7-8
Describe GASB requirements for accounting for Investment Trust Funds. Include
a.
A discussion of when the use of investment trust funds is appropriate
Exits when the government is the sponsor of a multi-government investment pool and accounts
for the external portion of those trust assets.
b.
The investments to be included and excluded
The external portion should be includes, Many governments participate in external investment
pools where the external portion is to be maintained
c.
The basis at which investments are to be reported
Agency funds do not report revenues, expenses, or net assets, but changes in assets and
liabilities are recognized on the accrual basis. Certain liabilities of defined benefit pension plans
and certain healthcare plans are recognized.
d.
Reporting of realized and unrealized gains and losses on investments
Statement 31, all investment income, including changes in the fair value of investments, should
be recognized as revenue in the operating statement. GASB does not permit separate display of
the realized and unrealized components of the change in fair value, with the exception of
external investment pools.
e.
Financial reporting ( i.e., financial statements)
Statement of Fiduciary Net Assets and Statement of Changes in Fiduciary Net Assets.
7-10
What are the required financial statements for a pension trust fund? What are the required
supplementary information schedules?
The financial reporting requirements include two statements and two schedules. Only the
schedules are reported as required supplementary information.
1. Statement of Plan Net Assets: provides information about the fair value of plan assets,
liabilities, and the net assets held in trust for benefits.
2. Statement of Changes in Plan Net Assets: provides information about additions to and
deductions from net assets.
3. Schedule of Funding progress: provides information about the actuarial status of the plan
from an ongoing long-term perspective.
4. Schedule of Employer Contributions: provides historical trend information about the
annual required contributions (ARC) and the actual contributions made by employers.
7-11
With regard to current GASB standards for pension reporting do the following:
A. (1) Defined contribution plans: is one only to pay out the amount that has been
accumulated for each employee. It is defined benefit plans may have unfunded actuarial
liabilities, whereas defined contribution plans do not.
(2) Defined benefit plans: is one in which the plan is required to pay out a certain level of
benefit, regardless of the amount available in the plan.
B.
(1) Agent plan: one in which each contributing employer, such as a local government, has
a separate account and each local government is required to keep its own contributions up to
date.
(2) cost-sharing multiemployer plans: a statewide plan in which separate accounts are not
kept for each employer. In this plan, unfunded actuarial liabilities are made up on a statewide
basis; the state applies extra charges to all participating governments to eliminate the actuarial
deficiency.
C.
(1) Annual required contribution: governments that contribute to single employer and
agent multiple-employer plans compute annual pension costs which are actuarially determined
as the employer’s normal cost plus a provision for amortizing the unfunded actuarial liability.
(2) Net pension obligation: the cumulative difference between the employers’ required and
actual contributions, the annual pension cost will include the ARC, interest on the NPO, and an
adjustment to the ARC.
D. (1) Agent multi-employer plans: include the annual pension cost compared with the
actual contributions made. It also required providing supplementary schedules listing additional
tree-years information.
(2) cost-sharing multiemployer plans: should record expenditures (for government funds) and
expenses (for proprietary funds) equal to the annual contractually required contributions to the
plans. Individual amounts cannot be computed for each employer, for cost-sharing plans.
E.
(1) General government employees: be reported for the year in the general or
another governmental fund. The amount would be limited to the amount that will be
liquidated with available financial resources.
(2) Enterprise fund employees: is determined by the type of contribution plan each specific
employer participates. It depend what activities the fund related to.
Copley, P. (2011). Essentials of Accounting for Governmental and Not-for-Profit
Organizations. (10th ed.). Boston: McGraw-Hill Irwin