GASB Update
Lisa R. Parker, CPA, CGMA
Senior Project Manager
Governmental Accounting Standards Board
The views expressed in this presentation are those of Ms. Parker.
Official positions of the GASB on accounting matters are reached
only after extensive due process and deliberation.
Current Board Members
Member
Dave Vaudt, Chair
Jan Sylvis, Vice Chair
Jim Brown
Bill Fish
Michael Granof
David Sundstrom
Brian Caputo
Term Expires
2020—single term
2017
2017—first term
2016—first term
2020
2019
2019—first term
2
GASB’s Website
www.gasb.org
www.gasb.org
4
Website Resources
 Free download of Statements, Interpretations, Concepts
Statements and other pronouncements
 Free access to the basic view of the Codification (GARS)
 Free copies of proposals
 Up-to-date information on current projects
 Articles and Fact Sheets about proposed and final
pronouncements
 Form for submitting technical questions
 Educational materials, including podcasts
 Electronic newsletter and other resources for users
5
Plain-Language Materials
 The GASB is committed to communicating in plain
language with constituents about its standards and
standards-setting activities.
 Plain-language articles accompany major proposals and
final pronouncements
 Fact Sheets are prepared for complex projects to answer
commonly raised questions
- Series of 8 fact sheets on Statements 67 & 68 on pensions
6
Where are we now?
Effective Dates—June 30
 2015
- Statement 68—pension accounting for employers and
nonemployer contributing entities
- Statement 69—government combinations
- Statement 71—pension transition
 2016
- Statement 72—fair value measurement and application
- Statement 76—GAAP hierarchy
 2017
- Statement 73—pensions not within the scope of Statement
68 and amendments to Statements 67 and 68
- Statement 74—financial reporting by OPEB plans
- Statement 77—tax abatement disclosures
 2018
- Statement 75—OPEB accounting for employers and
nonemployer contributing entities
8
Effective Dates—December 31
 2015
- Statement 68—pension accounting for employer and
nonemployer contributing entities
- Statement 71—pension transition
 2016
- Statement 72—fair value measurement and application
- Statement 76—GAAP hierarchy
- Statement 77—tax abatement disclosures
 2017
- Statement 73—pensions not within the scope of Statement
68 and amendments to Statements 67 and 68
- Statement 74—financial reporting by OPEB plans
 2018
- Statement 75—OPEB accounting for employers and
nonemployer contributing entities
9
Fair Value Measurement and
Application: Statement 72
10
Overview
 What: The Board issued Statement 72 to update the
existing standards on fair value (primarily Statement 31)
 Why: Review of existing standards found opportunities to
improve the measurement of resources available to
governments, and to increase comparability and
accountability
 When: Effective for fiscal years beginning after June 15,
2015
11
Statement 72 Roadmap
The first section of the Statement is conceptual
• Definition of Fair Value
• Measurement techniques, approaches, fair value hierarchy
The second section of the Statement is application
• What should be reported at fair value
• What should be disclosed for fair value measurements
12
Investment Definition
 A security or other asset that a government holds primarily
for the purpose of income or profit and with a present
service capacity that is based solely on its ability to
generate cash or to be sold to generate cash
- Service capacity refers to a government’s mission to provide
services
- Held primarily for income or profit—acquired first and foremost
for future income and profit
13
Investment Measurement
(Fair Value Application)
 Assets that meet the definition of an investment generally
should be measured at fair value
- Alternative investments
- Equity securities, stock warrants, and stock rights that do not have readily
determinable fair values
 Provided such investment-types are not reported according to the equity
method
- Commingled investment pools that are not government sponsored
- Invested securities lending collateral
- Intangible assets
- Land and land rights
- Real estate
- Lending assets
If they meet the
definition of an
investment
- Natural resource assets
14
Investments Not Reported at Fair Value
 Money market investments and participating interest-earning
investment contracts that have a remaining maturity at time of purchase
of one year or less, reported by governments other than external
investment pools
 Investments in 2a7-like pools
 Investments in life insurance. Investments in life settlement contracts,
however, should be at fair value
 Investments in common stock that meet the criteria for applying the
equity method
- Investments in common stock held by endowments as well as investments in
certain entities that calculate net asset value per share are ineligible for the
equity method.
 Non-participating interest earning investment contracts
 Unallocated insurance contracts
 Synthetic guaranteed investment contracts that are fully benefit
responsive
15
Fair Value Definition
 The price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date.
- An exit price
 Other characteristics of fair value
- Market-based
- Based on a government’s principal or most advantageous
market
 Fair value is not an option
16
Valuation Techniques
 Apply valuation technique(s) that best represents fair
value in the circumstances
- Market approach – Using prices and other relevant
information generated by market transactions involving
identical or similar assets or liabilities
- Cost approach – Amount that would be required currently
to replace the service capacity of an asset
- Income approach – Converts expected future amounts (for
example, cash flows) to a single current amount (that is,
discounted)
 Revisions due to a change in valuation technique(s) are
considered a change in accounting estimate
17
Inputs
 Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities, most reliable
 Level 2: quoted prices for similar assets or liabilities,
quoted prices for identical or similar assets or liabilities in
markets that are not active, or other than quoted prices that
are observable
 Level 3: unobservable inputs, least reliable
18
Measurement—Net Asset Value Per Share
(NAV)
 Measuring fair value of investments in certain entities that
calculate net asset value (NAV) per share or its equivalent
 NAV per share may be used as a practical expedient to
estimate fair value
- Adjustment to NAV per share amount may be necessary to be
consistent with measurement principles
- May be applied on an investment-by-investment basis but
must be applied consistently to fair value measurement of the
government’s entire position in a particular investment
 If sale of a portion of an investment at an amount different
from net asset value per share is probable, the practical
expedient may not be applied
19
Application of Acquisition Value
 Acquisition value (an entry price) replaces fair value for the
following:
-
Donated capital assets
Donated works of art, historical treasures, and similar assets
Capital assets acquired through a nonexchange transaction
Capital assets received through a service concession
arrangement
20
Disclosures
 The following information for each class or type of assets
and/or liabilities measured at fair value should be disclosed:
- The fair value measurement at the end of the reporting period and for
nonrecurring fair value measurements, the reasons for the
measurement
- The level of the fair value hierarchy within which the fair value
measurements are categorized in their entirety (Level 1, 2, or 3)
- A description of the valuation technique(s)
21
NAV Disclosures
 Disclosures for investments in certain entities that calculate
NAV per share (or its equivalent)
- Information that helps users of its financial statements to
understand the nature and risks of the investments
- Information on whether the investments are probable of being
sold at amounts different from net asset value per share (or its
equivalent)
22
Other Postemployment Benefits:
Statements 74 and 75
23
Overview
 What: The Board issued Statements 74 (plans) and 75
(employers), making OPEB accounting and financial
reporting consistent with the pension standards in
Statements 67 and 68
 Why: Pension and OPEB standards were updated
subsequent to a review of the effectiveness of the
standards – objective was to establish a consistent set of
standards for all postemployment benefits, providing more
transparent reporting of the liability and more useful
information about the liability and costs of benefits
 When: Effective for periods beginning after June 15, 2016
(plans) and June 15, 2017 (employers)
24
Plan and Asset Reporting
 Scope includes defined benefit and defined contribution
OPEB plans administered through trusts that meet specified
criteria
 Also addresses assets accumulated for purposes of
providing OPEB through defined benefit OPEB plans that
are not administered through trusts that meet the criteria
- Assets reported as assets in employer’s governmental/
proprietary funds
- Assets held for other government reported in an agency fund
 Few changes from Statement 43 for financial statement
recognition
 Notes/RSI changes primarily to reflect changes in
measurement of defined benefit liabilities of employers
25
Scope & Applicability
 Applies same definition of OPEB as used in Statement 45
- All postemployment healthcare benefits
- Other forms of postemployment benefits not provided through
a pension plan
 Addresses both defined benefit OPEB and defined
contribution OPEB
 Applies to employers and nonemployer contributing entities
that have a legal obligation to make contributions directly to
an OPEB plan or to make benefit payments as those
payments come due
- Special funding situations
- Other circumstances
26
Liability to Employees for OPEB
 Based on total OPEB liability—the portion of the actuarial
present value of projected benefit payments that is
attributed to past periods of employee service
 Is OPEB administered through a trust that meets the
specified criteria?
- Yes—recognize net OPEB liability (total OPEB liability, net of
OPEB plan fiduciary net position)
- No—recognize total OPEB liability
 Employer’s liability to employees for OPEB measured as of
a date no earlier than the end of the employer’s prior fiscal
year and no later than the employer’s current fiscal year
- Based on an actuarial valuation obtained at least biennially no
more than 30 months and 1 day earlier than the employer’s
most recent fiscal year-end
27
Measurement of the Total OPEB Liability—
General Approach
 Three broad steps
- Project benefit payments
- Discount projected benefit payments to actuarial present value
- Attribute actuarial present value to periods
 Methods and assumptions
- Generally, assumptions in conformity with Actuarial Standards
of Practice
28
Measurement of the Total OPEB Liability:
Projections of OPEB Payments
 Based on claims costs or age-adjusted premiums approximating
claims costs, in accordance with Actuarial Standards of Practice
 Not reduced by amounts expected to be received for making
benefit payments unless payments are providing Medicare
benefits
 Consider legal or contractual caps if determined to be effective
 Alternative measurement method may be applied if fewer than
100 employees (active and inactive) are provided benefits
through plan as of the beginning of the measurement period
- Generally, same simplifications to assumptions in Statement 45 can
be used
 Reference to U.S. Office of Personnel Management regarding age-based
turnover experience rather than default tables
29
Changes in Liability
 Recognize most changes in liability for the current reporting
period as OPEB expense immediately, except:
- Changes in total OPEB liability:
 Differences between expected and actual experience with regard
to economic and demographic factors in the measurement of the
total OPEB liability
 Changes of assumptions in the measurement of the total OPEB
liability
- For OPEB administered through trust in which specified criteria
are met:
 Difference between projected and actual earnings on OPEB plan
investments
 Employer contributions
30
Cost-Sharing Employers
 Relevant only for OPEB administered through trust in which
specified criteria are met
 Recognize proportionate shares of collective net OPEB
liability, OPEB expense, and deferred outflows of
resources/deferred inflows of resources related to OPEB
 Proportion (%)
- Basis required to be consistent with contributions
- Use of relative long-term projected contribution effort encouraged
- Consider separate rates related to separate portions of collective net
OPEB liability
 Collective measure × proportion = proportionate share of
collective measure
31
Notes and RSI
 Similar to those required for pensions
 Disclosure of effect on net OPEB liability of a discount rate
+/- 1 percent
 Disclosure of effect on net OPEB liability of a healthcare
cost trend rate +/- 1 percent
 Single and agent employers: 10-year RSI schedules for
changes in the net OPEB liability, ratios, and actuarially
determined contributions (statutorily or contractually
determined contributions, if no actuarially determined
contribution is calculated)
 Cost-sharing employers: 10-year RSI schedules of
proportions and ratios, and statutorily or contractually
determined contributions
32
GAAP Hierarchy: Statement 76
33
The GAAP Hierarchy
 What: In June, the Board issued Statement 76 and cleared
a revised Comprehensive Implementation Guide
 Why: The GAAP hierarchy was incorporated (by Statement
55) from the auditing literature essentially “as is”—this
project simplifies the hierarchy and explains how to identify
the relevant literature within the hierarchy
 When: Effective for periods beginning after June 15, 2015
34
Categories of Authoritative GAAP
Category Sources
Due Process
A
GASB Statements
Formally approved by the Board for the
purpose of creating, amending,
superseding, or interpreting standards,
AND exposed for a period of public
comment
B
GASB Technical
Bulletins and
Implementation Guides;
AICPA literature
specifically cleared by
GASB
Cleared by the Board, specifically made
applicable to state and local
governmental entities, AND exposed for
a period of public comment
35
Comprehensive Implementation Guide
(CIG)
 Now classified as Category B authoritative GAAP
 Revised due process
- Public exposure of new Q&A guidance going forward
- Will continue to issue Guides to individual pronouncements
(such as Statements 74 and 75 on OPEB) and annual updates
with new Q&As on various pronouncements
- Board clearance of the final Implementation Guides
36
Tax Abatement Disclosures:
Statement 77
37
Overview





A Brief History
Scope and Definition
General Disclosure Principles
Disclosure Requirements
Effective Date and Transition
38
A Brief History
 Pre-agenda research
- Initiated – Summer 2013
 Current technical agenda project
- Added – December 2013
- Exposure Draft – October 2014
- Final Statement issued – August 2015
 Effective for fiscal periods beginning after December 15,
2015
39
Scope: Definition of a Tax Abatement
Statement 77 applies only to transactions meeting this
definition:
A reduction in tax revenues that results from an agreement
between one or more governments and an individual or entity in
which (a) one or more governments promise to forgo tax
revenues to which they are otherwise entitled and (b) the
individual or entity promises to take a specific action after the
agreement has been entered into that contributes to economic
development or otherwise benefits the governments or the
citizens of those governments.
40
Scope: Substance over Form
 The Statement does not include or exclude transactions
based on their form or name – governments should apply
the criteria contained in the definition
 Key points:
- A principal distinction between tax abatements and other tax
expenditures is the existence of an agreement with an
individual or entity
- The agreement generally is in writing but not necessarily
- The agreement may or may not be legally enforceable
- The agreement must precede the reduction of taxes and the
recipient’s fulfillment of the promise to act
- The tax reduction may occur before, during, or after fulfilment
of the promise – as long as it occurs after the agreement has
been entered into
41
General Disclosure Principles
 A government should disclose information separately for:
- Its own tax abatements
- Tax abatements that are entered into by other governments
and that reduce the reporting government’s tax revenues.
 Disclosure information may be presented for individual
agreements or may be aggregated
- For a government’s own abatements: organized by major tax
abatement program
- For other government’s abatements: organized by the
governments entering into the abatements and the specific
taxes being abated
42
General Disclosure Principles (continued)
 Disclosure should commence in the period in which a tax
abatement agreement is entered into and continue until the
tax abatement agreement expires
- Exception: Information about a commitment by the government
other than to reduce taxes should be disclosed until the
government has fulfilled the commitment, which may be before
the agreement expires
43
Disclosing Individual Abatements
 If a government chooses to disclose individual abatement
agreements, it should select a quantitative threshold and
disclose all agreements that meet or exceed the threshold
- Any quantitative threshold used by the government to
determine which agreements to disclose individually should be
described in the note disclosure
- A government may use one threshold for its own abatements
and a different threshold for other governments’ abatements
- A government may disclose some of its own abatements
individually but disclose those of other governments in the
aggregate, or vice versa
- Tax abatements below the threshold (if any) should be
presented in the aggregate, as described in the Statement
44
Disclosure Requirements: Government’s
Own Abatements
 Brief descriptive information:
-
Name and purpose of the program
Specific taxes being abated
The authority under which taxes are abated
The criteria, if any, that make a recipient eligible
The mechanism for abating taxes (form and calculation)
Provisions for recapturing abated taxes, if any
The types of commitments made by recipients of tax
abatements
45
Disclosure Requirements: Government’s
Own Abatements (continued)
 Gross dollar amount by which the government’s tax
revenue was reduced in the current year, on an accrual
basis
 If the government made commitments other than to reduce
taxes, a description of:
- The types of commitments made
- The most significant individual commitments made
46
Disclosure Requirements: Other
Governments’ Abatements
 Brief descriptive information including the name of the other
government and the specific taxes being abated
 Gross dollar amount by which the reporting government’s
tax revenue was reduced in the current year, on an accrual
basis
47
Disclosure Requirements: All Abatements
(if applicable)
 If amounts are received or are receivable from other
governments in association with the forgone tax revenues :
- The names of the other governments
- The authority under which the amounts are paid
- The dollar amount received or receivable
 If a government legally prohibited from disclosing specific
information required by the Statement:
- A description of the general nature of the information omitted
- The specific source of the legal prohibition
48
Tax Abatements of Component Units
 Blended component units’ tax abatement agreements that
reduce the primary government’s tax revenues – disclose the
information required for the government’s own tax abatement
agreements
 Discretely presented component units’ tax abatement
agreements that reduce the primary government’s tax
revenues should be evaluated to determine whether they are
essential to fair presentation of the primary government (as
required by Statement No. 14, The Financial Reporting
Entity, as amended):
- If they are essential to fair presentation, disclose the
information required for the government’s own tax
abatements
- If they are not essential, disclose the information required
for other governments’ tax abatements
49
Effective Date & Transition
 The disclosure requirements should be applied to the
current period and all prior periods presented
 If application for all prior period presented is not practical,
the reason for not applying the standards to prior periods
presented should be explained
 Effective for periods beginning after December 15, 2015
- Early adoption is encouraged
50
Proposed Standards leading to
final Standards shortly
51
Exposure Draft: Certain External
Investment Pools
52
External Investment Pools
 What: The GASB has proposed revisions to the accounting
and financial reporting standards for 2a7-like investment
pools
 Why: Securities and Exchange Commission changes to
Rule 2a7 would make it difficult for external investment
pools to meet the criteria to continue to report as 2a7-like
 When: A final standard will be approved and issued by the
Board in December, 2015
53
“2a7-like” Pools
 An external investment pool that is not registered with the
SEC as an investment company, but nevertheless has a
policy that it will, and does, operate in a manner consistent
with the SEC's Rule 2a7 of the Investment Company Act of
1940 (17 Code of Federal Regulations §270.2a-7).
- Rule 2a7 allows SEC-registered mutual funds to use amortized
cost rather than market value to report net assets to compute
share prices if certain conditions are met.
 2014 amendments to Rule 2a7 significantly increased the
stringency of those conditions – without changes to the
accounting standards, 2a7-like pools would have had to
meet the new conditions
 The proposed Statement would replace the existing
concept of a “2a7-like” pool in Statement 31, as amended.
54
Proposed Criteria and Disclosures
 A pool would have to meet the following in order to report
investments at amortized cost:
-
Transact with participants at stable net asset value per share
Meet certain portfolio maturity requirements
Meet certain portfolio quality requirements
Meet certain portfolio diversification requirements
Meet certain pool liquidity requirements
Meet shadow price requirements
 Pools and pool participants that report at amortized cost
would disclose information about withdrawal restrictions,
such as withdrawal thresholds, limits, and waiting periods
that can be imposed
55
Consequences of Noncompliance
 Noncompliance with a criterion may not prevent a pool from
using amortized cost for that reporting period or in future
reporting periods, given the following considerations:
-
If the noncompliance was out of the control of management
The significance of the noncompliance
If noncompliance is an isolated event
The promptness of the pool to return to compliance
If the noncompliance significantly diluted the pool or presented
unfair results
- Any change in credit rating to the pool
- If a pool received financial or other support from a sponsoring
government
56
Effective Date and Transition
 Would be effective for reporting periods beginning after
June 15, 2015, except for requirements that are more
stringent than SEC Rule 2a7 before the 2014 amendments.
 Changes made to comply with the proposed Statement
should be applied on a prospective basis.
57
Exposure Draft: Blending
Requirements for Certain Component
Units
58
Blending Requirements
 What: The GASB has proposed revising the standards
regarding how certain component units should be
presented in the financial statements of the primary
government
 Why: There is diversity in practice, with some component
units
 When: A final Standard will be approved and issued by the
Board in January, 2016
59
Reporting Entity Standards
 Most component units should be included in the financial
reporting entity by discrete presentation. Currently, the
blending presentation is used only under the following
circumstances:
- Primary government and component unit have substantively
the same governing body AND
 A financial benefit/burden relationship exists, OR
 Management (below the elected official level) of the primary
government has “operational responsibility” for the activities of the
component unit
- Services of the component unit exclusively benefit the primary
government
- Debt of the component unit is expected to be repaid entirely or
almost entirely with resources of the primary government
60
Reporting Entity Issue
 Many healthcare entities have asked whether blending is
appropriate for certain component units
 These legally separate entities (mostly not-for-profit
corporations) generally:
- Do not have boards composed of the primary government
- Provide services directly to the community
- Are expected to pay for their own debt
 The healthcare entities are usually the sole corporate
member of these not-for-profit corporations and hold
specific corporate powers
61
Board Proposals
 The Board has proposed an additional blending criterion:
- A component unit that is incorporated as a not-for-profit
corporation, in which the primary government is the sole
corporate member, should be included in the reporting entity
financial statements using the blended method.
 Would be effective for reporting periods beginning after
June 15, 2016
 The Board is considering developing implementation
guidance clarifying the relationship between being sole
corporate member of an LLC, in which there is not a
separate governing board, and substantively the same
board.
62
Exposure Draft: Irrevocable SplitInterest Agreements
63
Irrevocable Split-Interest Agreements
 What: The GASB has proposed standards for reporting
split-interest agreements, which are particularly prevalent
among public colleges and universities
 Why: Limited guidance exists for split-interest agreements
in which the government acts as trustee (and is one of the
beneficiaries); no guidance exists for situations in which a
third party is the trustee and the government is one of the
beneficiaries; users need information about these
arrangements
 When: A final standard will be approved and issued by the
Board in March, 2016; would be effective for reporting
periods beginning after December 15, 2016
64
Scope
 Irrevocable split-interest agreements for which the
government is the intermediary (trustee or agent) and a
beneficiary
- Donor gives resources to government that also is a beneficiary
in the agreement
- Lead interest: payments during the life of the agreement,
generally to non-governmental beneficiary (donor or donor’s
relative)
- Remainder interest: assets remaining at termination of the
agreement; generally goes to government
 Beneficial interests in resources held and administered by
3rd parties
- Refers to the right to receive resources in a future reporting
period, from resources administered by a 3rd party
65
Proposal: Irrevocable Split-Interest Agreements
with Resources Held by Government
Measurement Asset
Liability
Deferred Inflow
Initial
Resources
measured at fair
value
For benefit of
nongovernmental
beneficiary:
• Lead interest—
measure directly
at settlement
amount
For government’s
benefit in resources:
• Remainder
interest—residual
amount (trust
assets less income
benefit)
Subsequent
Investments
remeasured at
fair value;
changes are
investment
income
Distributions to
lead interest
beneficiaries
reduce the liability
66
Proposal: Reporting Beneficial Interests in
Resources Held by Others
Asset recognition is required if all of the following criteria
are met:
a. Legal document specifies government by name as
beneficiary
b. Government has unconditional beneficial interest
c. Donation agreement is irrevocable
d. Donor has not granted variance power
e. Intermediary is not under the control of the donor
f. Assigning beneficial interests is not subject to approval
of the intermediary
g. Attempt to assign beneficial interests does not terminate
the agreement
67
Proposal: Irrevocable Split-Interest Agreements
with Resources Held by Third Party
Measurement Asset
Deferred Inflow
Initial
Resources initially
measured at fair value
For government’s benefit in
resources:
• Initially measured at fair
value
Subsequent
Changes in fair value of
resources are
investment income
68
Current Technical Agenda Projects
69
Current Technical Agenda Projects
•
•
•
•
•
•
Leases
Fiduciary Responsibilities
Asset Retirement Obligations
Financial Reporting Model—Reexamination of Statement 34
Pension Benefit Issues
Debt Extinguishments
70
Leases
71
Preliminary Views on Leases
 What: The GASB is redeliberating its proposed revisions to
existing standards on lease accounting and financial
reporting (primarily Statement 162) based on public
comments received on the November 2014 Preliminary
Views
 Why: The existing standards have been in effect for
decades without review to determine if they remain
appropriate and continue to result in useful information;
FASB and IASB have been conducting a joint project to
update their lease standards; opportunity to increase
comparability and usefulness of information and reduce
complexity for preparers
 When: Exposure Draft expected first quarter 2016
72
Scope and Approach
 Applied to any contract that meets the definition of a lease:
“A lease is a contract that conveys the right to use a
nonfinancial asset (the underlying asset) for a period of time
in an exchange or exchange-like transaction.”
 All leases are financings of the right to use an underlying
asset
- Therefore, single approach applied to accounting for all leases
except short-term leases
73
Initial Reporting
Assets
Lessee Intangible asset (right to use
underlying asset)—value of
lease liability plus
prepayments and initial
direct costs that are ancillary
to place asset in use
Lessor
• Lease receivable
(generally including same
items as lessee liability)
• Continue to report leased
asset
Liability
Deferred Inflow
Present value of
NA
future lease
payments (incl.
fixed payments,
variable payments
based on index or
rate, reasonably
certain residual
guarantees, etc.)
NA
Equal to lease
receivable plus
any cash received
up front that
relates to a future
period
74
Subsequent Reporting
Assets
Liability
Deferred
Inflow
Lessee
Amortize over shorter of useful life or
lease term
Reduce by
lease
payments
(less amount
of interest
expense)
NA
Lessor
• Depreciate leased asset (unless
NA
indefinite life or required to be returned
in its original or enhanced condition)
• Reduce receivable by lease payments
(less payment needed to cover
accrued interest)
Recognize
revenue
over the
lease term
on a
systematic
and rational
basis
75
Short-Term Leases
 At beginning of lease, maximum possible term under the
contract is 12 months or less
 Lessees recognize expenses/expenditures based on the
terms of the contract
- Do not recognize assets or liabilities associated with the right
to use the underlying asset for short-term leases
- Disclose short-term leases expense/expenditure recognized
during the reporting period
 Lessors recognize lease payments as revenue based on
the terms of the contract
- Do not recognize receivables or deferred inflows associated
with the lease
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Project Timeline
Pre-Agenda Research Started
April 2011
Added to Current Technical Agenda
April 2013
Preliminary Views Approved
November 2014
Exposure Draft Expected
January 2016
Final Statement Expected
November 2016
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Fiduciary Responsibilities
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Fiduciary Responsibilities
 What: The GASB is redeliberating proposed standards that
clarify when a government has a fiduciary responsibility and
is required to present fiduciary fund financial statements,
based on public feedback on the November 2014
Preliminary Views, Financial Reporting for Fiduciary
Responsibilities
 Why: Existing standards require reporting of fiduciary
responsibilities but do not define what they are; use of
private-purpose trust funds and agency funds is
inconsistent; business-type activities are uncertain about
how to report fiduciary activities
 When: Exposure Draft expected for fourth quarter 2015
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Exposure Draft Proposal: When Is a
Government a Fiduciary?
 An activity is a fiduciary activity of a government if (1) the
government controls the assets of the activity, (2) those
assets are not derived solely from the government’s ownsource revenue, and (3) one of the following is met:
- The assets result from a pass-through grant for which the
government does not have administrative or direct financial
involvement in the program
- The assets are administered through a trust agreement or equivalent
arrangement in which the government itself is not a beneficiary
- The assets are to be used for the benefit of individuals that are not
required to be residents or recipients of the government’s goods and
services as a condition of being a beneficiary
- The assets are to be used for the benefit of organizations or other
governments that are not part of the financial reporting entity or
recipients of the government’s goods and services
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Exposure Draft Proposal: When Is a Government
Controlling Resources?
 A government controls the assets of an activity if:
- The government holds the assets.
- The government has the ability to administer the use,
exchange, or employment of the present service capacity of
the assets.
- The government has the ability to direct the use, exchange, or
employment of the present service capacity of the assets.
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Exposure Draft Proposals: Other Scope Issues
 An entity determined to be a component unit under
Statement No. 14, The Financial Reporting Entity, would be
reported as a fiduciary fund if it meets one of the four
criteria discussed previously.
- Government does not need to be controlling the assets; the
component unit criteria take precedence
 A government that controls pension (and other employee
benefit) assets, and administers the assets through an
arrangement that is within the scope of existing GASB
guidance, should report those assets in accordance with
the existing guidance.
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Other Proposals in the Exposure Draft
 Fiduciary fund types:
- New definitions for pension trust funds, investment trust funds,
and private-purpose trust funds that focus on the resources
that should be reported within each.
 Trust agreement or equivalent arrangement should be present for an
activity to be reported in a trust fund.
- Custodial funds would report fiduciary activities for which there
is no trust agreement or equivalent arrangement.
 A stand alone BTA’s fiduciary activities should be reported
in separate fiduciary fund financial statements.
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Other Proposals in the Exposure Draft
 Governments engaged in fiduciary activities should be
required to present additions disaggregated by source and
deductions disaggregated by type in a statement of
changes in fiduciary net position for all fiduciary funds.
- If applicable separate display of:
 Net investment income, including separate display of investment income
and investment costs
– Investment costs if they are separable from (1) investment income and (2)
administrative expenses
 Administrative costs, including investment management and custodial
fees and all other significant investment-related costs
 Custodial fund activities held for a period of three months or
less may report a single aggregated amount for additions
and a single aggregated amount for deductions
- Descriptions should indicate the nature of the resource flows
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Other Proposals in the Exposure Draft―BTAs
 BTAs may report the assets and related liabilities of
fiduciary activities that otherwise would be reported in a
custodial fund in the Statement of Net Position of the BTA if
those assets are held for three months or less.
 BTAs that choose to report custodial assets and liabilities in
its Statement of Net Position should separately report
additions and deductions as cash inflows and cash outflows
in the operating category of its statement of cash flows.
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Project Timeline
Pre-Agenda Research Starts
April 2010
Added to Current Technical Agenda
August 2013
Preliminary Views Approved
November 2014
Exposure Draft Expected
December 2015
Final Statement Expected
October 2016
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Asset Retirement Obligations
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Asset Retirement Obligations
 What: The GASB is considering establishing accounting
and financial reporting standards for legal obligations to
retire certain capital assets, such as nuclear power plants
 Why: Existing standards (Statement 18) address only
municipal landfills but governments have retirement
obligations for other types of capital assets. There is
diversity in practice for these other types.
 When: An Exposure Draft is expected for December 2015
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Tentative Decisions: Scope
 Asset retirement obligation—A legal obligation associated
with the retirement of a capital asset
- Retirement of a tangible capital asset—The other-thantemporary removal of a capital asset from service (such as
from sale, abandonment, recycling, or disposal)
 Would include:




Nuclear power plant decommissioning
Coal ash pond closure (those that are not landfills)
Contractually required land restoration such as removal of wind turbines
Other similar obligations
 Would exclude:
 Landfills (Statement 18)
 Pollution remediation obligations from abnormal operation (Statement 49)
 Conditional obligations to perform asset retirement activities, such as
most asbestos removal
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Tentative Decisions: Initial Recognition
 ARO meets the definition of a liability
 Initial recognition of an ARO liability would happen when
the liability is incurred and is reasonably estimable
- Incurrence generally would be based on internal and external
obligating events
 Corresponding debit meets definition of a deferred outflow
of resources
- Deferred outflow would be subsequently recognized as an
expense in a rational, systematic manner
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Tentative Decisions: Project Approach and
Measurement
 Project approach—General guidance, with specific
guidance added as needed to operationalize the principles
 Measurement attribute—Settlement amount
 Measurement technique—Current cost
91
Project Timeline
Pre-Agenda Research Started
December 2013
Added to Current Technical Agenda
August 2014
Exposure Draft Expected
December 2015
Final Statement Expected
October 2016
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Financial Reporting Model—
Reexamination of Statement 34
Financial Reporting Model Research
 What: In September 2015, the Board decided to add a
project to examine the effectiveness of the financial
reporting model – Statements 34, 35, 37, 41, and 46, and
Interpretation 6
 Why: The GASB is committed not only to establishing
standards but also to ensuring that they continue to be
effective; most of the requirements of Statement 34 became
effective between 2002 and 2004; the provisions related to
reporting existing general infrastructure assets were fully
effective in 2006 and 2007
 When: Initial due process document expected at the end of
2016
Research Activities
 During 2013 the following activities were conducted:
- 11 research roundtables in 8 cities, focusing on either general purpose or
special-purpose governments, consisting of a mix of financial statement
preparers, auditors, and users
- Primary purpose was to identify any major, overarching issues that have arisen
since Statement 34 was implemented
 During 2014 the following activities were conducted:
- Broad surveys of financial statement preparers, auditors, and users, as well as
an additional survey of preparers using the modified approach for reporting
infrastructure
- Archival research with annual financial reports
- Literature review
- Primary purpose was to identify how Statement 34 has been implemented in
practice and to explore further the issues raised in the roundtables
 150 interviews were conducted in January–March 2015, to seek input on
how to address the issues raised in the roundtables and surveys
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Topics to Be Addressed
 Management’s Discussion and Analysis (MD&A)—
options for enhancing the financial statement analysis
component, eliminating requirements that are boilerplate
and no longer necessary for understanding the financial
reporting model, and clarifying guidance for presenting
currently known facts, decisions, or conditions
 Government-Wide Financial Statements—explore
alternatives for the format of the statement of activities and
consider whether a government-wide statement of cash
flows should be required
 Major Funds—explore options for providing additional
information about debt service funds, either individually or
in aggregate in the financial statements or the notes
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Topics to Be Addressed (continued)
 Governmental Fund Financial Statements—explore a
conceptually consistent measurement focus and basis of
accounting and a presentation format consistent with that
measurement focus and basis of accounting
 Proprietary Fund and Business-Type Activity (BTA)
Financial Statements—explore operating performance
measure alternatives in conjunction with evaluating the
guidance for the separate presentation of operating and
nonoperating revenues and expenses.
 Extraordinary and Special Items—explore options for
clarifying the guidance for more consistent reporting
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Topics to Be Addressed (continued)
 Fiduciary Fund Financial Statements—explore where
these financial statements should be presented in the basic
financial statements
 Budgetary Comparisons—explore the appropriate method
of communication (either as basic financial statements or
required supplementary information) and which budget
variances, if any, should be required to be presented
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Project Timeline
Pre-Agenda Research Started
August 2013
Added to Current Technical Agenda
September 2015
Deliberations to Begin
October 2015
Initial Due Process Document
Expected
December 2016
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Pension Benefit Issues
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Pension Benefit Issues
 What: The GASB is considering revisions to Statements 67
and 68 on pensions to address concerns raised by
stakeholders during the implementation process
 Why: The Board addresses requests to revisit existing
standards when the concerns are significant and raise new
issues
 When: An Exposure Draft was issued in October, 2015 with
a comment period ending November 16, 2015 and another
Exposure Draft is expected for December 2015
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Proposals
 ED already issued―Governments with employees who are
provided pension benefits through federally sponsored or
private multiple-employer pension plans (such as TaftHartley plans)
- These governments may have difficulty obtaining from the
plans the measurements and information required by
Statement 68
 ED to be issued―The definition of covered-employee
payroll, which is used in the reporting of liability and
contribution ratios in required supplementary information
- The term in Statements 67 and 68 is synonymous with “total
payroll” and differs from the prior covered payroll, which is
“pensionable pay”
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Proposals
 ED already issued―
- Amends Statement 68
- Excludes pensions provided to employees of state and local
government employers through a cost-sharing multipleemployer defined benefit plan that
 Is not a state or local governmental pension plan
 Is used to provide defined benefit pensions to employees of employers
that are not state or local governmental employers
 Has no predominant state or local governmental employer (either
individually or collectively with other state or local governmental
employers that provide pensions through the pension plan)
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Proposals
 ED already issued―
- Accrual basis
 Pension expense – recognized equal to the employer’s required
contributions to the plan
 Payable – recognized equal to the difference at the end of the period
between contributions required and contributions made
- Modified accrual basis
 Pension expenditures – recognized equal to the employer’s required
contributions to the pension plan that are associated with the pay periods
within the reporting period
 Payable – recognized to the extent it is normally expected to be liquidated
with expendable available financial resources
- Notes and RSI requirements
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Project Timeline
Added to Current Technical Agenda
September 2015
Exposure Draft Expected
December 2015
Final Statement Expected
March 2016
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Debt Extinguishments
Debt Extinguishments (including refundings)
 What: In September 2015, the Board added a project to
consider whether guidance is needed for debt refundings
that use a government’s current resources
 Why: Research found that Statements 7 and 23 on debt
refundings and Statement 62 on debt extinguishments are
working effectively, but that standards may be needed for
refundings with current resources
 When: Deliberations are schedule to begin in January 2016
Topics to Be Considered
 When a government places only existing resources with an
escrow agent for the purpose of an early extinguishment of
debt, should the old debt be derecognized as in a
refunding? Should the difference between the net carrying
value of the old debt and the reacquisition price be
deferred?
 Should governments be allowed to defer in entirety the
difference between the net carrying value of the old debt
and its reacquisition price, irrespective of what portion of
the refunding was completed with the government’s existing
resources?
 Should additional information be disclosed when debt is
extinguished using existing resources?
108
Project Timeline
Pre-Agenda Research Started
August 2013
Added to Current Technical Agenda
September 2015
Deliberations to Begin
January 2016
Exposure Draft Expected
August 2016
Final Statement Expected
May 2017
109
Pre-Agenda Research Activities
• Going Concern Disclosures
• Debt Disclosures, Including Direct Borrowing
• Exchange and Exchange-Like Revenues
110
Going Concern Disclosures:
Reexamination of Statement 56
Going Concern Disclosures
 What: A review of existing standards related to going
concern considerations, which were incorporated into
GASB literature mostly as-is from the AICPA literative in
Statement 56
 Why: As it is currently defined, going concern may not be
meaningful for governments, which hardly ever go out of
business; AICPA and others have asked the GASB to
examine the issue
 When: The Board added the pre-agenda research in April
2015
Topics to Be Considered
 Are the current going concern indicators presented in note
disclosures appropriate for state and local governments, in
light of the fact that, even under severe financial stress, few
governments cease to operate even when encountering
such indicators?
 What other criteria might better achieve the objective of
disclosing severe financial stress uncertainties with respect
to governments?
 What information do financial statement users need with
respect to the disclosure of severe financial stress
uncertainties?
113
Debt Disclosures, including
Direct Borrowing
Debt Disclosures
 What: A review of existing standards related to disclosures
of debt, including provisions in Statements 34, 38, and 62
 Why: Stakeholders have raised concerns about the
consistency and quality of notes about debt activity;
particular concern has been expressed about disclosure of
bank loans, which is increasing in frequency
 When: The Board added the pre-agenda research in April
2015
Topics to Be Considered
 What transactions constitute “debt” for financial reporting
purposes and, therefore, would be subject to debt-related
disclosures?
 What information about a government’s outstanding debt is
essential to users? Is that information currently available to
users from the notes to the financial statements or other
sources?
 What specific user needs exist regarding covenants (such
as acceleration or subordination clauses) in debt
transactions?
 Focus on disclosures related to debt in general; not
disclosures related to specific debt transactions that are the
subject of other projects, research, or potential topics
116
Exchange and Exchange-Like
Revenues
Revenue Recognition
 What: A review of existing standards related to recognition
of revenues from exchange transactions in Statement 62
and consider specific guidance for exchange-like
transactions
 Why: Stakeholders have raised questions about how to
account for revenues from transactions that are neither fully
exchange or nonexchange; the revenue recognition
standards incorporated in Statement 62 have not been
revised for governments in nearly 50 years
 When: The Board added the pre-agenda research in
September 2015
Topics to Be Considered
 What issues have arisen in practice with regard to
recognition of exchange and exchange-like revenues?
 What transactions constitute exchange-like revenue?
 What types of revenue transactions having single elements
do governments generally engage in for exchange and
exchange-like arrangements, and how do governments
account for them?
 What types of revenue transactions having multiple
elements do governments generally engage in for
exchange and exchange-like arrangements, and how do
governments account for them?
119
Topics to Be Considered (continued)
 Do governments generally engage in exchange and
exchange-like transactions such as those specifically
addressed in FASB Topic 606, such as unexercised rights,
warranty options, bill-and-hold arrangements, customer
options, variable consideration, stand-ready obligations,
discount allocations, and sales with financing (other than
leases)?
 How prevalent are sales with a right of return in the
governmental environment? Should paragraphs 26–27 of
Statement 62 be applicable to all governments?
 What specific user needs exist regarding revenue
recognition for exchange and exchange-like revenue?
120
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