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Reference Section |
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New and Emerging GASB Issues
Reference section
> New and Emerging GASB Issues
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The summaries below provide a short summary of recent and emerging
governmental accounting standards. The summaries of GASB statements are
presented generally in order of effective dates. |
| GASB Statement No. 40,
Deposit and Investment Risk Disclosures, an Amendment of GASB Statement No. 3 This standard was issued in March 2003. This pronouncement addresses additional risks to which governments are exposed. It requires state and local governments to communicate key information about deposit and investment risks, frequently one of the largest assets on a government’s balance sheet. Required disclosures are as follows:
Effective Date: The provisions of Statement 40 are effective for financial statements for periods beginning after June 15, 2004. Also see expanded GASB summary. GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries Issued in November 2003, this pronouncement establishes accounting and financial reporting standards for impairment of capital assets. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly. Impaired capital assets that will no longer be used should be reported at the lower of carrying value or fair value. Impairment losses on capital assets that will continue to be used should be measured using a restoration cost approach. Impairment of capital assets that are affected by enactment or approval of laws or regulations or other changes in environmental factors or are subject to technological changes or obsolescence generally should be measured using a service units approach. Impairment of capital assets that are subject to a change in manner or duration of use generally should be measured using a service units approach. This pronouncement also clarifies and establishes accounting requirements for insurance recoveries. An insurance recovery associated with events or changes in circumstances resulting in impairment of a capital asset should be netted with the impairment loss. Restoration of replacement of the capital asset using the insurance recovery should be reported as a separate transaction. Insurance recoveries for circumstances other than impairment of capital assets should be reported in the same manner. The provisions for this statement are effective for fiscal periods beginning after December 15, 2004. Also see expanded GASB summary. GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans This pronouncement supersedes the interim guidance included in Statement No. 26 – Financial Reporting for Postemployment Healthcare Plans Administered by Defined Benefit Pension Plans. The new standard establishes uniform financial reporting standards for Other Postemployment Employee Benefit (OPEB) trust funds included in the financial reports of plan sponsors or employers, as well as for the stand-alone financial reports of OPEB plans or the public employee retirement systems, or other third parties, that administer them. Statement No. 43 also provides requirements for reporting of OPEB funds by administrators of multiple-employer OPEB plans, when the fund used to accumulate assets and pay benefits of premiums when due is not a trust fund. This new standard expands the disclosures and required supplemental information presented with the basic financial statements. The standard is effective for financial statements for periods beginning after December 15, 2005 (GASB No. 34 phase 1 governments); December 15, 2006 (GASB No. 34 phase 2 governments); and December 15, 2007 (GASB No. 34 phase 3 governments.) Also see expanded GASB summary. GASB Statement No. 44, Economic Condition Reporting: The Statistical Section This standards was issued in May 2004 and applies to the statistical section that accompanies a state or local government’s basic financial statements. The standard reflects the significant changes that have taken place in government finance, including the more comprehensive government-wide financial information required by GASB Statement 34. This Statement updates the statistical section schedules to include, for example, requirements for governments to include ten-year trends in three types of operating information – government employment levels, operating statistics and capital asset information. The standard does not require that a statistical section accompany the basic financial statements, although this information is required when a governmental entity prepares a comprehensive annual financial report (CAFR.) The provisions for this statement are effective for fiscal periods beginning after June 15, 2005. Also see expanded GASB summary. GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions Issued in June 2004, this statement improves the relevance and usefulness of financial reporting by (a) requiring systematic, accrual-basis measurement and recognition of OPEB cost (expense) over a period that approximates employees’ years of service and (b) providing information about actuarial accrued liabilities associated with OPEB and whether and to what extent progress is being made in funding the plan. In summary, employers that participate in single-employer or agent multiple-employer defined benefit OPEB plans (sole and agent employers) are required to measure and disclose an amount for annual OPEB cost on the accrual basis of accounting. Annual OPEB cost is equal to the employer’s annual required contribution to the plan, with certain adjustments if the employer has a net OPEB obligation for past under or overcontributions. The standard is effective for financial statements for periods beginning after December 15, 2006 (GASB No. 34 phase 1 governments); December 15, 2007 (GASB No. 34 phase 2 governments); and December 15, 2008 (GASB No. 34 phase 3 governments.) Also see expanded GASB summary. GASB Statement No. 46, Net Assets Restricted by Enabling Legislation—an amendment of GASB Statement No. 34 This standard was issued in December 2004 and is designed to improve the comparability of net asset information by clarifying the circumstances under which net assets should be restricted because of enabling legislation enacted by a government. Statement No. 46 states that a legally enforceable enabling legislation restriction is one that a party external to a government, such as citizens, public interest groups, or the judiciary, can compel a government to honor. The standard also requires governments to display net assets restricted by enabling legislation separately from other restricted net assets. This statement becomes effective for periods beginning after June 15, 2005. Also see expanded GASB summary. GASB Technical Bulletin on Recognition of Pension and Other Postemployment Benefit Expenditures/Expense and Liabilities by Cost-Sharing Employers GASB issued this Technical Bulletin to clarify the requirements of GASB Statements 27 and 45 for employers’ contractually required contributions to cost-sharing pension and other postemployment benefit (OPEB) plans. The Technical Bulletin clarifies that a cost-sharing employer should recognize the contractually required contributions assessed for the employer’s financial reporting period as expenditures of that period, and should recognize any unpaid contributions assessed for that period as liabilities in governmental fund financial statements prepared on the modified accrual basis of accounting. Because the employer’s liability for unpaid contractually required contributions for the period is a matured liability, there generally will be no reconciling item required between the amount recognized as expenditures and the amount recognized as expense in government-wide financial statements prepared on the accrual basis of accounting. The Technical Bulletin is effective for financial statements for periods ending after December 15, 2004, with respect to pension transactions (earlier application is encouraged), and should be applied simultaneously with the implementation of Statement No. 45 with respect to OPEB transactions. Exposure Draft on Termination Benefits GASB proposed this standard in December 2004. Under the proposed standard, in financial statements prepared on the accrual basis of accounting, employers would be required to recognize a liability and expense for the cost of voluntary termination benefits (for example, early-retirement incentives or severance benefits) when the offer is accepted. A liability and expense for involuntary termination benefits (for example, severance benefits) would be recognized when a plan of termination has been approved by those with the authority to commit the government to the plan, and that plan has been communicated to the employees. Healthcare-related termination benefits generally would be measured based upon projected total claims costs (or age-adjusted premiums approximating claims costs) for terminated employees, with consideration given to the expected future healthcare cost trend, and would be discounted to their present value. In addition, non-healthcare-related termination benefits for which the amount and timing of payments are fixed and determinable would be measured at their discounted present value. For all other termination benefits, discounting would not be required. For termination benefits provided through an existing defined benefit OPEB plan, the provisions of the proposed Statement would be required to be implemented simultaneously with the requirements of Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. For all other termination benefits, the proposed Statement would be effective for financial statements for periods beginning after June 15, 2005. Exposure Draft on Concepts Related to Communication Methods GASB issued this exposure draft on June 24, 2004. The proposed Concepts Statement would provide a conceptual basis for selecting communication methods to present items of information within general-purpose external financial reports that contain basic financial statements. These communication methods would include recognition in basic financial statements, disclosure in notes to basic financial statements, presentation as required supplementary information and presentation as supplementary information. A final document is scheduled to be issued in the second quarter of 2006. The status of this proposed statement will be monitored and evaluated as it is developed. GASB Project on Fund Balance Reporting This GASB project will assess whether existing reporting requirements related to fund balance reporting adequately meet the needs of financial statement users and will consider potential changes to improve the usefulness of fund balance information. During the final four months of 2004, GASB conducted interviews with representatives from the financial statement user, preparer, and attestor communities. GASB Board deliberations are scheduled to begin in the first quarter of 2005. An exposure draft is expected to be released in the fourth quarter of 2005.
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Reference section
> New and Emerging GASB Issues |
