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  1. 1. <ul><li>GASB UPDATE </li></ul><ul><ul><li>Presented by: Brian A. Ritschel, CPA </li></ul></ul><ul><ul><li>Manager </li></ul></ul>1
  2. 2. GASB Current Developments <ul><li>TOPICS </li></ul><ul><li>GASB New Pronouncements </li></ul><ul><ul><li>Statement No. 41, Budgetary Comparison Schedules- Perspective Differences (amendment of GASB No. 34) </li></ul></ul><ul><ul><li>Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries </li></ul></ul>2
  3. 3. <ul><li>TOPICS </li></ul><ul><li>GASB New Pronouncements </li></ul><ul><ul><li>Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans </li></ul></ul><ul><ul><li>Statement No. 44, Economic Condition Reporting: The Statistical Section (an amendment of NCGA Statement 1) </li></ul></ul>3
  4. 4. <ul><ul><li>TOPICS </li></ul></ul><ul><ul><li>Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions </li></ul></ul><ul><ul><li>Statement No. 46, Net Assets Restricted by Enabling Legislation (an amendment of GASB No. 34) </li></ul></ul>4
  6. 6. <ul><li>EFFECTIVE DATE: </li></ul><ul><li>Periods beginning after December 15, 2004 </li></ul><ul><li>(Fiscal Year Ending June 30, 2006) </li></ul><ul><li>Earlier application is encouraged </li></ul>6
  7. 7. <ul><li>Asset impairment is a significant, unexpected decline in the service utility of a capital asset </li></ul>7
  8. 8. <ul><li>Identifying Impairments </li></ul><ul><ul><li>Events or changes in circumstance that indicate impairment should be prominent </li></ul></ul><ul><ul><li>Generally expected to have prompted discussion by governing board, management, or media </li></ul></ul>8
  9. 9. <ul><li>Common Indicators of Impairment </li></ul><ul><ul><li>Evidence of physical damage </li></ul></ul><ul><ul><li>Enact or approval of laws or regulations or other Environmental factors </li></ul></ul><ul><ul><li>Technological development or evidence of obsolescence </li></ul></ul>9
  10. 10. <ul><ul><li>A Change in the manner or expected duration of use of an asset </li></ul></ul><ul><ul><li>Construction stoppage </li></ul></ul>10
  11. 11. <ul><li>Impairment Test </li></ul><ul><ul><li>The magnitude of the decline in service utility is significant </li></ul></ul><ul><ul><li>The decline in service utility is unexpected </li></ul></ul>11
  12. 12. <ul><li>Measurement of Impairment </li></ul><ul><ul><li>Assets that are continuing to be used by the government: </li></ul></ul><ul><ul><ul><li>Restoration cost approach for assets with physical damage </li></ul></ul></ul><ul><ul><ul><li>Service units approach for legal/environmental changes, technological obsolescence, and some changes in duration or manner of use </li></ul></ul></ul><ul><ul><ul><li>Deflated depreciation replacement cost for some assets with a change in duration or manner of use </li></ul></ul></ul>12
  13. 13. <ul><ul><li>Assets that are not being used and construction stoppage: </li></ul></ul><ul><ul><ul><li>Lower of carrying value or fair value </li></ul></ul></ul>13
  14. 14. <ul><li>Reporting Impairment Losses </li></ul><ul><ul><li>As program or operating expense, special item, or extraordinary item per Statement 34 </li></ul></ul><ul><ul><li>Disclose general description, amount, and financial statement classification, if not evident from financial statements </li></ul></ul>14
  15. 15. <ul><li>Temporary Impairments </li></ul><ul><ul><li>Impairments are assumed to be permanent, unless </li></ul></ul><ul><ul><ul><li>Evidence is available to demonstrate impairment is temporary </li></ul></ul></ul><ul><ul><ul><li>Temporary impairments should not be recorded </li></ul></ul></ul>15
  16. 16. <ul><li>Insurance Recoveries </li></ul><ul><ul><li>Net impairment loss with insurance recovery </li></ul></ul><ul><ul><li>Replacement/restoration of asset is a separate transaction </li></ul></ul>16
  17. 17. <ul><ul><li>Applies to all insurance recoveries, not only those related to impairment Governmental funds would not report an impairment loss. Insurance recovery would be Other Financing Source. Replacement would be expenditure </li></ul></ul>17
  18. 18. GASB STATEMENT NO. 43 <ul><li>Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans </li></ul>18
  19. 19. EFFECTIVE DATE: Earlier application is encouraged 19 2009 12/15/07 Under $ 10 M III 2008 12/15/06 $ 10-100 M II 2007 12/15/05 $ 100 M I June 30 Fiscal Year Periods Beginning After Annual Revenues Phases
  20. 20. <ul><li>Uniform Standards of Financial Reporting for Other Postemployment Benefit Plans (OPEB Plans) </li></ul><ul><li>Postemployment Benefits “Other Than Pension Benefits” includes (a) Postemployment Healthcare Benefits and (b) Other Types </li></ul>Objectives 20
  21. 21. <ul><li>Approach Follows GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans </li></ul>21
  22. 22. SCOPE <ul><li>Agreement between Employers and Plan Members and their Beneficiaries in which: </li></ul><ul><ul><li>Employer contributions to the Plan are irrevocable </li></ul></ul><ul><ul><li>Plan Assets are dedicated to providing benefits to their retirees and their beneficiaries in accordance with the terms of the Plan </li></ul></ul><ul><ul><li>Plan Assets are legally protected from creditors of the employer(s) or the Plan administrator </li></ul></ul>22
  23. 23. <ul><li>Statement Provides: </li></ul><ul><ul><li>Financial reporting of Plan Assets, Liabilities and Net Assets </li></ul></ul><ul><ul><li>Disclosure of Actuarial Information about the funded status and funding progress of the Plan and contributions made to the Plan in comparison to Annual Required Contributions (ARC) </li></ul></ul><ul><ul><li>This Statement includes Defined Benefit OPEB Plans and Defined Contribution Plans </li></ul></ul><ul><ul><li>Single-Employer, Agent Multiple-Employer or Cost-Sharing Multiple-Employer Plans </li></ul></ul>23
  24. 24. Financial Reporting Framework <ul><li>The Financial Statements and Required Schedules are: </li></ul><ul><ul><li>Statement of Plan Net Assets </li></ul></ul><ul><ul><li>Statement of Changes in Plan Net Assets </li></ul></ul><ul><ul><li>Schedule of Funding Progress - - Actuarially determined Funded Status </li></ul></ul>24
  25. 25. <ul><ul><li>Schedule of Employer Contributions - - Contributions made by Employers in relation to the ARC </li></ul></ul><ul><li>Notes to the Financial Statements </li></ul><ul><li>Required Supplementary Information </li></ul>25
  26. 26. Actuarial Valuation <ul><li>An Actuarial Valuation should be performed at the following minimum frequency: </li></ul><ul><ul><li>Plans with total membership of 200 or more - - at least biennially </li></ul></ul><ul><ul><li>Plans with total membership of fewer than 200 - - at least triennially </li></ul></ul>56
  27. 27. <ul><li>Alternative Measurement Method for Plans with fewer than 100 Members </li></ul><ul><ul><li>Disclosure in Notes to Financial Statements the use of this method and all significant assumptions as listed in this Statement </li></ul></ul><ul><ul><li>Statement includes calculation methods and default values for use with the Alternative Measurement Method </li></ul></ul>27
  28. 28. GASB STATEMENT NO. 44 <ul><li>Economic Condition Reporting: The Statistical Section </li></ul><ul><li>(an amendment of NCGA Statement 1) </li></ul>28
  29. 29. <ul><li>EFFECTIVE DATE: </li></ul><ul><li>Periods beginning after June 15, 2005 </li></ul><ul><li>(June 30 Fiscal year in 2006) </li></ul><ul><li>Earlier application is encouraged </li></ul>29
  30. 30. Objectives <ul><li>Amends NCGA Statement 1, Governmental Accounting and Financial Reporting Principles, regarding the Statistical Section </li></ul><ul><li>The Statistical Section presents detailed information, generally in 10-Year trends, to aid users to better understand the Basic Financial Statements and Related Disclosures </li></ul>30
  31. 31. <ul><li>The Statistical Section is a required part of Comprehensive Annual Financial Report (CAFR) </li></ul><ul><li>NCGA Statement 1 presented fifteen tables or schedules </li></ul>31
  32. 32. <ul><li>The Statement presents five categories of information as follows: </li></ul><ul><ul><li>Financial Trends Information </li></ul></ul><ul><ul><ul><li>Net Assets </li></ul></ul></ul><ul><ul><ul><li>Change in Net Assets </li></ul></ul></ul><ul><ul><ul><li>Governmental Funds </li></ul></ul></ul>32
  33. 33. <ul><ul><li>Revenue Capacity Information </li></ul></ul><ul><ul><ul><li>Revenue Base </li></ul></ul></ul><ul><ul><ul><li>Revenue Rates </li></ul></ul></ul><ul><ul><ul><li>Revenue Payers </li></ul></ul></ul><ul><ul><ul><li>Property Tax Levies and Collections </li></ul></ul></ul>33
  34. 34. <ul><ul><li>Debt Capacity Information </li></ul></ul><ul><ul><ul><li>Ratios of Outstanding Debt </li></ul></ul></ul><ul><ul><ul><li>Ratios of General Bonded Debt </li></ul></ul></ul><ul><ul><ul><li>Direct and Overlapping Debt </li></ul></ul></ul><ul><ul><ul><li>Debt Limitation </li></ul></ul></ul><ul><ul><ul><li>Pledged-Revenue Coverage </li></ul></ul></ul>34
  35. 35. <ul><ul><li>Demographic and Economic Information </li></ul></ul><ul><ul><ul><li>Demographic and Economic Indicators </li></ul></ul></ul><ul><ul><ul><li>Principal Employers </li></ul></ul></ul><ul><ul><li>Operating Information </li></ul></ul><ul><ul><ul><li>Government Employees </li></ul></ul></ul><ul><ul><ul><li>Operating Indicators </li></ul></ul></ul><ul><ul><ul><li>Capital Assets </li></ul></ul></ul><ul><ul><ul><li>Pension and OPEB Plans </li></ul></ul></ul><ul><li>Narrative Explanations </li></ul>35
  36. 36. GASB STATEMENT NO. 45 <ul><li>Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions </li></ul>36
  37. 37. Note: All component units to implement same year as the primary government EFFECTIVE DATE: Earlier application is encouraged 37 2010 12/15/08 Under $ 10 M III 2009 12/15/07 $ 10-100 M II 2008 12/15/06 $ 100 M I June 30 Fiscal Year Periods Beginning After Annual Revenues Phases
  38. 38. Objectives <ul><li>Financial Accounting and Reporting for Other Postemployment Benefits (OPEB) </li></ul><ul><li>The Approach is consistent with GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers </li></ul>38
  39. 39. Measurement <ul><li>Single-Employer or Agent Multiple-Employer defined benefit OPEB Plans required to measure and disclose annual OPEB Cost On Accrual Basis of Accounting </li></ul><ul><li>Annual OPEB cost would equal employer’s Annual Required Contribution (ARC) with adjustments for Net OPEB obligation, if any </li></ul>39
  40. 40. <ul><li>ARC includes: </li></ul><ul><ul><li>Normal cost for the year, and </li></ul></ul><ul><ul><li>Amortization of unfunded actuarial accrued liabilities (or funding excess) not to exceed thirty years </li></ul></ul><ul><li>Actuarial Valuation: </li></ul><ul><ul><li>Frequency and timing </li></ul></ul><ul><ul><li>Methods </li></ul></ul><ul><ul><li>Assumptions </li></ul></ul><ul><li>Alternative Measurement Method </li></ul>40
  41. 41. Net OPEB Obligations <ul><li>Cumulative difference between annual OPEB Cost and Employer’s Contributions to the Plan (including OPEB liability or Asset at Transition) </li></ul><ul><li>Employer’s are required to measure Net OPEB Obligation equal to: </li></ul><ul><ul><li>ARC, </li></ul></ul><ul><ul><li>Year’s interest on Net OPEB Obligation, and </li></ul></ul><ul><ul><li>Adjustment to ARC to offset the effect of actuarial amortization of past under-or over contributions </li></ul></ul>41
  42. 42. Financial Statement Recognition and Disclosure <ul><li>Employer to recognize OPEB Expenses in Government-Wide, Proprietary and Fiduciary Fund Financial Statements </li></ul><ul><li>Net OPEB Obligations are to be displayed as liabilities (or assets) in Government-Wide, Proprietary and Fiduciary Fund Financial Statements </li></ul>42
  43. 43. <ul><li>Disclosures are required: </li></ul><ul><ul><li>Descriptive information about each Plan, including funding policy, </li></ul></ul><ul><ul><li>Contributions made in comparison to annual OPEB Cost, </li></ul></ul><ul><ul><li>Change in Net OPEB Obligation, </li></ul></ul><ul><ul><li>Funded status as of most recent actuarial valuation date, and </li></ul></ul><ul><ul><li>Nature of actuarial valuation process and significant methods and assumptions used </li></ul></ul>43
  44. 44. <ul><li>Required Supplementary Information (RSI) </li></ul><ul><ul><li>Schedule of funding progress for most recent actuarial valuation and two preceding valuations, together with notes regarding significant trends affecting the amounts presented </li></ul></ul>44
  45. 45. GASB STATEMENT NO. 46 <ul><li>NET ASSETS RESTRICTED BY ENABLING LEGISLATION </li></ul><ul><li>(an amendment of GASB No. 34) </li></ul>45
  46. 46. <ul><ul><li>EFFECTIVE DATE: </li></ul></ul><ul><ul><li>Periods beginning after June 15, 2005. </li></ul></ul><ul><ul><li>(Fiscal Year Ending June 30, 2006) </li></ul></ul><ul><ul><li>Earlier application is encouraged. </li></ul></ul>46
  47. 47. INTRODUCTION <ul><li>Enhance the usefulness and comparability of net asset information. </li></ul><ul><li>Clarify the meaning of Legally Enforceability. </li></ul><ul><li>Specify the accounting and financial reporting requirements. </li></ul>47
  48. 48. SCOPE AND APPLICABILITY <ul><li>Establishes and modifies requirements related to restrictions of net assets resulting from enabling legislation. </li></ul><ul><li>Amends GASB No. 34. </li></ul><ul><li>Discuss examples of Programs restricted by enabling legislation. </li></ul>48
  49. 49. DETERMINING LEGAL ENFORCEABILITY <ul><li>A Government can be compelled by an external party to use resources created by enabling legislation only for the purposes specified by the legislation. </li></ul>49
  50. 50. <ul><li>External Party include citizens, public interest groups or the judiciary. </li></ul><ul><li>“Generally, the enforceability of an enabling legislation restriction is determined by professional judgment .” </li></ul>50
  51. 51. CHANGES IN CIRCUMSTANCES <ul><li>New enabling legislation that replaces the original enabling legislation by establishing new restrictions. </li></ul><ul><li>Resources used for a purpose other than those stipulated in the enabling legislation, reevaluate the legal enforceability of the restrictions. </li></ul>51
  52. 52. DISCLOSURE REQUIREMENT <ul><li>Disclose the amount of net assets at end of reporting period that are restricted by enabling legislation in the notes to the financial statements. </li></ul>52