West Virginia Higher
Education Policy Commission
FASB-GASB Differences
October 13. 2004
Larry Goldstein, President
Campus Strategies
October 13, 2004
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Agenda
Background
Philosophy
Nature of Differences
Specific Differences
Commentary
Questions
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Background
AICPA College & University Audit Guide
(1973)
FASB’s not-for-profit agenda
– FASB 93 Depreciation (1987 / 1991)
– FASB 116 Contributions (1993 / 1997)
– FASB 117 Reporting model (1993 / 1997)
– FASB 124 Investments (1995 / 1997)
– Combinations (?)…
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Background (contd.)
AICPA Not-for-Profit Audit Guide (1997)
GASB college and university agenda
– 1984 Jurisdiction agreement
– GASB 3 Deposits (1986 / 1987)
– GASB 8 Depreciation (1988 / 1988)
– GASB 14 Reporting entity (1991 / 1994)
– GASB 15 Reporting model (1991 / 1993)
– GASB 19 Pell (1993 / 1994)…
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Background (contd.)
GASB college and university agenda
– GASB 33 Nonexchange transactions
(1998 / 2001)
– GASB 35 Separate reporting model (1999 /
2002)
– GASB 39 Affiliated organizations (2002 /
2004)
AICPA State & Local Audit Guide (2002 /
varied, based on GASB 34 implementation)
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Philosophy
FASB
– Overall focus is decision utility
– Conceptual framework
Objectives for business (1—1978) and
NFP (4—1980)
Qualitative characteristics (2—1980)
Recognition and measurement (5—1984)
Definition of elements (6—1985)
Cash flow and present value (7—2000)
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Philosophy (contd.)
GASB
– Overall focus is accountability
– Conceptual framework
Objectives (1—1987)
Service efforts and accomplishments
(2—1994)
Current agenda includes concept projects
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Areas of Potential
Differences
Recognition
Measurement
Display
Disclosure
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Contributed Services
FASB
– Specific recognition criteria
GASB
– No recognition criteria
Effect
– Gift revenues
– Expenses
– No impact on net revenues
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Restricted Cash Contributions
FASB
– Recognize either as temporarily or
permanently restricted
GASB
– Recognize as deferred revenue if use
restricted to future period
Effect
– Liabilities
– Gift revenues
– Net assets
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Endowment Pledges
FASB
– Recognize as permanently restricted
GASB
– Prohibits recognition of endowment pledges
Effect
– Assets
– Gift revenues
– Net assets
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Restricted
Non-endowment Pledges
FASB
– Recognize as temporarily restricted revenue
GASB
– Prohibits recognition if for future period use
Effect
– Assets
– Gift revenues
– Net assets
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Discounting of Pledges
FASB
– Requires discounting if collectible beyond
one year
GASB
– Allows, but does not require, discounting
Effect
– Gift revenues
– Assets
– Net assets
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Investment Income
GASB
– Investment income and realized investment
gains / losses must be reported as single net
amount
Net unrealized gains and losses can be
displayed separately using a prescribed
label
– Net increase (decrease) in the fair value
of investments
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Investment Income (contd.)
GASB
– Investment income cannot be operating
revenue
Exception for interest on program loans
Exception for pooled-investment entities
FASB
– No similar requirements related to
investment income display
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Pell Grants
FASB
– Balance sheet transaction
GASB
– Activities statement transaction
Effect
– Grants and contracts revenue
– Net tuition and auxiliaries revenue
– Liabilities and net assets
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Perkins Loan
FASB
– Balance sheet transaction
GASB
– Balance sheet or activities statement
Effect
– If activities statement
Grants and contracts revenue
Liabilities
Net assets
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Funds Held in Trust by Others
FASB
– Include as assets
GASB
– Only include via GASB 39
Effect
– Assets
– Revenues
– Net assets
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Restrictions Definition
FASB
– Only donors can restrict
GASB
– Any external party
Donors, creditors, legislation, constitution
Effect
– Categorization of net assets
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Use of Restricted Funds
FASB
– First dollar release mandated
GASB
– First dollar release optional
Effect
– Categorization of net assets
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OPEB & Pensions
FASB
– Expense and liability calculated consistently
using FASB methodology
GASB
– Expense and liability calculated consistently
using GASB methodology
Effect
– Measurement / recognition differences
impact expense, liability, and net assets
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Software
FASB
– Requirement to capitalize
GASB
– No requirement to capitalize; intangible
assets project pending
Effect
– Assets
– Expenses
– Net assets
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Impairment
FASB
– Requires cash flow approach
GASB
– Requires service utility approach
Effect
– Assets
– Expenses and losses
– Net assets
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MD&A
FASB
– No requirement related to MD&A
GASB
– Prescriptive requirement for MD&A
Effect
– No substantive effect, although potential
concerns regarding financial transparency
for private institutions
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Disaggregation
FASB
– Allows line of business (e.g., academic,
auxiliaries, etc.) or net asset class (e.g.,
unrestricted, temporarily restricted,
permanently restricted) disaggregation
GASB
– Line of business only; not net asset class
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Balance Sheet Display
GASB requires classified balance sheet (i.e.,
current and noncurrent)
FASB does not have a classification
requirement
FASB has three net asset classes
– Unrestricted
– Temporarily restricted
– Permanently restricted…
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Balance Sheet Display (contd.)
GASB has three net asset classes
– Capital assets, net of related debt
– Restricted
Expendable
Nonexpendable
– Unrestricted…
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Balance Sheet Display (contd.)
GASB prohibits display of net asset
designations
– Disclosure in notes is okay
GASB requires disclosure of nondepreciable
capital assets separate from depreciable
capital assets
FASB has no specific requirements related to
display of capital assets
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Cash Flow Statement
FASB
– Indirect method allowed
– Three categories
Operating
Investing
Financing…
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Cash Flow Statement (contd.)
GASB
– Direct method mandated
– Mandates reconciliation of operating cash to
SRECNA operating loss
– Four categories
Operating
Investing
Capital and related financing
Noncapital financing
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Activities Statement
Reclassifications
– FASB treats all expenses as unrestricted
Forces reclassification of resources from
temporarily restricted to unrestricted
– GASB has no similar concept
Expenses can be unrestricted, restricted,
operating, nonoperating…
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Activities Statement (contd.)
Operating measure
– GASB requires (somewhat) prescriptive
operating measure
State appropriations, gifts, investment
income
– FASB allows self-defined operating measure
Disclosure required if not obvious…
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Activities Statement (contd.)
Expense categories
– FASB allows natural but requires functional,
either through display or in notes
– GASB allows natural or functional
NACUBO encourages a matrix
reconciling functional and natural
expenses in notes…
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Activities Statement (contd.)
Specific expenses
– FASB requires allocation of certain expenses
O&M of plant
Depreciation
Interest
GASB allows allocation of depreciation
– GASB precludes recognition of bad debt
expense
Exception for loans…
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Activities Statement (contd.)
Exception items
– FASB
Extraordinary (i.e., unusual and
infrequent)
– GASB
Extraordinary (same as above)
Special (i.e., unusual and infrequent but
within management’s control)
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FASB-GASB Differences
Questions
~
Thank You!
Larry.Goldstein@Campus-Strategies.com
(540) 942-9146
October 13, 2004
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