North Carolina
Office of the State Controller
Financial Reporting Update
GASB 62 Effective for FY 2013
March 15, 2013 – Contact: Terri Noblin, Manager, Accounting & Financial Reporting – 919-707-0526
In December 2010, the Governmental Accounting Standards Board (GASB) issued GASB Statement No.
62, Codification of Accounting and Financial Reporting Guidance Contained in Pre‐November 30, 1989
FASB and AICPA Pronouncements. This pronouncement significantly reduces the need to rely on
sources outside of the GASB’s literature to locate the necessary accounting guidance for the
governmental environment.
GASB 62 is effective for the fiscal year ending June 30, 2013. This new standard incorporates into the
GASB’s authoritative literature certain FASB and AICPA pronouncements issued on or before
November 30, 1989, which do not conflict with or contradict GASB pronouncements. The guidance
generally has been taken “as-is” from the original FASB and AICPA pronouncements, except a few
provisions that have been modified where necessary to relate specifically to the governmental
environment.
By consolidating this GAAP for state and local governments into a single codification, the GASB is
making the process of identifying relevant “category (a)” literature much less complex and timeconsuming, while simultaneously improving the consistency of applying the literature. Identifying the
applicable guidance will no longer be a daunting task for preparers and auditors. Because financial
statement preparers and auditors would no longer have to search through various sources to determine
which pronouncements apply to state and local governments, more consistent application of the relevant
guidance is expected to result. Users of financial statements would benefit from this enhanced
consistency.
The standards section of GASB 62 contains more than 500 paragraphs. Nonetheless, the implementation
of this new standard should have minimal impact on most state and local governments.
To gain additional understanding of GASB 62, please review the following attachments and external
links:
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GASB “plain language” article on GASB 62 - Attachment 1
AICPA Government Brief on GASB 62 – Attachment 2
Article on NACUBO website – New GASB Standard Codifies Accounting Literature
The GASB homepage from which you may access the complete GASB 62 pronouncement as
well other GASB material http://gasb.org
Thank you for your time and attention to this important change. Questions regarding this specific update
should be directed to Prabhavathi Vijayaraghavan at 919-707-0527 or
Prabhavathi.vijayaraghavan@osc.nc.gov.
Governmental Accounting Standards Board
of the Financial Accounting Foundation
March 2011
GASB Statement Codifies FASB and AICPA Pronouncements
Applicable to State and Local Governments
For many years, preparers, auditors, and users of state and local government financial
statements have had to refer to the literature of multiple organizations to locate the relevant
accounting and financial reporting standards. They have to look not just to the Governmental
Accounting Standards Board (GASB)—the recognized setter of generally accepted accounting
principles (GAAP) for state and local governments—but also to the Financial Accounting
Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA).
GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance
Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which was issued
by the GASB on December 30, 2010, significantly reduces the need to rely on sources outside
of the GASB’s literature to locate the necessary accounting guidance for the governmental
environment.
This Statement allows those who prepare or audit financial statements, or reference
standards for state and local governments, to access the applicable guidance with greater
ease and certainty. The guidance contained in Statement 62 brings the top category of
authoritative governmental accounting and financial reporting literature—“category (a)”
GAAP—together in a single publication. The guidance generally has been taken “as-is” from
the original FASB and AICPA pronouncements, though a few provisions have been modified
where necessary to relate specifically to the governmental environment.
What Does Statement 62 Do?
Statement 62 specifically identifies and consolidates the accounting and financial
reporting provisions that apply to state and local governments. Prior to the issuance of
Statement 62, GASB Statements No. 20, Accounting and Financial Reporting for Proprietary
Funds and Other Governmental Entities That Use Proprietary Fund Accounting, and No. 34,
Basic Financial Statements—and Management's Discussion and Analysis—for State and
Local Governments, had required that governments apply pre-November 30, 1989, FASB and
AICPA pronouncements to accrual-based financial statements that do not conflict with or
contradict GASB standards. However, the applicable pronouncements were not specifically
identified and practitioners had to use professional judgment in applying them.
The November 30, 1989 date is significant because that is the date of the Jurisdiction
Determination, in which the trustees of the Financial Accounting Foundation reaffirmed the
1984 jurisdiction agreement which established the GASB’s status as the standards setter for
all state and local governmental entities. The jurisdiction agreement distinguished those
entities that would follow GASB standards from those that would follow FASB standards.
Why Was Statement 62 Issued?
As previously noted, prior to the issuance of Statement 62, financial statement
preparers had to identify which provisions within the FASB and AICPA pronouncements were
applicable to them, generally without authoritative guidance telling them how to do so. The
application of this process varied because it depended on individual professional judgment
regarding what provisions are considered conflicting and contradictory. The task was further
complicated by the fact that applicable provisions could be entire FASB or AICPA
pronouncements or just a handful of paragraphs within a pronouncement.
Over the years, the GASB staff has answered many technical inquiries regarding the
application of FASB pronouncements. The staff responses, however, are fact- and
circumstances-specific and, therefore, have not been been broadly distributed to the GASB’s
constituents as part of an authoritative document.
The need for Statement 62 became more pressing with the July 1, 2009, launch of the
FASB Accounting Standards Codification. The FASB codification supersedes all previous
FASB pronouncements as the official authoritative literature—in fact, individual FASB and
AICPA pronouncements became nonauthoritative literature for the private sector when the
new FASB Codification took effect.
The practical effect has been that the pre-November 30, 1989, authoritative standards
are no longer readily available in some cases to many GASB constituents. The project that
culminated in Statement 62 was designed not only to provide clear guidance for those needing
to apply these provisions, but to make that guidance easily accessible at the same time. By
identifying the provisions applicable to governments within the FASB and AICPA authoritative
literature, the issuance of the guidance contained in Statement 62 is expected to be of
significant value.
By consolidating this GAAP for state and local governments into a single codification,
the GASB is making the process of identifying relevant “category (a)” literature much less
complex and time-consuming, while simultaneously improving the consistency of applying the
literature. Identifying the applicable guidance will no longer be a daunting task for preparers
and auditors. Because financial statement preparers and auditors would no longer have to
search through various sources to determine which pronouncements apply to state and local
governments, more consistent application of the relevant guidance is expected to result. Users
of financial statements would benefit from this enhanced consistency.
What Topics Does the Statement Address?
Statement 62 addresses more than 120 FASB and AICPA pronouncements that date
back several decades and covers 30 accounting and financial reporting topic areas. A number
of key areas are highlighted below—specifically, those that are most commonly applied by
governments and that have the greatest impact on general purpose governmental accounting
and financial reporting for the widest range of governmental entities. Topics addressed
include:
•
Accounting changes and error corrections—This guidance defines various types of
accounting changes, such as changes in accounting principle or estimate, and provides
guidance for determining the manner of reporting each type. It also covers reporting a
correction of an error in previously issued financial statements.
•
Capitalization of interest costs—This section includes guidance for capitalizing interest as
part of the historical cost of constructing certain business-type activity assets.
•
Contingencies—This guidance addresses circumstances in which a loss contingency
should be recognized as a liability or disclosed in the notes to the financial statements.
•
Extinguishments of debt—This section provides guidance for when certain types of
governmental debt is considered to be extinguished.
•
Imputation of interest costs—This section includes guidance on when and how to impute
interest costs relating to the difference between the face amount and the present value of
certain receivables or payables.
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Investments in common stock—This section explains how to apply the equity method to
valuing these investments.
•
Leases—This section incorporates standards for capital and operating lease agreements
that previously were only referenced in the GASB’s literature.
•
Regulated operations—This section provides guidance for preparing general purpose
financial statements for many public utilities.
•
Special and extraordinary items—This section defines unusual in nature and infrequent in
occurrence as they are used in the definitions of special and extraordinary items.
•
Statement of net assets classification—This guidance defines and provides examples of
what may be included in or excluded from current assets and current liabilities in a
classified format.
When Does the Statement Take Effect?
Governments are required to implement the requirements of Statement 62 for financial
statements for periods beginning after December 15, 2011. Earlier application is encouraged.
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Order Statement 62
Read the news release
Read more about the GASB codification efforts
June 30, 2011
Government Brief
From the Business, Industry & Government Team
GASB Standard Identifies
Applicable FASB and AICPA
Accounting Literature
By: Terry K. Patton, Ph.D., CPA, CGFM
Robert Madera Distinguished Professor of Accounting, Midwestern
State University
Jacob Springstead, Graduate Student, Midwestern State University
OVERVIEW
The Governmental Accounting Standards
Board (GASB) issued Statement No. 62,
Codification of Accounting and Financial
Reporting Guidance Contained in PreNovember 30, 1989 FASB and AICPA
Pronouncements, in December 2010. It should
make it easier for governmental financial
statement preparers and auditors to find
relevant Financial Accounting Standards Board
(FASB) and American Institute of Certified
Public Accountants (AICPA) accounting and
financial reporting literature by placing all such
applicable pre-November 30, 1989 (hereafter,
pre-1989) FASB and AICPA pronouncements
within the authoritative GASB Literature.
Statement No. 62 is applicable for financial
reporting periods beginning after December
15, 2011.
The reason that the pre-1989 FASB and AICPA
pronouncements are important to government
financial statement preparers is found in
paragraph 17 of Statement 34, which states,
in part:
Reporting for governmental and
business-type activities should be based
on all applicable GASB pronouncements
as well as the following pronouncements
issued on or before November 30,
1989, unless those pronouncements
conflict with or contradict GASB
pronouncements:
a. Financial Accounting Standards Board
(FASB) Statements and Interpretations
b. Accounting Principles Board (APB)
Opinions
c. Accounting Research Bulletins (ARBs)
of the Committee on Accounting
Procedure.
An important factor in the GASB’s decision
to issue Statement No. 62 was the FASB’s
decision to codify all of its authoritative
literature in the FASB Accounting Standards
Codification. The FASB no longer publishes
individual Statements and considers previously
issued Statements as nonauthoritative.
Instead, the FASB now simply amends its
Codification when it approves changes to
its authoritative literature. The new FASB
Codification would make it much more difficult
for governmental accountants and auditors to
find the applicable pre-1989 FASB and AICPA
accounting literature as it generally is not
separately identifiable from other authoritative
portions of the Codification. Fortunately, GASB
Statement No. 62 not only preserves the FASB
and AICPA literature that the GASB considers
authoritative, but more importantly, identifies
the portion of the pre-1989 literature that the
GASB believes is applicable to governments.
aicpa.org/BIG
Eliminates GASB Statement No. 20 Option
GASB Statement No. 62 also supersedes GASB
Statement No. 20, Accounting and Financial
Reporting for Proprietary Funds and Other
Governmental Entities that Use Proprietary Fund
Accounting, and thus, eliminates the election in
Statement No. 20, paragraph 7, which allowed
enterprise funds and business-type activities to
apply post-November 30, 1989 FASB Statements
and Interpretations as long as they did not conflict
with or contradict GASB pronouncements.
GASB Statement No. 20 was initially created in
September 1993 to establish interim guidance for
reporting proprietary activities pending further
research by GASB. The reason for allowing the
election was to facilitate comparability between
governments’ financial statements and similar
entities in the private sector. The majority of
governmental entities that elected to follow
paragraph 7 of Statement No. 20, did so because
GASB had yet to fully address accounting issues
such as defined other postemployment benefits,
derivatives, and investments. The GASB has since
issued standards for these issues. Although not
considered authoritative, government financial
statements preparers may still wish to consult
the FASB literature for accounting and financial
reporting issues for which the GASB has not issued
pronouncements (see GASB Statement No, 55,
The Hierarchy of Generally Accepted Accounting
Principles for State and Local Governments,
paragraphs 5 and 6).
Topics Considered in Statement No. 62
The GASB’s approach to incorporating authoritative
FASB and AICPA accounting and reporting
literature was to adopt the accounting and financial
reporting requirements essentially as they are in
the pre-1989 FASB and AICPA pronouncements,
with modification to the language as appropriate
to recognize the effects of the governmental
environment, but without affecting the substance of
the provisions. Statement No. 62 is not intended
to establish new reporting requirements, but simply
incorporate FASB and AICPA pronouncements that
are applicable to state and local governments into
the GASB literature.
After examining the authoritative FASB and
AICPA literature, the GASB included sections in
GASB Statement No. 62 on the following broad
topics. The accounting and financial reporting
requirements apply to governmental activities,
business-type activities, and proprietary funds, but
not governmental funds, unless otherwise noted.
• Capitalization of interest cost provisions (apply
only to business-type activities and enterprise
funds)
• Revenue recognition for exchange transactions
(when the right of return exists applies only to
business-type activities and proprietary funds)
• Statement of net assets classification
• Special and extraordinary items (also apply to
governmental funds)
• Comparative financial statements
• Related parties disclosures (also apply to
governmental funds)
• Prior-period adjustments
• Accounting changes and error corrections
• Disclosure of accounting policies
• Contingencies (also apply to governmental
funds)
• Construction-type contracts—long-term
• Troubled debt restructuring
• Foreign currency transactions
• Interest costs—imputation
• Inventory (apply only to business-type activities
and proprietary funds)
• Investments in common stock
• Leases (also apply to governmental funds)
• Nonmonetary transactions
• Sales of real estate
• Costs incurred to sell and rent real estate
projects, including initial rental operations
• Costs and initial rental operations of real estate
projects
• Research and development arrangements
• Broadcasters
• Insurance entities—other than public entity risk
pools
• Lending activities
• Rate-regulated entities
• Right of offset.
DISCLAIMER:
This publication has not been approved, disapproved or otherwise acted upon by any senior technical committees of, and does not represent an official position of, the
American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal,
accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
aicpa.org/BIG
Terry K. Patton
Terry Patton, Ph.D., CPA, CGFM, is the Robert
Madera Distinguished Professor of Accounting
at Midwestern State University in Wichita Falls,
Texas. He is the author of numerous articles
on governmental accounting; co-author of a
leading governmental accounting textbook,
Governmental and Nonprofit Accounting, 9th
Edition (Pearson–Prentice Hall); and was coauthor on PPC’s Guide to Governmental Financial
Reporting Model: Implementing GASBS No. 34.
Previously, Dr. Patton was the Research Manager
at the Governmental Accounting Standards
Board (GASB). In his eight years at the GASB,
he was part of the project team on numerous
GASB Standards including major projects such
as GASB Statement No. 34, Basic Financial
Statements—and Management’s Discussion and
Analysis—for State and Local Governments and
GASB Statement No. 45, Accounting and Financial
Reporting by Employers for Postemployment
Benefits Other Than Pensions.
DISCLAIMER:
This publication has not been approved, disapproved or otherwise acted upon by any senior technical committees of, and does not represent an official position of, the
American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal,
accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
aicpa.org/BIG