GASB Update
GFOAz Quarterly Training
Thursday, May 17, 2012
Corey Arvizu, Heinfeld, Meech & Co.
Speaker Bio
Corey Arvizu is a partner in the Tucson, Arizona office of the
accounting firm Heinfeld, Meech & Co. and is the former
chairperson of the AICPA’s Governmental Audit Quality Center
Executive Committee. Corey manages audit services for
municipalities, school districts, insurance funds, pension plans
and not-for-profit organizations in both Arizona and New
Mexico. In his role as a partner Corey provides guidance and
training on accounting and auditing issues including GASB
pronouncements, auditing standards, Government Auditing
Standards, and Single Audits.
2
GASB
 What is the GASB?
 The Governmental Accounting Standards Board
(GASB) is the independent organization that establishes
and improves standards of accounting and financial
reporting for U.S. state and local governments. The
GASB is recognized by governments, the accounting
industry, and the capital markets as the official source of
generally accepted accounting principles (GAAP) for
state and local governments.
3
GASB
 How is the GASB funded?
 The GASB is not a government entity; instead, it is an
operating component of the Financial Accounting
Foundation, which is a private sector not-for-profit entity.
Funding for the GASB comes in part from sales of its
own publications and in part from state and local
governments and the municipal bond community.
4
GASB
 Are the GASB rules the law?
 GASB standards are not federal laws or regulations and
the organization does not have enforcement authority.
Compliance with GASB’s standards, however, is
enforced through the laws of some individual states and
through the audit process, when auditors render
opinions on the fairness of financial statement
presentations in conformity with GAAP.
5
GASB
 How does the GASB set standards?
 Before issuing its standards, the GASB follows the due
process activities described in its published Rules of
Procedure. The GASB’s stringent due process activities
are designed to encourage broad public participation in
the standards-setting process. The process includes
appointing an advisory task force of outside experts,
performing research, publishing discussion documents,
and conducting public hearings.
6
GASB
 How else does GASB communicate information?
 Website—www.gasb.org. The GASB makes a variety of
resources available through its website, including up-to-date
information about current agenda projects and major recent
pronouncements, summaries of GASB pronouncements, and free
copies of proposals.
 The GASB Report. The GASB strives to keep the public informed
of developments on its projects through a monthly newsletter.
 Plain-Language Articles. Proposed and final GASB standards are
typically accompanied by an explanatory article that uses a
minimum of technical language and focuses on both the
requirements of the document and the rationale for issuing it.
7
GASB 54 –
Fund Balance Reporting and Governmental Fund Type Definitions
Stabilization arrangements may not be assigned
General ledger and financial statements may differ
Transfers not considered revenues for the purpose
of determining special revenue funds
• However, transfers are considered “inflows” for the purpose of
calculating if actual restricted/committed revenues are a
substantial portion of the funds resources
Use of special revenue funds not required
• Except general fund of component unit and if legally mandated
General Fund budgetary comparison should not
include other funds included in the General Fund for
GAAP reporting
8
GASB 57 –
OPEB Measurements by Agent Employers and Agent Plans
Permits small plans to use alternative method
regardless of the size of total agent plan members
Permits agent multiple employer plan to aggregate
such valuations
Agent plan should require participating employers
to measure on same frequency and on a common
date
Effective for fiscal year 2012
9
GASB 64 –
Derivative Investments: Application of Hedge Accounting
Termination Provisions – an amendment to GASB No. 53
Clarifies whether a hedging relationship continues
in certain circumstances
Hedgeable item – instrument that reduces risk by
offsetting changes in cash flows or fair values
Hedge accounting – requires change in fair value of
hedgeable item to be deferred
Effective for fiscal year 2012
10
GASB 60 –
Service Concession Arrangements (SCA)
Guidance for certain agreements between
governments and private entities or other
governments
GASB partnered with international standard setters
in development
Excellent flowchart included in standard
Effective for fiscal year 2013
11
GASB 60 –
Service Concession Arrangements
Use of infrastructure or other public asset is a
required element
Provides guidance on capital asset recognition and
depreciation by the government
Recognition of liabilities for obligations under the
arrangement
Guidance for governmental operators to recognize
intangible assets (right to use facility)
Note disclosure requirements
12
GASB 60 –
Service Concession Arrangements
Definition –
1) Government conveys to an operator right to provide services
through use of asset/facility in exchange for significant
consideration,
2) The operator collects fees from third parties for service
provided, and
3) The government has input on services provided by the operator
and the fees charged for services.
13
GASB 60 –
Service Concession Arrangements
Examples –
1) State transportation department enters into arrangement with a
transportation authority for the operation of a tollway. Authority
to receive and retain revenues for a period of 75 years.
2) A City enters into arrangement with a private company for the
operation of City owned golf courses. The private company
agrees to pay the City 10% of revenues for 10 years.
3) County entering into an arrangement for a City to design, build
and operate a new jail facility. The County will collect and
retain all fees for a period of 40 years.
14
GASB 60 –
Service Concession Arrangements
Not within the scope of an SCA
1) Third party designs and builds a capital asset
2) Concessions or other ancillary services operated in
conjunction with a government facility
3) Service and management arrangement services the
government would otherwise perform
15
GASB 61 –
Reporting Entity
Issued November 2010
Objective – amend component unit guidance for
specific issues which have arisen
Modifies certain requirements for inclusion of
component units
Effective for fiscal year 2013
16
GASB 61 –
Reporting Entity
New blending requirement if CU total debt to be
repaid from PG resources
“Incomplete” removed from misleading guidance
Enhanced guidance on “major” component unit
presentation
Note disclosure should focus on rationale for
inclusion rather than the criteria
 Explain which criteria apply to the component unit
17
GASB 61 –
Reporting Entity
Blended Component Unit – The financial reporting entity presented in these
financial statements consists of the Town and the Town of Old Pueblo
Municipal Property Corporation (MPC) blended component unit. The MPC, a
non-profit corporation incorporated under the laws of the State of Arizona, was
originally formed for the purpose of assisting the Town in obtaining financing
for acquiring certain water companies. The Town has a contractual obligation
for the repayment of the MPC’s Municipal Facilities Revenue Bonds, therefore
the MPC is included in the Town’s reporting entity as a blended component unit
because the component unit's total debt outstanding is expected to be repaid
entirely with resources of the Town of Old Pueblo. The activity of the MPC is
reported in the applicable water enterprise fund. Separate financial statements
are not prepared for the component unit on a stand-alone basis.
18
Additional
financial
criteria added
Component unit
flowchart
“Incomplete” removed
from criteria
Debt repayment
requirement added
19
GASB 62 –
Codification of FASB Standards
Issued December 2010
Guidance to incorporate pre-1989 FASB and related
standards into GASB’s literature
Exposure draft over 600 pages
Option to apply post-1989 FASB removed
See Basis for Conclusions for standards excluded
from the codification
Effective for fiscal year 2013
20
GASB 62 –
Codification of FASB Standards
Key areas for which guidance is provided –
• Capitalization of Interest Cost
• Statement of Net Assets Classification
• Accounting Changes and Error Corrections
• Contingencies
• Leases
• Sale of Real Estate
• Special and extraordinary items
• Inventory
21
GASB 63 –
Deferred Outflow and Inflows of Resources
Result of definitions introduced in GASB Concepts
Statement No. 4, Elements of Financial Statements
Concept of “net position” replaces “net assets”
Note disclosure required if deferred items are
aggregated on the face of the financial statements
Effective for fiscal year 2013
• Limited to GASB 53 and 60 initially
• More widespread application upon implementation of GASB 65
22
GASB 63 –
Deferred Outflow and Inflows of Resources
The elements of a statement of financial position are
defined as follows:
• Assets are resources with present service capacity that the
government presently controls.
• Liabilities are present obligations to sacrifice resources that the
government has little or no discretion to avoid.
• A deferred outflow of resources is a consumption of net assets
by the government that is applicable to a future reporting period.
• A deferred inflow of resources is an acquisition of net assets by
the government that is applicable to a future reporting period.
• Net position is the residual of all other elements presented in a
statement of financial position.
23
TOWN OF OLD PUEBLO, ARIZONA
STATEMENT OF NET POSITION
JUNE 30, 2013
Governmental
Activates
ASSETS
Current assets:
Cash and cash equivalents
Taxes receivable
Accounts receivable
Intergovernmental receivable
Total current assets
$
Noncurrent assets:
Capital assets, non-depreciable
Capital assets, depreciable (net)
Total noncurrent assets
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Accumulated decrese in fair value of hedging derivatives
LIABILITIES
Current liabilities:
Accounts payable
Accrued wages and benefits
Unearned revenue
Compensated absences
Loans payable
Revenue bonds
Total current liabilities
Noncurrent liabilities:
Compensated absences
Loans payable
Revenue bonds
Total noncurrent liabilities
Total liabilities
23,065,362
718,368
362,153
969,057
25,114,940
Business-type
Activates
$
2,190,093
458,909
22,181,101
42,597,461
718,368
2,552,246
1,427,966
47,296,041
20,656,679
124,882,390
145,539,069
170,654,009
15,342,777
79,939,857
95,282,634
117,463,735
35,999,456
204,822,247
240,821,703
288,117,744
392,398
2,472,096
2,864,494
2,781,875
782,563
128,180
1,234,551
2,513,133
304,820
7,745,122
697,374
95,129
114,293
307,670
2,370,180
3,584,646
3,479,249
877,692
128,180
1,348,844
2,820,803
2,675,000
11,329,768
58,878
5,165,426
48,367,660
53,591,964
57,176,610
407,084
5,165,426
55,281,943
60,854,453
72,184,221
1,990,112
1,990,112
1,990,112
1,990,112
40,304,244
173,887,638
20,464,865
60,769,109
626,098
3,654,948
4,426,071
34,212,350
216,807,105
348,206
6,914,283
7,262,489
15,007,611
DEFERRED INFLOWS OF RESOURCES
Deferred service concession arragement receipts
Total deferred inflows of resources
NET POSITION
Net investment in capital assets
Restricted for:
Public safety
Highways and streets
Debt service
Unrestricted
Total net position
133,191,796
$
626,098
3,654,948
4,426,071
13,747,485
155,646,398
$
19,532,099
Total
$
$
24
GASB 65 –
Items Previously Reported as Assets and Liabilities
Expands the use of deferred inflows and outflows of
resources to other items
Certain elements apply to governmental fund
statements
Use of term “deferred” limited to deferred
outflows/inflows of resources
Does not impact fund balance reporting
Effective for fiscal year 2014
25
GASB 65 –
Items Previously Reported as Assets and Liabilities
Application items common to local governments
• Deferred outflow – difference between carrying value
of debt and the amount to refunded debt (if debit)
• Deferred inflow – “unavailable” related to the
application of modified accrual accounting
• Neither an asset or deferred outflow – debt issuance
costs to be reported as an expense
26
TOWN OF OLD PUEBLO, ARIZONA
STATEMENT OF NET POSITION
JUNE 30, 2014
ASSETS
Current assets:
Cash and cash equivalents
Taxes receivable
Accounts receivable
Intergovernmental receivable
Total current assets
Governmental
Activates
Business-type
Activates
$
$
Noncurrent assets:
Capital assets, non-depreciable
Capital assets, depreciable (net)
Total noncurrent assets
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Deferred item on refunded debt
LIABILITIES
Current liabilities:
Accounts payable
Accrued wages and benefits
Unearned revenue
Compensated absences
Loans payable
Revenue bonds
Total current liabilities
Noncurrent liabilities:
Compensated absences
Loans payable
Revenue bonds
Total noncurrent liabilities
Total liabilities
2,190,093
458,909
22,181,101
42,597,461
718,368
2,552,246
1,427,966
47,296,041
20,656,679
124,882,390
145,539,069
170,654,009
15,342,777
79,939,857
95,282,634
117,463,735
35,999,456
204,822,247
240,821,703
288,117,744
392,398
2,472,096
2,864,494
2,781,875
782,563
128,180
1,234,551
2,513,133
304,820
7,745,122
697,374
95,129
114,293
307,670
2,370,180
3,584,646
3,479,249
877,692
128,180
1,348,844
2,820,803
2,675,000
11,329,768
6,914,283
7,262,489
15,007,611
58,878
5,165,426
48,367,660
53,591,964
57,176,610
407,084
5,165,426
55,281,943
60,854,453
72,184,221
-
1,990,112
1,990,112
1,990,112
1,990,112
132,956,156
40,005,568
172,961,724
20,464,865
60,470,433
626,098
3,654,948
4,426,071
34,212,350
215,881,191
348,206
DEFERRED INFLOWS OF RESOURCES
Proceeds from sale of future revenues
Total deferred inflows of resources
NET POSITION
Net investment in capital assets
Restricted for:
Public safety
Highways and streets
Debt service
Unrestricted
Total net position
23,065,362
718,368
362,153
969,057
25,114,940
$
626,098
3,654,948
4,426,071
13,747,485
155,410,758
$
19,532,099
Total
$
$
27
TOWN OF OLD PUEBLO, ARIZONA
BALANCE SHEET - GOVERNMENTAL FUNDS
JUNE 30, 2014
General Fund
Receipt of
expenditure-driven
grants in advance of
incurred eligible costs
ASSETS
Cash and cash equivalents
Taxes receivable
Accounts receivable
Intergovernmental receivable
Special assessments
Prepaid items
Total assets
LIABILITIES, DEFERRED INFLOWS
OF RESOURCES AND FUND BALANCES
Liabilities:
Accounts payable
Accrued wages and benefits
Intergovernmental payable
Advance from grantor
Customer deposits payable
Total liabilities
$
$
$
Deferred inflows of resources:
Deferred grant revenues
Total deferred inflows of resources
Reimbursement
grants received after
the period of
availability
11,180
14,224,638
1,944,997
687,168
361,283
128,180
95,872
3,217,500
$
14,224,638
$
$
4,138,674
14,993
$
4,143,104
$
4,153,667
$
$
414,236
73,920
$
324,735
16,204
$
$
20,588,837
718,368
362,153
840,871
11,180
22,521,409
488,156
571,195
2,683,968
777,292
361,283
358,436
95,872
4,276,851
15,777
15,777
55,889
55,889
146,881
146,881
3,639,171
2,685,879
840,704
3,639,171
3,526,583
6,325,050
840,704
1,769,333
9,162,590
18,097,677
230,256
1,769,333
9,162,590
10,931,923
$
3,887,479
Total
Governmental
Funds
7,551
248,074
75,215
75,215
Fund balances:
Restricted
Committed
Assigned
Unassigned
Total fund balances
Total liabilities, deferred inflows and fund balances
12,562,684
718,368
354,602
577,804
HURF
Non-Major
Governmental
Funds
4,143,104
$
4,153,667
$
27,989,306
28
GASB 66 –
Technical Corrections – 2012
an amendment to GASB Statements No. 10 and No. 62
Eliminates requirement that risk financing activities
be accounting for in either the general fund or an
internal service fund
• Special revenues funds may be used
Corrections to GASB No. 62 for –
• Operating leases
• Purchase of a loan
• Servicing fees
Effective for fiscal year 2014
29
Pension Accounting and Financial Reporting
Exposure Draft
Governments will be required to report their
calculated share of the pension plan’s unfunded
obligations
Measurement is accounting-based rather than
funding-based
Will be applicable to many local governments
Numerous comment letters provided to GASB
Additional disclosures regarding funding process
deliberated by ultimately not adopted
Cleared for issuance
30
Government Combinations and Disposals
Exposure Draft
Specific accounting and financial reporting
guidance for mergers, acquisitions, and transfer of
operations
Prior guidance provided by Accounting Principles
Board (APB) Opinion No. 16
Note disclosure guidance
Gains or losses on disposal of operations reported
as a special item
Comment deadline is June 15, 2012
Planned effective date for fiscal year 2015
31
Economic Condition Reporting: Financial Projections
Preliminary Views
Propose presentation of certain economic condition
information as required supplementary information
Format of information presented similar to statistical
schedules of a CAFR
Appropriateness as RSI, impact on timeliness of
reporting, and cost-benefits among factors
considered
Strong “cautionary note” prior to information is
being proposed
Currently in deliberation
32
Economic Condition Reporting: Financial Projections
Preliminary Views
Components of fiscal sustainability information
1) Projections of cash inflows
2) Projections of cash outflows
3) Projections of financial obligations (bonds, pensions, long-term
contracts, etc.)
4) Projections of annual debt service payments (principal and
interest)
5) Narrative discussion of major intergovernmental service
interdependencies
33
Other GASB Projects
• In deliberation –
•
•
•
•
•
• In research –
Conceptual framework
OPEB accounting and reporting
Fair value measurements
Financial guarantees
GAAP hierarchy
•
•
•
•
Electronic financial reporting
Fiduciary responsibilities
Lease accounting
Tax abatement disclosures
• Potential projects –
•
•
•
•
•
Interim reporting
Popular reporting
Reporting unit presentations
In-kind contributions
Present value
34
Thank you
Corey Arvizu
Heinfeld, Meech & Co.
520-742-2611
carvizu@heinfeldmeech.com
35