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Chris Banta, CPA, CFE
Brown, Edwards & Company, LLP
Summary of Pending
Pronouncements Quick refresher on GASB No. 54 – Fund Balance Reporting
and Governmental Fund Type Definitions – Effective periods beginning after 6/15/10 (Now!)
GASB No. 59 – Financial Instruments Omnibus – Effective periods beginning after 6/15/10 (Now!)
GASB No. 60 – Accounting and Financial Reporting for Service Concession Arrangements – Effective periods beginning after 12/15/11
GASB No. 61 – The Financial Reporting Entity: Omnibus –an amendment of GASB Stmt. No. 14 and No. 34 – Effective periods beginning after 6/15/12
GASB No. 62 – Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements – Effective periods beginning after 12/15/11
Proposed Statement Changes
Deferred Outflows and Inflows and Net
Position
Quick Reminder on GASB No. 54
Effective June 30, 2011 for Virginia local
government entities
Work with your auditors early on!
Statistical section: presentation may be
made prospectively, but retroactive
presentation is encouraged.
Comparative statements: If presented
reclassifications should be applied by
restating prior periods presented.
Fund Balance Categories
Nonspendable Fund Balance –
Amounts that cannot be spent because they are either:
○ Not in spendable form – not expected to be converted to cash in the near term. Examples: inventories, prepaid amounts, long-term
loans/notes receivable, property acquired for resale
○ Legally or contractually required to be maintained intact – Example: the corpus of a permanent fund. On the Statement of Net Assets this would be shown in the restricted net asset section.
Fund Balance Categories
(Continued)
Restricted Fund Balance – Resources with constraints placed on them from
external sources
○ Creditors, grantors, contributors, or laws and other regulations of other governments.
○ Imposed by law through constitutional provisions or enabling legislation.
○ Source of the constraint is outside the government and cannot be changed by the government, however, does not include agreements with vendors.
○ Same definition as restricted net assets per GASB 34
Fund Balance Categories
(Continued) Committed Fund Balance – Amounts constrained for specific purposes by formal
action of the government’s highest level of decision making authority.
○ Formal action by councils, boards, etc. (internal to government)
○ Action should occur prior to year end, amount may be determined after
○ Funds cannot be used for any other purposes unless formally released from commitment by same action
○ Also includes contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Fund Balance Categories
(Continued)
Assigned Fund Balance – Amounts constrained by government’s intent to
fulfill specific purposes, but neither restricted norcommitted
Intent expressed by either:
○ Highest level of decision making authority, or
○ A body (ex: budget or finance committee) or official to which governing body has delegated authority to assign amounts to be used for specific purposes.
Assignment cannot create a deficit in unassigned fund balance
Fund Balance Categories
(Continued)
Unassigned Fund Balance –
○ Amounts not assigned to other funds, or
restricted, committed, or assigned with the
same fund.
○ Residual classification for the general fund.
○ Only in general fund can there be a positive,
unassigned fund balance. Other funds,
residual positive fund balance is assigned or
will need to fit into another category.
○ Other governmental funds may have negative
unassigned fund balance.
Fund Balance – Note Disclosures
Aggregate versus detail - if shown in total on face of financial statements, disclose detail in notes.
Committed fund balance – should disclose the highest level of decision making authority and the formal action required to establish a fund balance commitment.
Assigned fund balance – should disclose the body or official authorized to assign amounts to a specific purpose and the policy established by the governing body to which that authorization is given.
Must disclose whether the government considers restricted or unrestricted amounts to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available.
Encumbrances
Disclose significant encumbrances in notes by major fund and nonmajor in the aggregate in conjunction with other significant commitments disclosures.
If you encumber amounts for specific purposes, BUT those resources are already included in restricted, committed, or assigned fund balance…. Should NOT result in separate display of encumbered amounts within those classifications.
All encumbered amounts are automatically either assigned or committed depending on process through which they are encumbered.
GASB 60 – Accounting and Financial
Reporting for Service Concession
Arrangements Government – Private or Government –
Government contracts
Involves an arrangement between the transferor (government) & an operator (government or other entity).
Transferor government conveys rights and obligation to provide services through use of facility or other asset
Operator collects and is compensated with fees from users, customers.
GASB 60 - Continued
Transferor has control of asset(s) including
Significant residual interest in service utility of facility at the end of the agreement.
Has the ability to determine, modify, or approve:
○ What service the operator is required to provide
○ Who the services are provided to (customers, service areas)
○ Rate or pricing structure
GASB 60 – Examples
Types of arrangements
Build a new facility and operate it
Improve an existing facility and operate it
Operate an existing facility
Types of infrastructure
Civic centers
Toll facilities
Ball parks
Others?
GASB 60 – Accounting by
Transferor Government
Debits
Donated facility/improvement asset
○ Fair value when placed in service
Upfront payments
Installment payments (record PV)
Credits
Deferred inflow
Other liabilities (see next slide)
GASB 60 – Other Liabilities
Contractual obligations that are
Significant
Related directly to the asset
○ Related to ownership and responsibility for
condition of facility (capital improvements,
maintenance, insurance)
Involves a commitment to provide service
GASB 60 – Deferred Inflow
Amortize this credit as revenue
Must be systematic and rational
Must be over the term of the arrangement
Start once asset is placed in operation
GASB 60 – Donated Assets
No change to existing capital asset
accounting
No depreciation if asset is to be returned
in same or existing condition
Improvements/additions made during
the agreement term are capitalized as
made
GASB 60 – Government
Operators Show as an intangible asset
Not subject to GASB 51
Not capital in nature
Intangible will increase over time for improvements that will increase capacity to provide services or efficiency
Amortize Systematic and rational
Over term of agreement
If must be returned in specific condition If condition does not meet specific requirements of
arrangement, must record expense and liability○ If known to the government operator
○ Reasonably estimated restoration costs
GASB 60 – Revenue Sharing
Accounting….
Operators – report all revenues and
expenses, gross NOT net
Transferor – report only their share of
revenues, amount coming in from operator
Fixed amounts – report present value of
any installment payments as a receivable
GASB 60 – Disclosures
Aggregate disclosure allowed for similar
assets
General description of objectives and
status of any construction
Related assets, deferred inflows, and other
liabilities including nature of and amount
Any related and relevant legal specifics
Rights retained/granted
Guarantees / commitments
GASB 60 – Effective Date
Periods beginning after 12/15/11 or
6/30/13
Early application encouraged
GASB 61 – The Financial
Reporting Entity: Omnibus
Amends GASB 14 and 34
Focus is on fiscal dependency
Existing guidance
Fiscal dependency was enough to include
as a component unit
New guidance
Also must have ongoing relationship of
financial benefit or burden
GASB 61 – Governing Boards
What if entity has substantively the same governing board?
Existing guidance Blending
New guidance Must also meet new criteria
○ Ongoing relationship of financial benefit or burden
○ Operational responsibility – management responsible for day-to-day operations below governing board also manages the component unit in essentially the same manner
○ Obligation to repay debt of CU entirely, or almost entirely, from resource stream of primary government.
GASB 61 – Equity Interests
Existing guidance
Asset for measurable equity interest in a
joint venture
No such asset for equivalent equity interest
in component units.
New guidance
An asset should be reported as if you were
one of the other members.
GASB 61 – Minority Interests
Existing guidance
Joint venture included as a CU – portion of
equity “reserved for minority interest”
New guidance
Classify as “restricted net assets”
Does not meet GASB 34 definition
GASB 61 – Disclosures
Answer the question “Why is _____ a
component unit?”
Must specify the criteria for inclusion
that was applied to the CU
GASB 61 – Potentially Misleading
to Exclude
Existing guidance
If financial statements would be incomplete
or misleading…include….
New guidance
Remove “incomplete”
Relationships between primary government
and CU must be financial in nature
GASB 61 – Determining Major
Component Units
Existing guidance
Nature and significance of CU’s relationship
with primary government
Significance relative to total of discretely
presented Cus
New guidance
Remove second criteria, only retain first
requirement
GASB 61 – Business-Type
Activities and Blending
Option 1 – Consolidate the CU
information into the single BTA column
presentation. Include combining
information in notes to financial
statements
Option 2 – Display blended CU as a
separate column and then provide
combined primary government column.
GASB 61 – Effective Date
Periods beginning after June 15, 2012
or 6/30/13
Early application encouraged
GASB 62
“Codification of Accounting and
Financial Reporting Guidance Contained
in Pre-November 30, 1989 FASB and
AICPA Pronouncements”
What is the significance of that 1989
date?
Statement is HUGE!
GASB 62 – Background
Originally followed GASB 20 for applicability of private-sector GAAP standards
Follow standards up to November 30, 1989 unless they contradict or conflict with GASB standards
Use of subsequent standards is optional for proprietary funds only and must not contradict of conflict with GASB standards
GASB 62 – Background
(Continued)
GASB 34 revisions/additions to GASB
20
Expanded use of pre-1989 standards to
government-wide reporting as well.
Optional use of subsequent standards now
limited to enterprise funds and business-
type activities only. (No internal service
funds)
GASB 62 – Highlights
Why? Hard to keep track of everything.
Current standards did not allow for
subsequent amendments. New FASB
codification made it impossible to track
changes.
Codification brings all info into one
standard, eliminates need to consult
private-sector GAAP
GASB 62
Adopted “as-is”
Removed standards or provisions that
conflicted with or contradicted GASB
guidance
GASB 62 – What was left out?
Any private-sector GAAP that Specifically excluded state and local
governments from the scope of their guidance
Applied to events or transactions that do not occur in governments or that rarely applies to governments
Is purely of historical interest
Conflicts/contradicts GASB guidance
Relates to business combinations and disposals of segments of business
Optional use of subsequent to 1989 FASB standards is eliminated.
GASB 62 – Effective Date
Periods beginning after December 15,
2011 or 6/30/13
Provisions of standard are to be applied
retroactively.
Proposed GASB Changes
Deferred Outflows and Inflows and
Net Position
Terminating Hedge Accounting
Positions
Deferred Outflows and Inflows
and Net Position
Framework for reporting of deferrals and
net position.
Deferred inflows and outflows are to be
reported separate from assets and
liabilities in a statement of net position.
Goal is to provide users with information
about transactions that have already
occurred but should be recognized in
future period financial statements.
Net Position/Fund Balance
Would now show “net position” instead of “net assets”
Net position = Assets + Deferred Outflows – liabilities – deferred inflows
Three sections Net Investment in Capital Assets
Restricted
Unrestricted
Govt funds: Assets + Deferred Outflows = Liabilities + Deferred Inflows + Fund Balance.
THANK YOU!
Chris Banta CPA, CFE
Brown, Edwards & Company, LLP
540-345-0936
