Agent Multiple –Employer Plans
Exposure Draft - Reexamination of GASB 14
Issued March, 2010
 May be effective in FY 13

International Financial
Reporting Standards
IFRS
Future Considerations

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Exchange – like revenues
Fiduciary responsibilities
In-kind contributions
Irrevocable charitable trusts
Reporting unit presentation and GASB 14
Financial performance measures
Reexamination Projects


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Compensated absences
Debt refundings
Deferred compensation plans
NACUBO Issues

FASB component units disclosures in a GASB
based financial report

GASB 14 Revisited

Alternative SRECNA

Pell and Direct Lending
Questions?
ctegen@clemson.edu