GASB UPDATE
John DeBurro, CPA
Agenda
What’s Applicable in FY14?
1. Statement No. 65**
2. Statement No. 66
3. Statement No. 67
4. Statement No. 70
What Applicable in FY15?
1. Statement No. 68 (amended by
Statement No. 71)**
2. Statement No. 69
2
Statement No. 65
Items Previously Reported as
Assets and Liabilities
Effective for periods beginning after
December 15, 2012 (FY14)
Purpose
Statement No. 65
Establishes standards that reclassify,
as deferred outflows of resources or
deferred inflows of resources, certain
items that were previously reported
as
assets
and
liabilities
and
recognizes, as outflows or inflows of
resources, certain items that were
previously reported as assets and
liabilities.
4
Summary of Changes
• Terms –
The use of the term deferred should be limited
to items reported as deferred outflows of
resources or deferred inflows of resources.
• Major Funds Calculation –
Combine assets and deferred outflows and
combine liabilities and deferred inflows
• Gain/loss on refunding –
Reported as deferred outflow/inflow and
recognized as a component of interest
expense over the remaining life of the old
debt or life of the new debt, whichever is
shorter.
5
Summary of Changes
• Debt issuance costs –
Expensed in the period incurred with the exception
of any portion related to prepaid insurance
• Sale–leasebacks –
Gain/loss on sale of property should be reported as
deferred inflow/outflow
• Imposed non-exchange transactions –
Report as deferred inflow when received or
receivable before the period:
- for which property taxes are levied
- resources are required to be used /first permitted
for use
6
Summary of Changes
• Government Mandated/Voluntary non-exchange
transactions –
- If received prior to eligibility requirements are met,
record as asset by provider and liabilities by
recipient.
- If received prior to time requirements being met but
with all other eligibility requirements being met,
record as deferred outflow by provider and
deferred inflow by recipient.
• Sale of future revenues –
Transferor should report proceeds as a deferred inflow in
both the government-wide and fund financial
statements except when recognition as revenue in the
period of sale is appropriate as discussed in para. 14 of
Statement 48.
7
Implementation
• Accounting changes should be applied
retroactively by restating financial statements, if
practical, for all periods presented
8
GASB 65–Statement of Net Position
Example Independent School District
Statement of Net Position
August 31, 2014
Data
Control
Codes
1
2
3
Governmental
Activities
Business-type
Activities
Total
ASSETS
1110
1220
1230
1240
1290
1410
1510
1520
1530
1580
1000
Cash and cash equivalents
Property taxes receivables (delinquent)
Allowance for uncollectible taxes (credit)
Due from other governments
Other receivables, net
Prepaid expenses
Capital assets:
Land
Buildings, net
Furniture and equipment, net
Construction in progress
Total assets
-
-
-
-
-
-
DEFERRED OUTFLOWS OF RESOURCES
1700 Deferred loss on refunding
Total deferred outflows of resources
9
GASB 65–Statement of Net Position
(Con’t)
LIABILITIES
2110
2140
2150
2160
2180
2200
2300
Accounts payable
Interest payable
Payroll deductions and withholdings
Accrued wages payable
Due to other governments
Accrued expenses
Unearned revenue
2501
2502
2000
Long term liabilities:
Due within one year
Due in more than one year
Total liabilities
-
-
-
NET POSITION
3200
3820
3850
3900
3000
Net investment in capital assets
Restricted for:
Federal and state programs
Debt service
Unrestricted
Total net position
$
-
$
-
$
-
10
GASB 65–Balance Sheet
Example Independent School District
Governmental Funds - Balance Sheet
August 31, 2014
Data
Control
Codes
10
50
Debt
Service
Fund
General
Fund
60
Other
Governmental
Funds
Capital
Projects
Total
Governmental
Funds
ASSETS
1110
1220
1230
1240
Cash and cash equivalents
Property taxes delinquent
Allowance for uncollectable taxes (credit)
Due from other governments
1260
Due from other funds
1290
1410
Other receivables
Prepaid expenditures
1000
Total assets
$
-
$
-
$
-
$
-
$
-
LIABILITIES
2110
2150
2160
2170
2180
2200
2300
2000
Accounts payable
Payroll deductions and withholdings
Accrued wages payable
Due to other funds
Due to other governments
Accrued expenditures
Unearned revenue
Total liabilities
-
-
-
-
-
-
-
-
-
-
DEFERRED INFLOWS OF RESOURCES
2601
Unavailable revenue - property taxes
2600
Total deferred inflows of resources
FUND BALANCES
3590
Nonspendable:
Prepaid items
Restricted:
Federal or state funds grant restrictions
Capital acquisitions and contractual obligations
Retirement of long-term debt
Committed:
Construction
Other committed fund balance
Assigned:
Other assigned fund balance
3600
Unassigned
3430
3450
3470
3480
3510
3545
3000
4000
Total fund balances
Total liabilities, deferred inflows and fund balances
$
-
$
-
$
-
$
-
$
-
11
How Will it Affect You?
Government-wide Financial Statements:
• Bond issuance costs – remove / restate
beginning net position
• Deferred gain/loss on refunding –
reclassify from LTD to deferred outflows
(loss) or inflows (gain)
12
How Will it Affect You?
Fund Level Financial Statements:
• Property taxes – unavailable revenues
now reported as deferred inflow rather
than deferred revenue (liability)
• Deferred revenue – term will no longer be
used – depending on the situation, will
involve reclassification to either deferred
inflow or a renamed liability (i.e.
unearned revenue)
• Revenue – earned vs unavailable
13
Statement No. 66
Technical Corrections – an
amendment of GASB Statements
No. 10 and No. 62
Effective for periods beginning after
December 15, 2012 (FY14)
Purpose
Statement No. 66
To improve accounting and financial
reporting by resolving conflicting
guidance caused by the issuance of
two recent pronouncements:
Statements No. 54 & No. 62
15
Summary of Changes
• Amends GASB 10 – allows for use of special revenue
funds to report an entity’s risk financing activities
• Paragraphs 222 and 227b of GASB 62 include
guidance on accounting for operating lease
payments that vary from a straight-line basis. Those
provisions were deleted to remove what could be
perceived as a potential prohibition against the use
of the FV method which is permitted under
paragraph 6b of Statement 13
• Loans that are purchased should be recorded at
the price paid
• Service fees – should not result in an adjustment to
the sales price of mortgage loans
16
How Will this Affect You?
• It probably won’t…
17
Statement No. 67
Financial Reporting for Pension
Plans – an amendment of GASB
Statement No. 25
Effective for periods beginning after
June 15, 2013 (FY14)
GASB 67
Addresses accounting and financial
reporting for the activities of pension plans
that have the following characteristics:
• Contributions and earnings on
contributions are irrevocable;
• Plan assets are dedicated to providing
pensions to plan members; and
• Plan assets are legally protected from the
creditors of employers, nonemployer
contributing entities, and the plan
administrator.
19
GASB 67
• For defined pension plans:
– Establishes standards of financial reporting
for separately issued financial reports
– Specifies the required approach to
measuring the pension liability of
employers and nonemployer contributing
entities for benefits provided through the
pension plan
– Details note disclosure requirements for
defined contribution pension plans
20
GASB 67
Financial Statements
• Required to present two financial
statements:
– Statement of fiduciary net position
– Statement of changes in fiduciary net
position
• Required disclosures:
– Description of plan
– Description of plan investments
– Description of investment policies and how
fair value is determined
21
GASB 67
• Required disclosures (cont.):
– Investment concentrations
– Rate of return on plan investments
– Other specific disclosures for singleemployer and cost-sharing plans
• Required supplementary information:
– Sources of changes in net pension liability
– 10 years
– Components of net pension liability and
related ratios – 10 years
22
GASB 67
• Statement No. 67 is effective for financial
statements for fiscal years beginning after
June 15, 2013 (fiscal year 2014).
• Any changes to beginning fiduciary net
position resulting from implementation
should be treated as an adjustment of prior
periods.
23
GASB 67
How will this affect you?
• It will only affect governments that are
responsible for their Plan’s financial reporting
24
Statement No. 70
Accounting and Financial
Reporting for Nonexchange
Financial Guarantees
Effective for periods beginning after
June 15, 2013 (FY14)
Purpose
Statement No. 70
Requires a government that extends
a nonexchange financial guarantee
to recognize a liability when
qualitative and historical data, if any,
indicate that the government will
more likely than not be required to
make payment on that guarantee
26
Qualitative Factors
• Entering into bankruptcy/reorganization
• Breach of debt contract (i.e. rate
covenants, coverage ratios, delinquent
payments)
• Indicators of significant financial difficulty
(i.e. drawing on reserve fund)
27
Recognition
Economic Resources Measurement Focus –
• Recognize liability and expense
• Discounted PV –best estimate of future
outflows
Current Resources Measurement Focus –
• Recognize fund liability and expenditure
• To the extent the liability is expected to be
liquidated with expendable available
financial resources
28
Recognition
Governments Issuing Guaranteed Debt –
• If required to repay a guarantor, reclassify
portion of previously recognized liability as
liability to guarantor
• If/when legally released as obligor to the
guarantor, recognize as revenue
29
Disclosures
Governments that Extend Nonexchange
Guarantee –
• Description of guarantee – legal authority,
relationship, length of time, recovery
arrangements
• Total amount of all guarantees extended
• If liability recognized or payments made: a
roll-forward of balances
30
Disclosures
Governments Issuing Guaranteed Obligations
• Name of guarantor
• Amount of guarantee
• Length of time
• Amount paid by guarantor during current
period and overall
• Requirements to repay the entity
31
Statement No. 68
Accounting and Financial
Reporting for Pension Plans – an
amendment of GASB Statement
No. 25
Summary
• Statement No. 68 replaces Statements 27
& 50 as they relate to governments that
provide pensions primarily through plans
administered as trusts.
• It requires governments that provide
defined benefit pensions to recognize
their long-term obligation for the pension
benefit as a liability for the first time
• “Divorces” funding and reporting for
pensions
33
Purpose
• Statement No. 68 also requires more
comprehensive and comparable
measurement of the annual costs of
pension benefits
• The Statement enhances
accountability and transparency
through revised and new footnote
disclosures and RSI
34
Net Pension Liability
Requires governments to report Net Pension
Liability as of a Measurement Date
Total pension liability
– Assets set aside in a trust and restricted to
paying benefits to employees, retirees and their
beneficiaries
=Net Pension Liability
Total Pension Liability is the actuarial present
value of projected benefit payments
35
Defined Benefit Pension Plans
Requires immediate recognition of the
following pension expenses:
• Annual service cost and interest on pension
liability
• Effect of changes in benefit terms on the net
pension liability
36
Defined Benefit Pension Plans
Other components of pension expense will be
recognized over a closed period including:
 Changes in economic and demographic
assumptions
 Differences between those assumptions and
actual
 Effects of differences between expected
and actual investment returns will be
amortized over a closed 5-year period
37
Defined Benefit Pension Plans
• Key changes to treatment of defined
benefit pension plans by government
employers:
– Projections of benefit payments
– Discount rate
– Attribution method
38
Defined Benefit Pension Plans
Projection of Benefit Payments
• Based on then-existing benefit terms
and incorporate projected salary
changes and service credits and
projected automatic postemployment
benefit changes including automatic
COLAs
• New – will also include ad-hoc
postemployment benefit changes, if
considered substantively automatic
39
Defined Benefit Pension Plans
Discount Rate
• Based on a single rate that reflects:
– Long-term expected ROR as long as the plan
net position is projected under specific
conditions to be sufficient to pay pensions of
current employees and retirees and plan
assets are expected to be invested using a
strategy to achieve these results
– Yield or index rate on tax-exempt 20-yr, AAor-higher rated muni bonds to the extent that
the conditions for use on LT ROR are not met
40
Defined Benefit Pension Plans
Attribution Method
• Governments will use a single actuarial
cost allocation method (entry age)
with each period’s service cost
determined as a level percentage of
pay
41
Defined Benefit Pension Plans
• Cost-sharing plan – i.e. TRS – all assets
and liabilities are pooled – assets can
be used to pay benefits of any
employee of any employer
• Agent multiple-employer plan – i.e.
TMRS – assets are pooled for investment
purposes, but separate accounts are
maintained for each employer
• Single-employer pension plan –
provides pensions to employees of one
employer
42
Cost Sharing Employers
• Recognize proportionate share of
collective NPL (net pension liability) as
of measurement date
• Recognize proportion of collective plan
expense and deferred outflows/inflows
• Recognize over average expected
remaining service for:
• Change in proportionate share
• Difference between employer’s
contributions and proportionate share of
all contributions
43
Special Funding Situations
A special funding situation exists if a
“nonemployer contributing entity” is
legally responsible for making
contributions directly to a pension plan
on behalf of a government, and one or
both of the following are true:
44
Special Funding Situations
(Con’t)
1. The amount the nonemployer
contributing entity is required to
contribute is not based on events or
circumstances unrelated to pensions
(such as contributing a percentage of
a specific revenue source) – i.e. State
(ISD’s)
2. The nonemployer contributing entity is
the only entity legally required to
contribute to the plan
45
TRS
• State will record liability that represents
approximately 70-80% of the System’s liability –
based on nonemployer (for Districts) and
employer (for University, etc) contributions
• Remaining liability will be allocated based on
amounts paid in by Districts (employers) as a
percentage of overall contributions
• State Auditor’s office will audit allocation /
census data as well as the System’s financial
statements
• Updated information will be posted on its
website (http://www.trs.state.tx.us/)
46
TRS
Annual information to be provided to
ISDs will include:
• Allocation percentage ( 7 decimals!)
• Amounts of TRS’ liability, pension
expense, deferred inflows/outflows
• Necessary disclosure information on
the System
47
TRS
TRS encourages:
• Districts to ensure monthly reporting is
done timely (by the cutoff of
September 6th for the month of
August) to avoid estimates being
made by TRS
48
Single and Agent Employers
• Recognize liability for NPL (net
pension liability) as of measurement
date (more about this later…)
• Recognize pension expense and
deferred outflows/inflows
49
TMRS
• Will provide GASB Reporting Package:
Provides cities with data needed for
financial reporting –anticipate June
issuance date. Also expecting:
• Schedule of “Changes in Plan Fiduciary Net
Position,” by employer, in CAFR of PERS; plan
auditor engaged to provide opinion
• Will provide cities with SOC-1 Type II report on
TMRS’s controls
• Has developed 4 Control Objectives for cities
50
TMRS – Control Objectives
1. Controls provide reasonable assurance
that reporting of participant census to
the TMRS outside actuary is complete
and accurate
2. Controls provide reasonable assurance
that contributions received from
employers are completely and
accurately posted to the employee and
employer accounts in the proper period
51
TMRS – Control Objectives
(Con’t)
3. Controls provide reasonable
assurance that distributions are
authorized and processed
accurately, completely, and in a
timely manner in accordance with
employer plan provisions
4. Controls provide reasonable
assurance that logical access to
programs and data is granted to
appropriately authorized individuals
52
Actuarial Valuations
• Actuarial valuations required at least
every two years
• Valuation date - no more than 30
months and one day from the
employer’s current FYE
53
Measurement Date
• Measurement Date – no earlier than
1 year prior to employer’s fiscal year
end
• Cities – will use 12/31/xx (i.e. for
9/30/15 use 12/31/14)
• ISDs – will use 8/31/xx (i.e. for 6/30/15
or 8/31/15 use 8/31/14)….WHY?
• Employer contributions subsequent
to measurement date = deferred
outflows
54
Disclosures
• Descriptive information about the
types of benefits provided
• How contributions are determined
• Assumptions and methods used to
calculate pension liability
• Additional info (single & agent
employers) such as composition of
employees covered and sources of
changes in the components of net
pension liability
55
RSI – Single and Agent Employers
Single and agent employers will also
present RSI schedules covering the past 10
years regarding:
• Sources of changes in the components of
net pension liability
• Ratios that assist in assessing the
magnitude of the net pension liability
• Comparisons of actual employer
contributions with actuarially determined
contribution requirements and related
ratios
56
RSI – Single and Agent Employers
SCHEDULE OF SAMPLE CITY's NET PENSION LIABILITY AND RELATED RATIOS
Firefighter Single Employer Plan
Last Ten Fiscal Years
(Dollar amounts in thousands)
2015
Total Pension Liability:
Service cost
Interest
Change in benefit terms
Difference between expected and
actual experience
Change in assumptions
Benefit payments
Net change in total pension liability
Total Pension Liability-beginning
Total Pension Liability-ending
$
Plan Fiduciary Net Position
Contributions - employer
Contributions - nonemployer
Net investment income
Benefit payments
Administrative income
Other
Net change in plan fiduciary net position
Plan fiduciary net position -beg
Plan fiduciary net position -beg
City's net pension liability -ending
Plan fiduciary net position as a %
of total pension liability
Covered payroll
City's net pension liability as a %
of employee payroll
$
73,034
219,345
-
2014
$
71,505
207,809
-
2013
$
68,503
191,499
-
2012
$
66,757
177,281
-
2011
$
64,380
165,004
-
2010
$
2009
60,442
150,315
-
$ 57,245
138,675
-
2008
$
50,167
129,195
-
2007
$
2006
47,420
108,149
119,513
$ 39,063
99,270
-
(37,539)
(119,434)
135,406
2,853,455
2,988,861
(15,211)
(112,603)
151,500
2,701,955
2,853,455
(3,562)
61,011
(104,403)
213,048
2,488,907
2,701,955
38,438
(95,376)
187,100
2,301,807
2,488,907
19,927
(88,790)
160,521
2,141,286
2,301,807
(28,228)
92,500
(86,139)
188,890
1,952,396
2,141,286
34,335
(77,185)
153,070
1,799,326
1,952,396
13,464
(70,907)
121,919
1,677,407
1,799,326
30,981
32,979
(66,789)
272,253
1,405,154
1,677,407
35,780
(60,653)
113,460
1291694
1,405,154
79,713
31,451
196,154
(119,434)
(3,373)
8
184,519
2,052,589
2,237,108
86,607
30,550
(44,099)
(112,603)
(3,287)
(83)
(42,915)
2,095,504
2,052,589
89,828
29,137
(16,138)
(104,403)
(2,774)
173
(4,177)
2,099,681
2,095,504
91,963
28,547
298,260
(95,376)
(2,582)
(175)
320,637
1,779,044
2,099,681
93,541
27,743
166,826
(88,790)
(2,086)
9
197,243
1,581,801
1,779,044
85,681
26,709
140,132
(86,139)
(2,235)
75
164,223
1,417,578
1,581,801
68,866
25,577
193,107
(77,185)
(1,912)
(493)
207,960
1,209,618
1,417,578
29,849
22,673
39,142
(70,907)
(1,887)
8
18,878
1,190,740
1,209,618
25,086
21,132
(22,410)
(66,789)
(1,509)
(44,490)
1,235,230
1,190,740
22,826
19,202
(5,750)
(60,653)
(1,491)
(25,866)
1,261,096
1,235,230
751,753
800,866
606,451
389,226
522,763
559,485
534,818
589,708
486,667
169,924
74.85%
71.93%
77.56%
84.36%
77.29%
73.87%
72.61%
67.23%
70.99%
87.91%
381,554
$ 365,385
301,891
$ 274,318
146.63%
146.37%
161.21%
61.94%
449,293
167.32%
$
436,424
183.51%
$
416,243
145.70%
$
407,812
95.44%
$
396,332
131.90%
$
$
322,896
182.63%
$
57
RSI – Single and Agent Employers
SCHEDULE OF SAMPLE CITY'S CONTRIBUTIONS
TEACHERS RETIREMENT SYSTEM
Last Ten Fiscal Years
(Dollar amounts in thousands)
2015
Statutorially required Contributions
$
Actual contributions in relation to
statutorially required contributions
Contribution deficiency (excess)
City's Covered Payroll
Contributions as a percentage
of City's covered payroll
210
2014
$
(210)
$
-
206
2013
$
(206)
$
-
197
2012
$
(197)
$
-
165
2011
$
(165)
$
-
118
2010
$
(118)
$
-
2009
90
$
(90)
$
-
82
2008
$
(82)
$
-
77
2007
$
(77)
$
-
88
2006
$
(88)
$
-
108
(108)
$
-
11,512
10,412
9,715
9,553
9,522
9,299
8,709
8,175
7,909
7,659
1.82%
1.98%
2.03%
1.73%
1.24%
0.97%
0.94%
0.94%
1.11%
1.41%
58
RSI – Cost Sharing Employers
10-year Schedule 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
 If contributions are statutory/contractual, 10year schedule of such amounts compared to
actual contributions
59
RSI – Cost Sharing Employers
SCHEDULE OF SAMPLE ISD'S PROPORTIONATE SHARE OF NET PENSION LIABILITY
TEACHERS RETIREMENT SYSTEM
Last Ten Fiscal Years
(Dollar amounts in thousands)
District's Proportionate Share of
Net Pension Liability (asset)
$
State's proportionate share of Net
Pension Liability associated with
the Sample ISD
1,491
$
1,174
$
1,297
$
1,349
0.020%
0.020%
0.019%
0.019%
0.019%
0.020%
2010
2011
2012
2013
2014
2015
District's Proportion of the
Net Pension Liability (asset)
$
1,489
$
1,161
$
2009
2008
2007
2006
0.020%
0.021%
0.021%
0.021%
437
$
(235)
$
(126)
$
(93)
(834)
13,419
10,564
11,675
12,145
13,402
10,445
3,935
(2,119)
(1,137)
14,910
$ 11,738
$ 12,972
$ 13,494
$ 14,891
$ 11,606
$ 4,372
$ (2,354)
$ (1,263)
District's Covered Payroll
11,512
10,412
9,715
9,553
9,522
9,299
8,709
8,175
7,909
7,659
District's proportionate share of net
pension liability (asset) as a percentage
of its covered payroll
12.95%
11.28%
13.35%
14.12%
15.64%
12.49%
5.02%
-2.87%
-1.59%
-1.21%
Plan fiduciary net position as a
percentage of total pension liability
81.38%
83.20%
80.41%
78.53%
75.79%
79.74%
91.78%
104.52%
102.83%
102.10%
Total
$
$
(927)
60
GASB 68
• Is effective for financial statements for
fiscal years beginning after June 15,
2014 (fiscal year 2015)
• Any changes to beginning net position
resulting from implementation should
be treated as an adjustment of prior
periods.
61
GASB 68 Implementation Guide
• Issued January 2014
• Contains 272 Q & A
• Statement No. 68, as amended by
Statement No. 71
• Illustrations:
– Calculation of discount rate
– Note disclosures and RSI under various
scenarios, as well as calculations of NPL,
Deferred Outflows/Inflows, and Pension
Expense
62
Statement No. 69
Government Combinations and
Disposals of Government
Operations
GASB 69
Government Combinations:
• Mergers
• Acquisitions
• Transfer of operations
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GASB 69
• Defines each type of combination
• Establishes methods of measurement
and recognition for each type of
combination
• Establishes required footnote
disclosures
• The provisions in Statement 69 are
effective for fiscal years beginning
after December 15, 2013 (FY15)
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Contact Information
John DeBurro, CPA
Senior Audit Manager
972.448.6970
John.deburro@weaver.com
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