38 Years of Excellent Client Service GASB Update Presented By
William Blend, CPA, CFE
Slide 2
Schedule Course Begins Break Course Ends GASB Update Part 1
GASB Update Part 2 2
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Housekeeping Details Course evaluations Confirmation of
attendance Type of credit Participants responsibility Other matters
3
Slide 4
GASB Update 4 Clarifications on implementation of GASB No. 54
Fund Balance Reporting and Governmental Fund Type Definitions GASB
60 Accounting and Reporting for Service Concession Arrangements
GASB No. 61 The Financial Reporting Entity: Omnibus Agenda
Slide 5
GASB Update GASB 62 Codification GASB 64 Derivatives:
Application of Hedge Accounting GASB 63 Reporting Deferred
Outflows, Inflows and Net Position Future GASB Projects Agenda
5
Slide 6
38 Years of Excellent Client Service GASB Update Part 1 6
Slide 7
38 Years of Excellent Client Service GASB 54 Revisited 7
Slide 8
GASB 54 O VERVIEW Objectives: Establishes fund balance
classifications based on the relative strength of the constraints
on spending and the source of constraints Clarifies the existing
governmental fund type definitions (special revenue funds and
capital projects funds) 8
Slide 9
GASB 54 GASB No. 54 Fund Balance Reporting and Governmental
Fund Type Definitions This statement is designed to improve
financial reporting by establishing fund balance classifications
that are easier to understand and apply. The following
classifications are established : Nonspendable (inventory,
prepaids, advances, etc.) Restricted (externally) Committed
(contractual, highest level of action by governing body) Assigned
(intended use set by a governing body or designee) Unassigned
(residual in general fund) 9
Slide 10
GASB 54 I MPLEMENTATION G UIDANCE GASB Comprehensive
Implementation Guide Refer to Chapter Z, Section 54 10
Slide 11
N ONSPENDABLE F UND B ALANCE First, consider resources that are
not in spendable form, such as inventories and prepaids. Second,
consider other amounts that are potentially nonspendable, such as
long-term receivables, long-term advances to other funds, and
property held for resale. Third, determine if potential amounts are
restricted, committed, or assigned. 11
Slide 12
N ONSPENDABLE F UND B ALANCE If cash to be received from
nonspendable asset is restricted, committed, or assigned, then fund
balance should be classified as such and not as nonspendable
12
Slide 13
N ONSPENDABLE F UND B ALANCE Q: General Fund has inventory of
$100 and long-term advances to Utility Fund of $400? Payments
received from Utility Fund will fund general government operations.
What amount should be reported as nonspendable fund balance in the
General Fund? A: $500 Nonspendable 13
Slide 14
N ONSPENDABLE F UND B ALANCE Q: CRA Special Revenue Fund has
prepaids of $50 and property held for resale of $150? What amount
should be reported as nonspendable fund balance in this Special
Revenue Fund? 14
Slide 15
N ONSPENDABLE F UND B ALANCE A: Only $50 is nonspendable.
Because spendable resources in a special revenue fund must be
either restricted, committed, or assigned, cash received from sale
of property will fall into one of those categories. 15
Slide 16
R ESTRICTED F UND B ALANCE Externally imposed by creditors
(such as through debt covenants), grantors, contributors, or laws
or regulations of other governments Imposed by law through
constitutional provisions or enabling legislation 16
Slide 17
R ESTRICTED F UND B ALANCE Restricted Fund Balance for
governmental funds does not typically equal Restricted Net Assets
for govern- mental activities for the following reasons:
1.Principal of permanent fund is nonspendable for governmental
funds but restricted for govern- mental activities 2.Difference in
basis of accounting 3.Governmental activities includes internal
service fund assets 17
Slide 18
C OMMITTED F UND B ALANCE Amounts used for specific purposes
pursuant to constraints imposed by formal action of the
government's highest level of decision-making authority Committed
fund balance also should incorporate contractual obligations to the
extent that existing resources in the fund have been specifically
committed for use in satisfying those contractual requirements
18
Slide 19
C OMMITTED F UND B ALANCE Committed fund balance constraints
cannot lapse Amounts in committed fund balance may only be
redeployed for other purposes by using the same level of action
used to originally commit the funds 19
Slide 20
C OMMITTED F UND B ALANCE Formal action of the government's
highest level of decision-making authority that commits fund
balance should occur prior to the end of the reporting period
20
Slide 21
A SSIGNED F UND B ALANCE Amounts that are constrained by the
government's intent, but are neither restricted nor committed
Intent should be expressed by: The governing body itself A body (a
budget or finance committee, for example) or official to which the
governing body has delegated the authority to assign amounts to be
used for specific purposes 21
Slide 22
A SSIGNED F UND B ALANCE Assigned fund balance includes: All
remaining amounts (except for negative balances) reported in
governmental funds, other than the general fund, not classified as
nonspendable, restricted or committed Amounts in the general fund
that are intended to be used for a specific purpose 22
Slide 23
A SSIGNED F UND B ALANCE Reporting amounts that are not
restricted or committed in a special revenue; the government has
assigned those amounts to the purposes of the respective fund
Unspent resources remaining in a special revenue fund at year end
remain assigned (no additional action necessary) 23
Slide 24
A SSIGNED F UND B ALANCE Action to assign may occur after close
of the reporting period to identify purpose and amount 24
Slide 25
A SSIGNED F UND B ALANCE Q: A government adopts its FY13 legal
budget before 9/30/12 through the use of an ordinance, which
includes the use of FY12 existing fund balance to cover a projected
FY13 budgetary deficit of $500. Should the $500 be reported as
committed or assigned fund balance at 9/30/12? A: Assigned. Because
the constraint lapses at end of FY13 budget period with no formal
action taken. Committed constraints do not lapse. 25
Slide 26
A SSIGNED F UND B ALANCE Q: Citys FY13 legally adopted budget
ordinance for the general fund reports beginning fund balance of
$100 as a funding source and also projects an ending fund balance
of $75. What amount should be reported as Assigned for Subsequent
Year Expenditures at 9/30/12? 26
Slide 27
A SSIGNED F UND B ALANCE A: $25 The legal budget authorizes
rather than constrains spending. The $100, while included in the
FY13 budget as a funding source, is not entirely constrained for
spending in FY13. Only $25 ($100 beginning FB minus $75 ending FB)
is intended to fund the FY13 budgetary deficit. 27
Slide 28
U NASSIGNED F UND B ALANCE Unassigned fund balance is the
residual classification for the general fund The general fund
should be the only fund that reports a positive, unassigned fund
balance amount 28
Slide 29
U NASSIGNED F UND B ALANCE Unassigned fund balance is not an
appropriate category for encumbrances because a purchase order
entails a spending constraint (assignment at a minimum) Unassigned
fund balance of a blended component unit becomes assigned,
committed, or restricted when it is reported in the primary
governments financial statements because it is reported as a
special revenue fund 29
Slide 30
S TABILIZATION A RRANGEMENTS Some governments set aside amounts
for use in emergency situations or when revenue shortages or
budgetary imbalances arise. Those amounts are subject to controls
that dictate the circumstances under which they can be spent, such
as: Revenue stabilization Working capital needs Contingencies or
emergencies 30
Slide 31
S TABILIZATION A RRANGEMENTS To be classified as restricted or
committed: Authority for establishing stabilization arrangements
should be set by enabling legislation or highest level of decision
making Conditions of arrangement must be specific and non-routine
in an emergency is not specific when revenues fall more than 1%
below expectations is specific but could be expected to occur
routinely 31
Slide 32
S TABILIZATION A RRANGEMENTS Regardless of whether arrangement
meets criteria to be classified as restricted or committed,
disclosure is needed for the following: The authority for
establishing stabilization arrange- ments (for example, by statute
or ordinance) The requirements for additions to the stabilization
amount The conditions under which stabilization amounts may be
spent The stabilization balance, if not apparent on the face of the
financial statements 32
Slide 33
S TABILIZATION A RRANGEMENTS Difference between a stabilization
policy and a minimum fund balance policy: A stabilization
arrangement establishes spending constraints so that fund balance
may be expended only when certain specific circumstances or
conditions exist that are not expected to occur routinely. A
minimum fund balance policy establishes a savings target that the
government believes should be maintained. 33
Slide 34
S TABILIZATION A RRANGEMENTS Q: What is the difference between
a stabilization arrangement and a minimum fund balance policy?
34
Slide 35
S TABILIZATION A RRANGEMENTS A: For financial reporting
purposes, resources set aside under a stabilization arrangement may
be expended only when certain specific circumstances or conditions
exist that are not expected to occur routinely. A minimum fund
balance policy generally does not stipulate the conditions under
which fund balance may fall below the minimum but, rather,
establishes a target amount that the government believes should be
maintained to provide a reasonable level of assurance that
day-to-day operations can continue if revenues are insufficient to
cover expenditures. 35
Slide 36
S TABILIZATION A RRANGEMENTS Q: In May 2012, a City Commission
agrees in a workshop that it would like to set aside a reserve for
emergencies in its General Fund equal to 25% of General Fund
operating expenditures. If there is no further action on the
matter, how should this affect the Citys fund balance
classification at 9/30/12? Committed, assigned, or unassigned?
36
Slide 37
S TABILIZATION A RRANGEMENTS A: Unassigned. Not committed
because no formal action was taken by the Commission, nor did the
Commission establish specific and non-routine conditions to
determine when the fund balance amount could be spent. Not assigned
because the only possible classification options for stabilization
arrangements, even de facto stabilization arrangements like a
minimum fund balance policy, are restricted, committed, or
unassigned (GASB 54, Para. 21). 37
Slide 38
R EPORTING E NCUMBRANCES Encumbering amounts for specific
purposes for which resources already have been restricted,
committed, or assigned should not result in separate display of the
encumbered amounts within those classifications (within the detail
note, or on the face of the financial statements) Encumbrances
should not be included within unassigned fund balance
classifications 38
Slide 39
G OVERNMENTAL F UND T YPE D EFINITIONS General Fund Special
Revenue Funds will have further discussion Capital Projects Funds
Debt Service Funds Permanent Funds will have further discussion
Definitions are modified to provide for clarity and consistency
39
Slide 40
Special Revenue Funds Special revenue funds are used to account
for and report the proceeds of specific revenue sources that are
restricted or committed to expenditure for specified purposes,
other than debt service or capital projects Restricted or committed
revenues should be the foundation for a special revenue fund 40 G
OVERNMENTAL F UND T YPE D EFINITIONS
Slide 41
Special Revenue Funds (Cont.) Assigned resources are permitted,
but the restricted or committed revenue sources should be expected
to continue to comprise a substantial portion of the inflows
reported in the fund Annual transfer is not a sufficient basis for
use of a special revenue fund 41 G OVERNMENTAL F UND T YPE D
EFINITIONS
Slide 42
I MPLEMENTATION E XAMPLE Special Revenue Funds Q: A government
uses a formal ordinance to require that 20% of an existing revenue
source can be spent only for economic development activities. A
separate fund is established to account for those resources and
their use. The government budgets the entire revenue source in the
general fund and annually appropriates a transfer to the separate
fund. Can the government report the separate fund as a special
revenue fund? 42
Slide 43
A: It depends. The ordinance qualifies as a commitment of a
specific revenue for a specific purpose. However, notwithstanding
the budgetary treatment, the separate fund can be reported as a
special revenue fund only if the 20% portion is recognized as
revenue in the separate fund, rather than in the general fund. 43 I
MPLEMENTATION E XAMPLE Special Revenue Funds
Slide 44
Permanent Funds Used to account for and report resources that
are restricted to the extent that only earnings, and not principal,
may be used for purposes that support the reporting government's
programs, that is, for the benefit of the government or its
citizenry. 44 G OVERNMENTAL F UND T YPE D EFINITIONS
Slide 45
I MPLEMENTATION The following slides present examples provided
within the statement itself, the comprehensive implementation
guide, and a few real-life examples of implementing the standard
for assigned fund balance. 45
Slide 46
I MPLEMENTATION E XAMPLE Assumptions Special revenue fund whose
policy is to use restricted resources before unrestricted No
established policy for use of its unrestricted resources The fund
includes amounts that have been restricted, committed, or assigned
to three specific purposes 46
Slide 47
47 I MPLEMENTATION E XAMPLE
Slide 48
Using the example in the preceding question, assume that the
government has adopted a policy of using assigned resources first,
followed by committed amounts. How would the ending balances
change? (Q&A2012-Z.54.20) 48 I MPLEMENTATION E XAMPLE
Slide 49
49 I MPLEMENTATION E XAMPLE
Slide 50
Using the special revenue fund example, what would be the
effect if one of the specific purposes was overspent?
(Q&A2012-Z.54.21) The government would first reduce balances
assigned to other purposes in the fund (the specific purposes that
would be reduced are at the government's discretion) until the
deficit is eliminated. However, if the deficit exceeds the
remaining assigned balances in the fund, then the residual amount
should be reported as negative unassigned fund balance. 50 I
MPLEMENTATION E XAMPLE
Slide 51
51 I MPLEMENTATION E XAMPLE
Slide 52
38 Years of Excellent Client Service GASB 60 52
Slide 53
GASB Statement No. 60 Effective for fiscal years beginning
after December 15, 2011 and thereafter (FL - FYE 6/30/13 &
9/30/13) A type of public-private or public-public partnership
Parties: Transferor, Operator, Customer/User Benefits: Leverage
existing infrastructure for cash Get facilities built, but transfer
the risks Provide services in a more efficient manner Accounting
and Financial Reporting for Service Concession Arrangements 53
Slide 54
Scope: What is an SCA? ALL of the following criteria are met:
Transferor conveys to an operator the right and related obligation
to provide services to the public through the use and operation of
a capital asset (facility) in exchange for significant
consideration Operator collects and is compensated by fees from
third parties 54
Slide 55
Scope: What is an SCA? ALL of the following criteria are met:
Transferor is entitled to significant residual interest in the
service utility of the facility at the end of the arrangement
Transferor determines or has the ability to modify or approve: What
services the operator is required to provide To whom the services
will be provided The prices or rates that will be charged 55
Slide 56
Examples of SCAs An operator will design and build a facility
and obtain the right to collect fees from third parties:
construction of a municipal complex for the right to lease a
portion of the facility to third parties. Operator will provide
significant consideration in exchange for the right to access an
existing facility: operating a parking garage and collecting fees
from third parties for its usage. 56
Slide 57
Examples of SCAs The operator will design and build a facility
(new tollway), finance the construction costs, provide the
associated services, collect the associated fees, and convey the
facility to the government at the end of the arrangement. 57
Slide 58
Should recognize a liability for certain obligations to
sacrifice financial resources if: Obligation relates directly to
the facility, or Obligation relates to a commitment to maintain a
minimum or specified level of service in the facility Deferred
inflow should be reduced and revenue recognized in a systematic and
rational manner over the term of the SCA GASB Statement No. 60
58
Slide 59
38 Years of Excellent Client Service GASB 61 59
Slide 60
GASB 61 T HE F INANCIAL R EPORTING E NTITY : O MNIBUS - AN
AMENDMENT OF GASB S TATEMENTS 14 AND 34 60
Slide 61
I NTRODUCTION Effective for fiscal years beginning after June
15, 2012 (FL - FYE 6/30/13 & 9/30/13) The cumulative effect of
applying this statement should be reported as a restatement of
beginning equity for the current period with appropriate disclosure
61
Slide 62
I NTRODUCTION Omnibus means to address multiple issues within
one document Objective of GASB 61: To improve financial reporting
for governmental entities and, specifically, to address issues that
have arisen since GASB 14 and 34 Include the organizations that
should be included Exclude the organizations that should not be
included Consistency with current conceptual framework 62
Slide 63
S COPE AND A PPLICABILITY Modifies existing requirements for
the assessment of potential component units in determining what
should be included in the financial reporting entity, and financial
reporting entity display and disclosure requirements. It applies to
financial reporting by primary governments and other stand-alone
governments, and to the separately issued financial statements of
governmental component units, as defined in Paragraph 9 of
Statement 14. 63
Slide 64
S COPE AND A PPLICABILITY In addition, GASB 61 should be
applied to nongovernmental component units when they are included
in a governmental financial reporting entity. 64
Slide 65
A MENDMENTS TO I NCLUSION C RITERION GASB 61 adds financial to
the accountability criteria of GASB 14, making it financial
accountability. To meet this criteria, the following circumstances
for a primary government should include the following: a.PG
appoints a voting majority and it is able to impose its will on the
organization or the organization has the potential to provide
specific financial benefits to, or impose financial burdens on the
PG b.If an organization is fiscally dependent on the PG and there
is a potential for the organization to provide specific financial
benefits to, or impose specific financial burdens on, the PG
despite: (1) separately elected governing board, (2) governing
board appointed by a higher level of government, or (3) jointly
appointed board 65
Slide 66
Examples of the financial benefit or burden relationship
presented in GASB 61 are: a.PG is legally entitled to, or can
otherwise access, the organizations resources b.PG is legally
obligated, or has otherwise assumed the obligation to finance the
deficits of, or provide financial support to, the organization c.PG
is obligated in some manner for the debt of the organization The
above are examples of other ways to show this relationship? 66 A
MENDMENTS TO I NCLUSION C RITERION
Slide 67
A MENDMENTS TO THE M ISLEADING TO E XCLUDE C RITERION GASB 61
emphasizes the use of managements professional judgment when
considering the inclusion of potential component units. The
relationship between a primary government and closely related
organization will generally be financial in nature and often
include financial benefit or burden relationships. When an
organization does not meet financial accountability criteria,
management may still determine that inclusion is necessary to
prevent the reporting entitys financial statements from being
misleading. When evaluating a potential component unit, management
should consider if the organization is closely related to or
financially integrated with the primary government. 67
Slide 68
A MENDMENTS TO THE C RITERIA FOR B LENDING C OMPONENT U NITS
Discrete presentation is the default method for inclusion of
component units. Blending should occur only in specific, narrowly
defined circumstances. Prior to GASB 61, this criterion consisted
of substantively the same governing body and services provided
entirely/exclusively to the primary government. GASB 61 adds
additional criteria for blending component units. Using just the
substantively the same governing body rule, resulted in PG adding
significant assets to their financial statements that they could
not access, or significant debt for which it was not liable.
68
Slide 69
A MENDMENTS TO THE C RITERIA FOR B LENDING C OMPONENT U NITS
The two provisions added to the blending criteria of substantively
the same governing body were as follows: 1)Either a financial
benefit or burden requirement also exists between the PG and
component unit, or 2)Management of the PG also has operational
responsibility for the component unit. GASB 61 also added a third
criterion for blending, which occurs when a component units total
debt outstanding, including leases, is expected to be repaid
entirely or almost entirely with resources of the PG. 69
Slide 70
A MENDMENTS TO THE R EQUIREMENTS FOR R EPORTING THE F UNDS OF A
B LENDED C OMPONENT U NIT GASB 61 clarifies that funds of a blended
component unit assume all the characteristics of funds of the PG
and are subject to the same fund reporting requirements. The
general fund of a blended component unit should continue to be
reported as a special revenue fund of the PG. For governments
engaged only in business-type activities that use a single-column
presentation, a component unit may be blended by consolidating its
financial statement data within the single column of the PG and
presenting condensed combining information in the notes to the
financial statements. 70
Slide 71
A MENDMENTS TO THE R EQUIREMENTS FOR R EPORTING THE F UNDS OF A
B LENDED C OMPONENT U NIT Condensed combining information should
include at a minimum: 1)Condensed statement of net assets
2)Condensed statement of revenues, expenses, and changes in net
assets 3)Condensed statement of cash flows 71
Slide 72
A MENDMENTS TO THE M AJOR C OMPONENT U NIT R EQUIREMENTS Prior
to GASB 61, there was inconsistency between PG in how they
determined which component units are major. GASB 61 clarifies that
major component units should be those which are of greater interest
to the financial statement user. Therefore, determination should be
based on the nature and significance of relationship to the PG.
This would include factors, such as: 1)Essential services provided
to the citizenry 2)Significant transactions with the PG
3)Significant financial benefit or burden relationship with the PG
72
Slide 73
A MENDMENTS TO THE M AJOR C OMPONENT U NIT R EQUIREMENTS In
addition, GASB 61 eliminates the requirement that the major
component unit determination include consideration of each
component units significance relative to other component units.
Major component units should be presented either: 1)In a separate
column in the statement of net assets and activities 2)In combining
statements of major component units in the basic financial
statement following the fund financial statements, or 3)In the
notes to the financial statement in a condensed financial statement
format. Nonmajor component units should be aggregated in a single
column. A combining schedule is not required but is allowed as
supplementary information. 73
Slide 74
A MENDMENTS TO THE R EQUIREMENTS FOR R EPORTING E QUITY I
NTERESTS OF C OMPONENT U NITS When a government owns a majority of
the equity interest of a legally separate organization and the
intent is to directly enhance the governments ability to provide
governmental services, the organization should be reported as a
component unit. Prior to GASB 61, equity interests in discretely
presented component units were reported as expense or outflow of
resources for the acquisition, whereas equity interests in joint
ventures were reported as assets. 74
Slide 75
GASB 61 now requires that the equity interest in a discretely
presented component unit be reported as an asset of the fund that
has the equity interest. If the component unit is blended, the
equity interest is eliminated in the blending process. 75 A
MENDMENTS TO THE R EQUIREMENTS FOR R EPORTING E QUITY I NTERESTS OF
C OMPONENT U NITS
Slide 76
N OTE D ISCLOSURES GASB 61 clarifies how disclosure
requirements for component units should be applied. Note
disclosures should include the following: 1)Brief description of
the component units of the financial reporting entity and their
relationship to the PG. 2)Discussion of the rationale for including
each component unit in the financial reporting entity and whether
it is discretely presented, blended, or in fiduciary funds.
3)Information about how the separate financial statements for the
individual component units may be obtained. 76
Slide 77
N OTE D ISCLOSURES GASB 61 also clarifies that component units
may be disclosed together based on common characteristics, as long
as each component unit is separately identified. (Example: multiple
CRA funds) Believe it or not, no new disclosures. 77
Slide 78
A MENDMENTS FOR C OMPONENT U NITS AND R ELATED O RGANIZATIONS
WITH J OINT V ENTURE C HARACTERISTICS GASB 61 provides reporting
guidance for minority interests in component units and related
organizations with joint venture characteristics. For component
units reported in a majority participants financial reporting
entity, equity interests of the minority participants should be
reported as restricted net assets, nonexpendable. Minority interest
in a component unit was also added to GASB 34s paragraph describing
expendable and nonexpendable restricted net assets. 78
Slide 79
I LLUSTRATION GASB 61 Q: A County established a nonprofit
organization to provide emergency medical services to its
residents. The County commissioners serve as the Board for the EMS.
The County provides significant financial support to the EMS. How
should the EMS be reported in the F/S of the County? 79
Slide 80
A: Blended Component Unit. The EMS governing body is
substantively the same as the Countys and a financial burden to the
County exists. 80 I LLUSTRATION GASB 61
Slide 81
Q: A District School Board has approved a charter school. The
charter school is not fiscally dependent on the District, nor is
the District responsible for funding the charter schools deficits.
There are no other significant financial relationships between the
District and charter school. How should the charter school be
reported in the financial statements of the District School Board?
81 I LLUSTRATION GASB 61
Slide 82
A: Not a Component Unit, but disclose as a related
organization. The District School Board does not have financial
accountability for the charter school, nor does it appear to be
misleading to exclude the charter school from the School Boards
financial statements because of the lack of any significant
financial relationships. 82 I LLUSTRATION GASB 61
Slide 83
38 Years of Excellent Client Service GASB Update Part 2 83
Slide 84
38 Years of Excellent Client Service GASB 62 84
Slide 85
GASB Statement No. 62 Effective for fiscal years beginning
after December 15, 2011 and thereafter (FL FYE 6/30/13 &
9/30/13) Incorporates pronouncements issued before November 30,
1989, by the following that do not contradict GASB Pronouncements
FASB Statements and Interpretations (SFAS 106) Accounting Principle
Board opinions (APB) AICPA Accounting Research Bulletins Supersedes
GASB S-20 Codification of Accounting and Financial Reporting
Guidance Contained in Pre-November 30, 1989 FASB and AICPA
Pronouncements 85
Slide 86
Capitalized interest Proprietary Funds Revenue recognition when
right of return exists Proprietary Funds Defines classifications
for a classified statement of position (balance sheet) Over 500
paragraphs Due to issuance of FASB Codification GASB Statement No.
62 86
Slide 87
38 Years of Excellent Client Service GASB 63 87
Slide 88
GASB Statement No. 63 Effective for fiscal years beginning
after December 15, 2011 Applies to Florida governments FYE
6/30/2013 and 9/30/2013 Financial Reporting of Deferred Outflows of
Resources, Deferred Inflows of Resources and Net Position 88
Slide 89
Background Concepts Statement 4 identifies 5 elements that make
up a statement of financial position: Assets Liabilities Deferred
outflows of resources Deferred inflows of resources Net position
Differs from the composition currently required by Statement 34,
which requires the presentation of assets, liabilities, and net
assets in a statement of financial position Statements 53 and 60
identify deferrals of resources 89
Slide 90
For Proprietary Funds Net approach is encouraged Balance Sheet
approach is allowed For Governmental Funds Balance Sheet approach
still appropriate Difference is still called Fund Balance and
applies GASB 54 90
Slide 91
Definitions Deferred outflows of resources A consumption of net
assets by the government that is applicable to a future reporting
period Has a positive effect on net position, similar to assets
Deferred inflows of resources An acquisition of net assets by the
government that is applicable to a future reporting period Has a
negative effect on net position, similar to liabilities Net
position The residual of all elements presented in a statement of
financial position 91
Slide 92
Statement of Net Position Assets + Deferred Outflows = Total
Assets and Deferred Outflows Liabilities + Deferred Inflows = Total
Liabilities and Deferred Inflows Net Position 92
Slide 93
Display Requirements Deferred outflows should be reported in a
separate section following assets Similarly, deferred inflows
should be reported in a separate section following liabilities Net
position components resemble net assets components under Statement
34, but include the effects of deferred outflows and deferred
inflows Net investment in capital assets Restricted Unrestricted
Governmental funds continue to report fund balance 93
Slide 94
Disclosures Provide details of different types of deferred
amounts if components of the total deferred amounts are obscured by
aggregation on the face of the statements If the amount reported
for a component of net position is significantly affected by the
difference between deferred inflows or outflows and their related
assets or liabilities, provide an explanation in the notes Balances
of deferred outflows and deferred inflows may be aggregated on face
of statements 94
Slide 95
Current Deferred Outflows/ Inflows Statement 53 - Accounting
and Financial Reporting for Derivative Instruments Statement 60 -
Service Concession Arrangements 95
Slide 96
Examples of Other Deferred Inflows of Resources Proposed
Deferred amounts from refunding of debt (credits) Proceeds from
sales of future revenues Deferred gain from sale-leaseback
Regulatory credits 96
Slide 97
Deferred amounts from refunding of debt (debits) Cost to
acquire rights to future revenues (intra-entity) Deferred loss from
sales-leaseback Examples of Other Deferred Inflows of Resources
Proposed 97
Slide 98
Other Issues Criteria for determining major funds will include
deferred items Use of the term deferred limited to deferred
outflows and deferred inflows 98
Slide 99
38 Years of Excellent Client Service GASB 64 99
Slide 100
GASB Statement No. 64 Effective for fiscal years beginning
after June 15, 2011 Applies to Florida governments FYE 6/30/2012
and 9/30/2012 Derivative Instruments: Application of Hedge
Accounting Termination Provisions an amendment of GASB Statement
No. 53 100
Slide 101
GASB Statement No. 64 In many instances, governments have
managed to replace their swap counterparty or swap counterpartys
credit support providers by amending existing swap agreements or by
entering into new swap agreements. Therefore, GASB 64 was issued to
clarify the circumstances in which an effective hedging
relationship continues after these events occur. 101
Slide 102
When Does a Hedging Relationship Continue? Statement 53
requires immediate recognition of deferred amounts when swap is
terminated This Statement clarifies when a hedging relationship
(and hedge accounting) continues when all of the following are met:
Collectability of swap payments is probable Counterparty (or
support provider) is replaced with an assignment or in-substance
assignment Act of default or termination by counterparty (or
support provider) 102
Slide 103
Assignment Assignment: Occurs when swap agreement is amended to
replace original counterparty, or counterpartys credit support
provider, but all other terms of swap agreement remain unchanged.
103
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In-substance Assignment In-substance Assignment: Original
counterparty, or counterpartys credit support provider, is replaced
Original swap agreement ended and replacement swap agreement
entered into on same date Terms that affect changes in fair values
and cash flows in original and replacement swap agree- ments are
identical (notional amounts, maturity, reference rates, etc.)
104
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38 Years of Excellent Client Service Future GASB Projects
105
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Other Current Projects Economic Condition Reporting: Financial
Projections Pension Accounting and Reporting Conceptual Framework
Recognition and Measurement Attributes Government Combinations
Financial Guarantees Fair Value Measurement and Reporting GAAP
Hierarchy User Guide Series 106
Slide 107
38 Years of Excellent Client Service GASBs Economic Condition
Reporting: Financial Projections Project 107
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NCGA Concepts Statement 1 Information concerning financial
condition of the governmental unit. To provide financial
information useful for determining and forecasting the financial
condition of the governmental unit and changes therein. 108
Slide 109
GASB Concepts Statement 1 Financial reporting should assist
users in assessing the level of services that can be provided by
the governmental entity and its ability to meet its obligations as
they become due. Financial reporting should provide information
about the financial position and condition of a governmental
entity. 109
Slide 110
Why Now? Current Environment Many governments are under
financial stress Financial statement users are looking for the
pressure points Weakness in revenue sources Calls on resources
Users need financial projections to assess a governments fiscal
sustainability 110
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What is Economic Condition? Economic condition is a composite
of a governments financial position, fiscal capacity, and service
capacity. (Redundancies removed) Financial Position Financial
position is the status of a governments assets, deferred outflows,
liabilities, deferred inflows, and net position, as displayed in
the basic financial statements. Fiscal Capacity Fiscal capacity is
the governments ability and willingness to meet its financial
obligations as they become due on an ongoing basis. Service
Capacity Service capacity is the governments ability and
willingness to meet its commitments to provide services on an
ongoing basis. 111
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Assumptions for Projections Principles-based approach for
providing guidance on how to identify and develop assumptions which
would not specifically identify the assumptions necessary for
projecting the components of fiscal sustainability information.
Principles provide that assumptions should be based on relevant
historical information, as well as events and conditions that have
occurred and affect the future, that are: Consistent with each
other and the information used as the basis for the assumptions
Comprehensive by considering significant trends, events, and
conditions Assumptions used by the government should be disclosed
112
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38 Years of Excellent Client Service Pension Accounting and
Financial Reporting by Employers Preliminary Views of the GASB
113
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Fundamental Approach Balance between a point-in-time measure of
the employers obligation to employees and the measure over time of
the cost to taxpayers of providing governmental services
Employment-exchange transactions create an obligation of employer
to employees to provide pension benefits in retirement Annual
exchanges, viewed by the Board within context of a career-long
employment relationship Accounting-based versus funding-based
proposals (currently, we compare the ARC with the actual payment
made) 114
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Types of Plans Single-employer plans involve only one
government Multiple-employer plans includes more than one
government Agent multiple-employer plans separate accounts are
maintained to ensure that each employers contributions are used to
provide benefits only for the employees of that government
Individual employers are responsible for benefits associated with
their own employees only, and separate actuarial calculations are
made for each participating government in the plan Collection of
single-employer plans Costs of administering the plan are shared by
participating governments, and the plan assets are pooled for
investment purposes 115
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Multiple-employer plans include more than one government
Cost-sharing multiple-employer plans governments pool (share) the
costs of providing benefits and administering the plan and the
assets accumulated to pay benefits A single actuarial valuation is
conducted for all of the employees of the participating governments
combined Types of Plans 116
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Biggest Changes SOLE OR AGENT MULTIPLE-EMPLOYER PLANS Old UAL
meets the definition of a liability when parameters of the
calculation are limited to: Use of fair value of plan net position,
instead of a potential actuarial value of assets Use of the
actuarial cost method similar to the current definition of entry
age, instead of one of 6 methods, as allowed in Statement 27
117
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SOLE OR AGENT MULTIPLE-EMPLOYER PLANS (Cont.) Changes in the
components of the total pension liability, that are not changes in
plan terms (which are recognized as expense immediately) to be
amortized over the expected remaining service life of plan members
(now no distinction between active and inactive (retired)
employees) CHANGE FROM THE ED WHICH WAS amortized over the weighted
average, expected remaining service life of the individual employee
(causing immediate recognition of expense for retirees), instead of
a period up to 30 years Biggest Changes 118
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Biggest Changes SOLE OR AGENT MULTIPLE-EMPLOYER PLANS (Cont.)
Changes in investment performance (differences in expected and
actual investment performance) should be amortized over a 5-year
closed period COST-SHARING MULTIPLE-EMPLOYERS Should apply these
concepts and report their collective share of the activity of the
plan (liability, expense, deferred inflows, and deferred outflows),
unless another entity is legally obligated to pay its share, or a
portion of its share, of the liability on an ongoing basis 119
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38 Years of Excellent Client Service Cost-Sharing Employers
120
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Current Requirements Reflect the pooling of risks and assets Do
not require actuarial information to be presented for individual
employers The information is required to be presented in the
cost-sharing pension plans own financial statements USERS want to
know if a government in a cost- sharing plan, like other government
employers, incurred an obligation to provide pensions to employees
as they have worked 121
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Proposed Recognition A government participating in a
cost-sharing pension plan would report A net pension liability
based on its proportion of the collective net pension liability of
all of the governments participating The proportion would equal the
governments long-term expected contributions to the plan divided by
those of all governments in the plan, if calculation is practicable
122
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Measurement The Board adopts the same approach to measurement
of the collective unfunded liability, deferred inflows, and pension
expense for cost-sharing employers as it tentatively has done for
sole and agent employers. 123
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38 Years of Excellent Client Service GASBs Conceptual Framework
Project 124
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Recognition and Measurement Attributes Concepts Statements
Recognition Concepts: Develop recognition criteria for what items
should be reported as elements of that financial statement The
related basis of accounting determines when those items should be
reported 125
Slide 126
Recognition and Measurement Attributes Concepts Statements
Measurement Approach: Focuses on whether an asset or liability
presented in a financial statement should be reported at an amount
that reflects the value when: The asset was acquired or the
liability was incurred Remeasured to reflect the value at the date
of the financial statements 126
Slide 127
Recognition of Elements of Financial Statements Boards
Preliminary Views : Financial statements prepared using the current
financial resources measurement focus (fund statements) should be
replaced with the near- term financial resources measurement focus,
which recognizes balances from a near-term perspective and flows of
financial resources for the reporting period The period to which
near-term refers should be considered in standards, rather than a
concept statement 127
Slide 128
Current Financial Resources Recognizes the net effect of
transactions on current financial resources by recording accruals
for those revenue and expenditure transactions which have occurred
by year- end that are normally expected to result in a cash receipt
or disbursement within a specified period after year-end (confusion
is it 60 days, like deferred property taxes, or 1 year?) 128
Slide 129
Measurement Approaches Initial-Transaction-Date-Based
Measurement (Initial Amount) The transaction price, or amount
assigned when an asset was acquired or a liability was incurred,
including subsequent modifications to that price or amount, such as
through amortization or depreciation
Current-Financial-Statement-Date-Based Measurement (Remeasured
Amount) The amount assigned when an asset or liability is
remeasured as of the financial statement date, including fair
value; current acquisition, sales, and settlement price;
replacement cost; and value-in-use 129
Slide 130
Measurement Approaches Boards Preliminary Views : Neither
measurement approach is best for all objectives Initial amounts are
appropriate for: Assets that are used directly in providing
services Remeasured amounts are more appropriate for: Assets that
will be converted to cash Variable-payment liabilities, such as
compensated absences or pollution remediation obligations 130
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38 Years of Excellent Client Service Government Combinations
131
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Project Objectives Consider the financial reporting
requirements for government combinations that are accomplished
through annexation, consolidation, acquisition, shared service
arrangements, or by other means Analysis of government combinations
that have taken place in both the general government area (ex.,
City/County consolidations), and the business- type activities area
(ex., Healthcare organizations) Address certain spin-off issues
(ex., a library district that was formerly a department in a
primary government) 132
Slide 133
Overall Approach To consider government combinations based on
the presence (or lack) of financial consideration Other combination
arrangements, without the presence of financial consideration, that
are within the scope of this project: Annexations that include
transfers of assets and liabilities between two or more legally
separate governments School district reorganizations that result in
the consolidation of two or more legally separate entities or that
include transfers of assets and liabilities between two or more
legally separate entities Shared service arrangements in
circumstances that governments jointly agree to provide
discontinued services and create new legally separate entities, or
contribute resources to existing legally separate entities in order
to provide those services 133
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38 Years of Excellent Client Service Financial Guarantees
134
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Financial Guarantees Primarily associated with commitments
related to debt issue by governmental entities Take many forms,
including statutory commitments Current economic environment has
resulted in a level of financial stress, bringing to light
financial guarantees that have been made or received in the past
135
Slide 136
Financial Guarantees No single comprehensive source of
guidance. Heightened and potential for claims on a governments
resources and if a recipient, potential resources Additional
guidance should be developed regarding the recognition and
disclosure of financial guarantees made by state and local
governments 136
Slide 137
Examples: A state government that guarantees the debt of local
school districts Several states providing guarantees for invest-
ments made in venture capital organizations Financial Guarantees
137
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38 Years of Excellent Client Service Fair Value Measurement and
Application 138
Slide 139
Objectives of the Project Review and consider alternatives for:
Further development of the definition of fair value Methods used to
measure fair value Potential disclosures about fair value
measurements Address issues of fair value measurement of
alternative investments: Private placements and hedge funds Real
estate investment trusts State land trusts Partnership interest
139
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Project Parts Part 1 - Addresses the definition of fair value
and potential measurement techniques Part 2 - Addresses specific
issues involving the application of fair value measurement to
specific assets and liabilities, including donated capital assets
and fair value measurement in governmental funds Will not begin
until Part 1 is completed 140
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38 Years of Excellent Client Service GAAP Hierarchy 141
Slide 142
Project Objectives Will consider possible modifications to the
GAAP hierarchy, as set forth in Statement No. 55 Will re-examine
the hierarchy levels to assess whether the standards-setting
process and the governmental financial reporting environment have
sufficiently evolved since the establishment of the original
hierarchy by the AICPA in 1992 to warrant reconsideration or
reconfiguration of certain aspects of the structure Will consider
modifying the reference to the pronouncements referred to in
categories (a)-(d) in Paragraph 6 of Statement No. 55 and adding a
specific reference in that paragraph to the FASB Codification as
other accounting literature 142
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38 Years of Excellent Client Service GASBs User Guide Series
143
Slide 144
GAAP Hierarchy Summary Established Accounting Principles GASB
Statements and Interpretations, plus AICPA and FASB pronouncements,
if made applicable to state and local governments by a GASB
Statement or Interpretation GASB Technical Bulletins, and the
following pronouncements, if specifically made applicable to state
and local governments by the AICPA: AICPA Industry Audit and
Accounting Guides and AICPA Statements of Position Consensus
positions of the GASB Emerging Issues Task Force (has not been
established) and AICPA Practice Bulletins, if specifically made
applicable to state and local governments by the AICPA (none
currently exist) Qs and As published by the GASB staff, as well as
industry practices widely recognized and prevalent 144
Slide 145
GAAP Hierarchy Summary Established Accounting Principles Other
Accounting Literature Other accounting literature, including GASB
Concepts Statements pronouncements in the first four categories of
the hierarchy for nongovernmental entities, when not specifically
made applicable to state and local governments 145
Slide 146
User Guide Series To update the user guides to incorporate GASB
standards issues during the past decade and revising them to
address issues raised by readers To issue a new series of four user
guides to replace the original series What you should know about
your local governments finances: A guide to financial statements
(released January 2012) What you should know about your school
districts finances: A guide to financial statements What you should
know about the finances of your governmental business-type
activity: A guide to financial statements An analysts guide to
state and local government financial statements, note disclosures,
and supporting information Project Objective 146
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38 Years of Excellent Client Service GASBs Research Agenda
147
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Research Agenda Electronic Financial Reporting - GASB to
monitor and encourage use Fiduciary Responsibilities - Assess
whether additional guidance should be developed regarding the
application of the fiduciary responsibilities criterion in deciding
whether and how governments should report fiduciary activities in
their financial statements Leases Re-examine issues associated with
lease accounting, considering improvements to existing guidance,
including consideration of whether operating leases meet the
definitions of assets or liabilities 148
Slide 149
Research Agenda Tax Abatement Disclosures - Consider providing
disclosure guidance for governments that have granted stand-alone
property tax abatement programs (SAPTAPS) or other
abatements/subsidies that share the same characteristics Provide
for decreased tax liability for select parcels Serve a specific
purpose beyond tax relief (spurring growth) - taxpayer receiving
the abatement promises some performance Are in effect for a limited
time Can stand alone without other incentives 149