2013 GASB Update

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2013 GASB Update

  1. 1. A Global Reach with a Local Perspective www.decosimo.comDecosimo - GASB UpdateChristopher D. Flaig – chrisflaig@decosimo.com
  2. 2. CONTACT ME Christopher D. Flaig, CPA Assurance Principal chrisflaig@decosimo.com 513-579-1717 The contents and opinions contained in this article are for informational purposes only. The information is not intended to be a substitute for professional accounting counsel. Always seek the advice of your accountant or other financial planner with any questions you may have regarding your financial goals.2
  3. 3. GASB UPDATE – AN APPETIZER SUMMARY OF GASB PRONOUNCEMENTS  EFFECTIVE FOR PERIODS BEGINNING AFTER JUNE 15, 2011 (YEAR ENDING JUNE 30, 2012)  GASB 57 – OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans  GASB 64 – Derivative Instruments: Application of Hedge Accounting Termination Provisions (an amendment to GASB Statement No. 53)3
  4. 4. GASB UPDATE – AN APPETIZER SUMMARY OF GASB PRONOUNCEMENTS  EFFECTIVE FOR PERIODS BEGINNING AFTER DECEMBER 15, 2011 (YEAR ENDING DECEMBER 31, 2012)  GASB 60 – Accounting and Financial Reporting for Service Concession Arrangements  GASB 62 – Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements  GASB 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position4
  5. 5. GASB UPDATE – AN APPETIZER SUMMARY OF GASB PRONOUNCEMENTS  EFFECTIVE FOR PERIODS BEGINNING AFTER JUNE 15, 2012 (YEAR ENDING JUNE 30, 2013)  GASB 61 – The Financial Reporting Entity: Omnibus and Amendment of GASB Statements No. 14 and No. 345
  6. 6. GASB UPDATE – AN APPETIZER SUMMARY OF GASB PRONOUNCEMENTS  EFFECTIVE FOR PERIODS BEGINNING AFTER DECEMBER 15, 2012 (YEAR ENDING DECEMBER 31, 2013)  GASB 65 – Items Previously Reported as Assets and Liabilities  GASB 66 – Technical Corrections – 2012 (an amendment of GASB No. 10 and GASB No. 62)6
  7. 7. GASB UPDATE – AN APPETIZER SUMMARY OF GASB PRONOUNCEMENTS  Other statements:  GASB 58 – Accounting and Financial Reporting for Chapter 9 Bankruptcies (for periods beginning after June 15, 2009)  GASB 59 – Financial Instruments Omnibus (for periods beginning after June 15, 2009)7
  8. 8. GASB 57 – OPEB Measurements by AgentEmployers and Agent Multiple-EmployerPlans8
  9. 9. GASB 57 – OPEB Measurements by AgentEmployers and Agent Multiple-EmployerPlans Background  Addresses issues related to the use of alternative measurement method and the frequency and timing of measurements  Agent Employers and Agent Multiple-Employer OPEB Plans  FYI – OPERS, STRS, SERS are cost-sharing, multiple- employer plans (not agent / trust plans)9
  10. 10. GASB 64 – Derivative Instruments: AnApplication of Hedge AccountingTermination Provisions10
  11. 11. GASB 64 – Derivative Instruments: AnApplication of Hedge AccountingTermination Provisions Background  Clarifies whether an effective hedge exists AFTER the replacement of a swap counterparty or a swap counterparty’s credit support provider  GASB 53 – Derivatives should be reported at fair value  Fair value should be reported as a direct change  UNLESS – a hedge exists11
  12. 12. GASB 64 – Derivative Instruments: AnApplication of Hedge AccountingTermination Provisions Hedge  To reduce risk of market volatility  GASB 53 – Derivatives should be reported at fair value  Fair value should be reported as a direct change  UNLESS – a hedge exists  Associate the asset / liability or future cash flows with derivatives to offset risk12
  13. 13. GASB 64 – Derivative Instruments: AnApplication of Hedge AccountingTermination Provisions Hedge Accounting  If a hedge exists:  Defer recognition (statement of activities) of change in fair value of hedging derivative  Hedge Terminates  No longer effective  End of transaction13
  14. 14. GASB 64 – Derivative Instruments: AnApplication of Hedge AccountingTermination Provisions But what happens when there is a default by the counterparty?  What is the response?  Amend and replace the counterparty  New agreement with a new counterparty  In summary, continue to use hedge accounting if:  Collectability is still probable  Assignment / in-substance assignment represent essentially same terms14
  15. 15. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA)15
  16. 16. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Background  SCAs – Public/Private or Public/Public Partnerships  More prevalent than ever before16
  17. 17. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) SCAs  Government (aka transferor)  Gives right to operate an asset FOR  Consideration  Cash (upfront payment or installment payments)  Asset improvements / asset construction  Operator  Gives up consideration (as noted above)  Receives revenues17
  18. 18. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) SCA include but not limited to:  Arrangements in which OPERATOR  Designs and builds facility  Obtains right to collect fees from 3rd parties for usage  Example:  Construct municipal complex for the right to lease a portion of the facility to a 3rd party18
  19. 19. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) SCA include but not limited to:  Arrangements in which OPERATOR  Provides significant consideration in exchange for the right to access an existing facility  And obtains right to collect fees from 3rd parties for usage  Example:  Parking garage19
  20. 20. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) SCA include but not limited to:  Arrangements in which OPERATOR  Designs and builds a facility for the Government  Finance construction costs  Provide associated services  Collect associated fee  Convey facility to Government at the end of arrangement  Example:  Toll road20
  21. 21. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Required Criteria for GASB 60 (all must be present):  The transferor conveys to the operator the right and related obligation to use capital assets to serve the public  In exchange for significant consideration  The operator is compensated by 3rd party fees  The transferor retains control over service and rates  The transferor is entitled to significant residual interest in service utility21
  22. 22. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) DOES NOT INCLUDE:  Contracts to operate ancillary services  Concessions / Souvenirs  Privatized or outsourced services  Arrangements where the operator is compensated by the transferor (Government) versus 3rd party fees  Summary - excludes agency relationships  Arrangements in which operator accepts 3rd party payments and remits to the transferor for an established fee22
  23. 23. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) NOT APPLICABLE TO GOVERNMENTAL FUNDS23
  24. 24. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Transferor Accounting and Financial Reporting  If facility is an existing facility  Continue to report as an asset  If facility is NEW (purchased / constructed / improved)  (A)Report capital asset at fair value when placed in operation  (B)Any direct contractual obligations as liabilities  Difference between (A) and (B) as Deferred Inflow of Resources24
  25. 25. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Transferor Accounting and Financial Reporting  Liabilities  Obligation directly relates to the facility; or  Obligation relates to a commitment made to maintain a minimum level of service  Example – providing a level of police and fire services for the facility  Example – providing maintenance to areas surrounding the facility  Record liability at present value25
  26. 26. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Transferor Accounting and Financial Reporting  Depreciation  Do not depreciate if the arrangement requires the operator to return the asset in original or enhanced condition at the end of the agreement26
  27. 27. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Transferor Accounting and Financial Reporting  Deferred inflow needs to be recognized as revenue  Systematic / Rational manner over the life of agreement beginning when the facility is placed in operation  Liability should be reduced as the obligation is satisfied  As obligations are satisfied  Deferred inflows should be recognized  Then recognized as revenues in the same manner as above  Additional asset improvements should be recognized27
  28. 28. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Transferor Accounting and Financial Reporting  If an up-front payment is received…..  Essentially the same accounting  Up-front payment or present value of installment payments posted as an asset  Book contractual liability (as noted previously)  Net equals deferred inflow of resources  Amortize deferred inflow of resources (as noted previously) in a systematic and rational manner over the life of the agreement28
  29. 29. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Public – Public Partnership….a Government as the OPERATOR…..  Record an “Intangible Asset” –  Why – “right to….access facility or collect fees, etc.”  Equates to the amount paid for the facility / upfront payments  Improvements increase the value of the asset  Amortize asset in a systematic and rational manner over the life of the agreement  Also – consider a liability if the “asset” (the facility) needs to be returned in a certain condition29
  30. 30. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) REVENUE SHARING ARRANGEMENT  Government Operator  Revenues – TOTAL amount collected  Expense – TOTAL amount to be paid to TRANSFEROR  Government Transferor  Revenue – only recognize the amount due to you!  If amounts are FIXED – then book via PV as installment amounts30
  31. 31. GASB 60 – Accounting and FinancialReporting for Service ConcessionArrangements (SCA) Key Disclosures – see disclosure checklist Year of implementation – changes to comply should be treated as adjustments of prior periods Restate prior year (as applicable) with a cumulative effect of the change on beginning assets if at all possible31
  32. 32. GASB 62 – Codification of Accounting andFinancial Reporting - November 30, 1989Guidance32
  33. 33. GASB 62 – Codification of Accounting andFinancial Reporting - November 30, 1989Guidance Background  GASB 34  Provided (for Governmental and BTAs) should follow GASB and FASB (pre November 30, 1989) UNLESS FASB conflicted or contradicted GASB  Supersedes GASB 20  As such the ELECTION for BTAs to use FASB POST 11/30/1989 is eliminated33
  34. 34. GASB 62 – Codification of Accounting andFinancial Reporting - November 30, 1989Guidance OBJECTIVE  Incorporate FASB and AICPA pronouncements  Practical effect:  Same standard  No real change expected  No longer an “option” to elect to follow……  May continue to follow as other accounting literature So what is really happening here – the codification!!34
  35. 35. GASB 63 – Financial Reporting of DeferredOutflows of Resources, Deferred Inflows ofResources and Net Position35
  36. 36. GASB 63 – Financial Reporting of DeferredOutflows of Resources, Deferred Inflows ofResources and Net Position OBJECTIVE  The current equation –  Assets less liabilities = net assets  GASB reviewed concepts statement #4  What about things that are not really assets OR liabilities  And the mezzanine was born Deferred outflows of resources (FKA assets / debits) Deferred inflows of resources (FKA liabilities / credits)36
  37. 37. GASB 63 – Financial Reporting of DeferredOutflows of Resources, Deferred Inflows ofResources and Net Position DEFERRED OUTFLOWS VS. ASSETS  Deferred outflows  Consumption applicable to future periods  Example – Resources provided to a grantee when only the time requirement has not been met  Assets  Resources with present service capacity that the government presently controls  Example - Prepaids37
  38. 38. GASB 63 – Financial Reporting of DeferredOutflows of Resources, Deferred Inflows ofResources and Net Position DEFERRED INFLOWS VS. LIABILITIES  Deferred inflows  Acquisitions applicable to future periods  Example – Proceeds of sale of future revenues (unavailable)  Liabilities  Present obligations to sacrifice resources that really cannot be avoided  Example – Payments received for services yet to be performed38
  39. 39. GASB 63 – Financial Reporting of DeferredOutflows of Resources, Deferred Inflows ofResources and Net Position SOME NOTES  Do not net inflows with outflows  Assets should be added with outflows – subtotal  Liabilities should be added with inflows – subtotal  For governmental funds still a balance sheet with subtotals…..  For entity-wide – net assets NOW renamed as net position39
  40. 40. GASB 63 – Financial Reporting of DeferredOutflows of Resources, Deferred Inflows ofResources and Net Position NEW – STATEMENT OF NET POSITION (NO LONGER NET ASSETS)  Net Investment in Capital Assets – New title!  Unrestricted  Restricted40
  41. 41. GASB 63 – Financial Reporting of DeferredOutflows of Resources, Deferred Inflows ofResources and Net Position Implementation Guidance  Retrospective application  No increase in “equity” – but how things are classified from the prior year will change  See the illustrative GFOA CAFR statements attached41
  42. 42. GASB 65 – Items Previously Reported asAssets and Liabilities42
  43. 43. GASB 65 – Items Previously Reported asAssets and Liabilities Background – jump ahead from GASB 63  Required for years ended 12/31/2013  Early implementation encouraged  Provides detailed information  Provides guidance on placement of various accounts43
  44. 44. GASB 65 – Items Previously Reported asAssets and Liabilities Background  Report and continue to keep as asset / liability  Report as a Deferred Inflow / Outflow (still on balance sheet – just a new section)  Report as inflow/outflow (to the P&L – never to the balance sheet)44
  45. 45. GASB 65 – Items Previously Reported asAssets and Liabilities For each account – the approach to be used:  Is the account an asset or liability  Yes – stay as is  Or is it a Deferred Outflow / Inflow  Yes – a new place on the balance sheet (SONP)  Fall back plan - report as inflow/outflow (to the P&L)45
  46. 46. GASB 65 – Items Previously Reported asAssets and Liabilities What I once knew to be true, AKA what were once assets are now deferred outflows (some examples)  Refunded debt – the excess of the price over the original carrying amount  Resources provided to a grantee when only the time requirement has not been met46
  47. 47. GASB 65 – Items Previously Reported asAssets and Liabilities What I once knew to be true, AKA what were once assets are now P&L outflows (some examples)  Debt issuance costs (except prepaid insurance)  Initial direct costs of operating leases47
  48. 48. GASB 65 – Items Previously Reported asAssets and Liabilities What I once knew to be true, AKA what were once liabilities are now Deferred Inflows (some examples)  Revenue of a governmental fund not yet recognized because it is not yet AVAILABLE  Refunded debt – the excess of the price over the original carrying amount  Property taxes – received or recognized as a receivable prior to the period they were INTENDED to finance48
  49. 49. GASB 65 – Items Previously Reported asAssets and Liabilities What I once knew to be true, AKA what were once liabilities are now Deferred Inflows (some examples)  Resources received from a grantor when only the time requirement has not been met  Other imposed non-exchange revenues received or recognized as receivables prior to the period when the use of the resource is required or first permitted49
  50. 50. GASB 65 – Items Previously Reported asAssets and Liabilities What I once knew to be true, AKA what were once Liabilities are now P&L Inflows (some examples)  Loan origination fees50
  51. 51. Things to remember….. Private – Public Partnership – GASB 60 Component Units – get ready to re-evaluate for GASB 61 (but not until 6/30/2013 and after) FASB Codification – no longer GASB 20 - GASB 62 GASB 64 – If you have derivatives GASB 63 & 65 – some changes in classification!! GASB 66 – Mess-ups getting cleaned up! For next time – Pensions….Pensions…Pensions!!51
  52. 52. Thank you!52

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