GASB Update2016 McCane - Weaver · Fair Value Measurement and Application Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later • Defines “fair value” and “investment”

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GASB UpdateSeptember 8, 2016

Agenda

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GASB Implementation Timeline

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FY15 FY16 FY17 FY18

68, 71 72, 7673,74,7778,79, 80,82

75,81

GASB Statement No.68 Revisited (Year 2)

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Introduction

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Introduction

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Cost-Sharing Plans (TRS)

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Deferred Schedules

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Deferred Outflows ‐ Difference Between Projected and Actual Earnings

MY 2014 MY 2015 MY2016 MY 2017Total

Ouflows Total Inflows

$ 600 $ 400 $ (300) $ 100

Fiscal Year

2015 120 $ 120 $ ‐

2016 120 80 200 ‐

2017 120 80 (60) 200 (60)

2018 120 80 (60) 20 220 (60)

2019 120 80 (60) 20 220 (60)

2020 80 (60) 20 100 (60)

2021 (60) 20 20 (60)

2022 20 20 ‐

MY = Measurement Year

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Change in Proportionate Share - TRS

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GASB 68 - TRS

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What to remember:• Download TRS Schedules early• Create deferral schedules• Prepare /record entries• Make sure you have everything

you need for the footnotes• RSI Schedules:

– Schedule of Proportionate Share of NPL (MY)– Schedule of Contributions (FY)

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GASB 68 - TRS

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Footnote Disclosures – include:• Contributions / rate• Actuarial assumptions - including

changes since prior valuation• Discount rate / sensitivity analysis• Target asset allocation• Proportion (%) and change in proportion• Pension expense• State on-behalf payment• Deferred inflows / outflows and amortization

schedule

GASB 68 - TRS

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Required Supplementary Information1) Schedule of District’s Proportionate Share of the NPL2) Schedule of District’s Contributions

Note: Both RSI schedules present covered payroll and contributions, but they are not the same numbers….why?

Remember: building towards 10-year schedules

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RSI

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Schedule of District’s Proportionate Share of the NPL10-year schedule (eventually) presenting: Employer’s % of the collective NPL Employer’s proportionate share of NPL Employer’s covered payroll Employer’s NPL as a % of covered payroll The Plan’s FNP as a % of TPL The portion of the non-employer’s proportionate share of

the collective NPL that is associated with the employer

Schedule of District’s Contributions10-year schedule of statutory/contractual amounts compared to actual contributions (info for all 10 years is available)

RSI – example ISDs

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SCHEDULE OF SAMPLE ISD'S PROPORTIONATE SHARE OF NET PENSION LIABILITY

TEACHERS RETIREMENT SYSTEM

Last Ten Fiscal Years

(Dollar amounts in thousands)

2016 2015

District's Proportion of the

Net Pension Liability (asset) 0.020% 0.019%

District's Proportionate Share of

Net Pension Liability (asset) 1,491$ 1,174$

State's proportionate share of Net

Pension Liability associated with

the Sample ISD 13,419 10,564

Total 14,910$ 11,738$

District's Covered Payroll 11,512 10,412

District's proportionate share of net

pension liability (asset) as a percentage

of its covered payroll 12.95% 11.28%

Plan fiduciary net position as a

percentage of total pension liability 81.38% 83.20%

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RSI – example ISDs

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SCHEDULE OF SAMPLE ISD'S CONTRIBUTIONS

TEACHERS RETIREMENT SYSTEM



2016 2015

Statutorially required Contributions 210$ 206$

Actual contributions in relation to

statutorially required contributions (210) (206)

Contribution deficiency (excess) ‐$ ‐$

District's Covered Payroll 11,780 10,658

Contributions as a percentage

of District's covered payroll 1.78% 1.93%

Implementing GASB 68 - TMRS

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• Eye on GASB– http://www.tmrs.org/GASB_Resources.php

• GASB Employer Reporting Guide– Describes Employer Reporting Package– Provides guidance / instruction– Pension Disclosure Requirements Table– Sample Pension Note Disclosure

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• Employer Reporting Package:– Actuarial certification letter– Executive Summary– Info / data for disclosures

• Financial Schedules• Actuarial assumptions and plan provisions• Deferred inflows / outflows of resources – amortization

schedules

• City Portal:– SOC 1 Type 2 Report

• Census data• Controls over contributions and distributions made by cities• On IT-related controls

– Census data file (excel)– Qualifications of Actuary


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Financial Statements - Cities’ presentation similar to that of ISDs

Required Supplementary Information (RSI) -1.Schedule of City’s Net Pension Liability and Related

Ratios• 10-year schedule (eventually) – present two years • Rolls forward the total pension liability, showing components• Rolls forward fiduciary net position, showing components• Fiduciary net position as a % of total pension liability• Covered payroll / NPL as a % of covered payroll

2.Schedule of City’s Contributions

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TMRS – City RSI

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SCHEDULE OF SAMPLE CITY's NET PENSION LIABILITY AND RELATED RATIOS

Texas Municipal Retirement Plan



2016 2015

Total Pension Liability:

Service cost 73,034$ 71,505$

Interest 219,345 207,809

Change in benefit terms ‐ ‐

Difference between expected and

actual experience (37,539) (15,211) Change in assumptions ‐ ‐

Benefit payments (119,434) (112,603)

Net change in total pension liability 135,406 151,500

Total Pension Liability‐beginning 2,853,455 2,701,955

Total Pension Liability‐ending 2,988,861 2,853,455

Plan Fiduciary Net PositionContributions ‐ employer 79,713 86,607

Contributions ‐ nonemployer 31,451 30,550

Net investment income 196,154 (44,099)

Benefit payments (119,434) (112,603) Administrative income (3,373) (3,287)

Other 8 (83)

Net change in plan fiduciary net position 184,519 (42,915)

Plan fiduciary net position ‐beg 2,052,589 2,095,504

Plan fiduciary net position ‐beg 2,237,108 2,052,589

City's net pension liability ‐ending 751,753 800,866

Plan fiduciary net position as a %

of total pension liability 74.85% 71.93%

Covered payroll 449,293$ 436,424$

City's net pension liability as a %

of covered payroll 167.32% 183.51%

Questions?

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Statement No. 72

Fair Value Measurement and Application

Statement No. 72 – Fair ValueEffective FYE June 16, 2016 and later

• Defines “fair value” and “investment”• Requires investments to be measured at fair value, with

certain exceptions• Addresses acceptable valuation techniques• Establishes a fair value hierarchy that categorizes the inputs to

valuation techniques used to measure fair value into three levels (level 1, 2, and 3)

• Expands disclosure requirements related to fair value measurements and the impact of fair value measurements on a government’s financial position

• Similar to FASB Accounting Standards Codification Topic 820, Fair Value Measurement

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“Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

– “Fair value” is a market based exit-price measurement.– Amount received to sell an asset or paid to transfer a

liability

“An investment is a security or other asset that (a) a government holds primarily for the purpose of income or profit and (b) has a present service capacity based solely on its ability to generate cash or to be sold to generate cash.”

– The “investment” designation is made at acquisition and remains for the life of the asset, even if usage changes over time.

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Market – government’s principal market or most advantageous – Market with the greatest volume and level of activity– Market that maximizes the amount that would be received to

sell an asset or minimizes the amount that would be paid to transfer a liability, after taking into account transaction costs and transportation costs.

Market participants – Buyers and sellers that are in the principal (or most advantageous) market for an asset or liability and are independent, knowledgeable, able and willing to enter into a transaction for asset or liabilityTransaction costs – should not be adjusted Orderly transaction – Assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities, not a forced transactionMeasurement date – date at which fair value of asset or liability is determined

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• Valuation techniques:

– Market approach – prices and other relevant information generated by market transactions

– Cost approach – replace the current service capacity

– Income approach – converts future amounts to a single current amount

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Fair Value Hierarchy

– Level 1 – quoted market prices for identical assets or liabilities in active markets

– Level 2 – inputs other than quoted market prices included in Level 1 that are observable for an asset or liability, either directly or indirectly

– Level 3 – unobservable inputs for asset or liability

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Exceptions to fair value measurement:

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Investments in nonparticipating interest‐earning investment contracts Measure using a cost‐based measure ‐ GASB 31

Unallocated insurance contracts Report as interest‐earning investment contracts – GASB 31/59

Money market investments and participating interest‐earning investment contracts that have a remaining maturity at the time of purchase of one year or less and are held by governments other than external investment pools

Measure at amortized cost – GASB 31

Investments held by 2a7‐like external investment pools May measure at amortized cost – GASB 31

Synthetic guaranteed investment contracts that are fully benefit‐responsive

Measure at contract value ‐ GASB 53

Investments in 2a7‐like external investment pools Measure at the net asset value (NAV) per share (or its equivalent) determined by the pool –GASB 59

Investments in life insurance contracts Measure at cash surrender value

Investments in common stock meeting the criteria for the equity method

Apply equity method – GASB 62

Donated capital assets, donated works of art, historical treasures, and similar assets, as well as capital assets that a government receives in a service concession arrangement

Measure at acquisition value – GASB 72


Disclosures should be organized by asset/liability and the following should be considered for determining level of detail and disaggregation:

• Nature, characteristic, and risk• Level of the fair value hierarchy• This Statement or another Statement specifies a type for

asset/liability• Objective/mission of government• Characteristics of government• Relative significance of assets/liabilities• Whether separately issued financial statements are available• Line items presented in statement of net position

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Disclosures for fair value measurements:– For recurring and nonrecurring

• Fair value measurement at end of reporting period• Except for investments that are measured at the NAV per

share (or its equivalent), the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety

• Description of valuation techniques• Change in valuation technique that has a significant

impact on results

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Disclosures for investments in entities that calculate the net asset value per share:

– The fair value measurement of the investment type at the measurement date and a description of the significant investment

– Estimate of the period over which the underlying assets are expected to be liquidated by the investees

– Unfunded commitments related to that investment type– Description of the terms and conditions upon which a

government may redeem investments in the type – Circumstances in which an otherwise redeemable investment in

the type might not be redeemable (lockup or gate)

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Disclosures for investments in entities that calculate the net asset value per share – Cont’d:

– Investments that are restricted from redemption as of the government’s measurement date: the estimate of when the restriction from redemption might lapse; if an estimate cannot be made, disclose that fact and how long the restriction has been in effect

– Significant restriction on the ability to sell investments– If a government determines that it is probable that it will sell an

investment(s) for an amount different from the NAV per share (or its equivalent): the total fair value of all investments and any remaining actions required to complete the sale

– Group of investments would otherwise meet the criteria in paragraph 74 but the individual investments to be sold have not been identified

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Active Significant

Markets for Other Significant

Identical Observable Unobservable

Assets Inputs Inputs Percent of Weighted Average

June 30, 2016 (Level 1) (Level 2) (Level 3) Total Investments Maturity (Days) Days x Fair Value

Investments not Subject to Fair Value:

Investment Pools:

Texpool $ 108,037 $ ‐ $ ‐ $ ‐ 0.01% 1$

108,037

Lone Star 165,503,671 ‐ ‐ ‐ 18.69% 1 165,503,671

LOGIC 226,291,965 ‐ ‐ ‐ 25.55% 1 226,291,965

Texas CLASS 211,805,417 ‐ ‐ ‐ 23.91% 1 211,805,417

Investments by Fair Value Level:

U.S. Government Agency Securities:

Federal Farm Credit Bank 29,935,180 ‐ 29,935,180 ‐ 3.38% 410 12,273,423,800

Federal Home Loan Bank 103,913,085 ‐ 103,913,085 ‐ 11.73% 552 57,360,022,920

Federal Home Loan Mortgage Corp. 12,974,514 ‐ 12,974,514 ‐ 1.46% 486 6,305,613,804

Financing Corporation 675,367 ‐ 675,367 ‐ 0.08% 1031 696,303,377

Federal National Mortgage Association 37,179,454 ‐ 37,179,454 ‐ 4.20% 228 8,476,915,512

Private Export Funding Corporation 1,005,560 ‐ 1,005,560 ‐ 0.11% 585 588,252,600

Tennessee Valley Authority 6,831,062 ‐ 6,831,062 ‐ 0.77% 738 5,041,323,756

US Treasury Bonds 1,004,530 1,004,530 ‐ ‐ 0.11% 716 719,243,480

Commercial Paper 88,504,566 ‐ 88,504,566 ‐ 9.99% 76 6,726,347,016

Total Value $ 885,732,408 $ 1,004,530 $ 281,018,788 $ ‐$

98,791,047,318

Portfolio Weighted Average Maturity 112

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GASB UpdateAn overview of GASB Statements Effective FY2017

No. Title Effective Date ‐ FYE

73 Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68

June 16, 2016/2017

74 Financial Reporting for Postemployment Benefit Plans Other than Pension Plans

June 16, 2017

77 Tax Abatement Disclosures December 16, 2016

78 Pensions Provided Through Certain Multiple‐Employer Defined Benefit Pension Plans

December 16, 2016

79 External Investment Pools June/December 16, 2016

80 Blending Requirements for Certain Component Units – an amendment of GASB 14

June 16, 2017

82 Pension Issues – an amendment of GASB 67, 68 and 73 June 16, 2017/June 16, 2018

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GASB Statements

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Statement No. 73

Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain

Provisions of GASB Statements 67 and 68

Statement No. 73 – PensionsEffective FYE June 16, 2016/2017 and later

• Establishes requirements for pensions that are not within the scope of GASB 68, as well as for the assets accumulated for purposes of providing those pensions.

– Requirements for pensions – effective for fiscal years ending 6/16/17 or later

– Requirements for related assets – effective for fiscal years ending 6/16/16 or later

• Also amends certain provisions of GASB 67 and 68 for pension plans and pensions that are within their respective scopes.

– Amendments effective for fiscal years ending 6/16/16 or later

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For defined benefit and contribution plans not within the scope of GASB 68, the requirements are similar to those of GASB 68:• Recognize the pension liability as portion of actuarial present value of

projected benefit payments (similar to GASB 68)• Changes in pension liability should be recognized as pension

expense, deferred inflows/outflows (similar to GASB 68)• Disclosures and RSI are similar to GASB 68• Assets held and administered through a trust should be accounted

for in employer’s financial statements through an agency fund

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For pensions within the scope of GASB 68 and pension plans within the scope of GASB 67:• GASB 73 amends requirements related to the following:

1. Information that is required to be presented as notes to the 10-year schedules of required supplementary information about investment-related factors that significantly affect trends in the amounts reported

2. Accounting and financial reporting for separately financed specific liabilities of individual employers and nonemployer contributing entities for defined benefit pensions

3. Timing of employer recognition of revenue for the support of nonemployercontributing entities not in a special funding situation

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Statement No. 74

Financial Reporting for Postemployment Benefit Plans Other than Pension Plans

Requirements are similar to GASB 67 (for pension plans)

• Effective for plans for fiscal years ending June 16, 2017 or later

Scope includes OPEB plans – Defined Benefit and Defined Contribution administered through trusts that meet the following criteria:

– Contributions to plan and earnings are irrevocable– OPEB plan assets are dedicated to providing benefits to

plan members– OPEB plan assets are protected from creditors of

employers

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Statement No. 74– OPEBEffective FYE June 16, 2017/2018 and later

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Required Statements for OPEB Plans– Statement of Fiduciary Net Position– Statement of Changes in Fiduciary Net Position

Required Disclosures– OPEB provided, classes of plan members covered,

composition of plan’s board– OPEB’s plan investment policies, concentration of

investments, investments exceeding 5% of net position, annual money weighted rate of return

Additional disclosures for single employer and cost sharing OPEB plans

– Components of OPEB liability and related ratios including net position as a percent of OPEB liability

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Required Supplementary Information – All plans– Money weighted rate of return on OPEB investments

Required Supplementary Information – Single Employer and Cost Sharing Plans

– Sources of changes in net OPEB liability – OPEB net position as a percentage of OPEB liability– Net OPEB liability as a percentage of covered payroll

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Measurement of Net OPEB Liability– Total OPEB liability less OPEB plan fiduciary net position– OPEB liability determined actuarially or alternative

measurement method if fewer than 100 plan members, active or inactive

– Plan assets that are not administrated through trusts are accounted for as assets of the employer in an agency fund

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Statement No. 77

Tax Abatement Disclosures

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Statement No. 77 – Tax AbatementsEffective FYE December 16, 2016 and later

Requires governments to disclose information about tax abatement programs from both the reporting government and other governments that reduce the reporting government’s tax revenues.

• A tax abatement is defined as a reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which: – (a) one or more governments promise to forgo tax

revenues to which they are otherwise entitled and – (b) the individual or entity promises to take a specific

action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments.

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General Disclosure Principles• Should distinguish between tax abatements resulting from

agreements that are entered into by the reporting government and agreements that are entered into by other governments that impact the reporting government

• May be provided individually or aggregated• Organized by each major tax abatement program,• Organized by the government that entered into the tax

abatement agreement

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The new disclosures about a government’s own tax abatement agreements include:

– The purpose of the tax abatement program– The tax being abated– The authority under which tax abatements are entered into– The mechanism by which taxes are abated– Dollar amount of taxes abated– Provisions for recapturing abated taxes– The types of commitments made by tax abatement

recipients– Other commitments made by a government in tax

abatement agreements, such as to build infrastructure assets

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The new disclosures about tax abatements that are entered into by other governments and reduce the reporting government’s tax revenues include:

– The name of the government entering into the abatement agreement

– The tax being abated (received and receivable by government entity)

– Dollar amount of the reporting government’s taxes abated.

Governments that are legally prohibited from disclosing specific information should disclose the general nature of the tax abatement information omitted and the specific source of the legal prohibition.

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Statement No. 78

Pensions Provided Through Certain Multiple-Employer Defined Benefit Pension Plans

Statement No. 78 – PensionsEffective FYE December 16, 2016 and later

• Amends the scope and applicability of GASB 68 to exclude certain private or federally sponsored cost-sharing multiple-employer defined benefit pension plans, and establishes requirements for recognition and measurement of pension expense, expenditures, and liabilities; note disclosures; and required supplementary information for such pensions

• Results from the inability to obtain measurements and other relevant data points needed to comply with GASB 68

• Focuses employer accounting and financial reporting requirements for those pension plans on obtainable information

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Statement No. 78 – PensionsEffective FYE December 16, 2016 and later

Recognition and Measurement in Financial Statements• Economic Resources Measurement Focus

– Pension expense for required contributions– Payable for unpaid required contributions

• Current Financial Resources Measurement Focus– Pension expenditures should equal required contributions

associated with pay periods during reporting period• Notes to Financial Statements

– Name of plan and who administers– Whether plan issues publicly available report and how to obtain– Description of benefit terms– Description of contribution requirements

• Required Supplementary Information– Required contributions for past 10 years

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Statement No. 79

External Investment Pools

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Statement No. 79 – Investment PoolsEffective FYE June/December 16, 2016 and later

Existing standards provide that external investment pools may measure their investments at amortized cost for financial reporting purposes if they follow substantially all of the provisions of the SEC’s Rule 2a7. Likewise, participants in those pools are able to report their investments in the pool at amortized cost per share. • The SEC’s Rule 2a7 regulations were changed in 2014

(effective April 2016)• Would cause many governments and investments to no

longer qualify to measure their investments at amortized cost

GASB 79 replaces the reference in existing GASB literature to Rule 2a7 with criteria that are similar in many respects to those in Rule 2a7 to allow many pools to continue to qualify for amortized cost accounting.

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Criteria to elect to measure investments at amortized cost – Transacts with participants at stable net asset value per share @

$1/share– Meets portfolio maturity requirements (generally weighted

average maturity of 60 days or less, weighted average life of 120 days or less)

– Meets portfolio quality requirements (rated by NRSRO, denominated in U.S. dollars with highest rating of short-term category or long-term equivalent)

– Meets portfolio diversification requirements (no more than 5% from one issuer)

– Meets portfolio liquidity requirements (to meet reasonable foreseeable redemptions)

– Meets shadow pricing requirements (net assets per share calculated at least monthly must be within one-half of1% of net asset value per share)

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GASB 79 also establishes additional note disclosure requirements for governments that participate in those pools. • Information about limitations or restrictions on

participant withdrawals– Redemption notice periods– Maximum transaction amounts– Liquidity fees/redemption gates

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Statement No. 80

Blending Requirements for Certain Component Units

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Statement No. 80 – BlendingEffective FYE 2017

This Statement requires a component unit to be included in the reporting entity financial statements using the blending method if the component unit is organized as a not-for-profit corporation in which the primary government is the sole corporate member, as identified in the component unit’s articles of incorporation or bylaws, and the component unit is included in the financial reporting entity pursuant to the provisions in paragraphs 21-37 of Statement 14, as amended.

Financial Accountability• Appointment of a voting majority• Imposition of Will• Financial Benefit to or Burden on a Primary Government

Does not apply to component units addressed in Statement No. 39 – Determining Whether Certain Organizations are Component Units

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Statement No. 82

Pension Issues – An Amendment of GASB Statement Nos. 67, 68, and 73

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Statement No. 82 – Pension IssuesEffective FYE 2017 or later

• Presentation of Payroll Related Measures in Required Supplementary Information

• Selection of Assumptions

• Classification of Employer Paid Member Contributions

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• Presentation of Payroll Related Measures in Required Supplementary Information – Change in definition– Covered payroll is payroll on which contributions to a

pension plan are based – Required Supplementary Information should be restated for

all years presented, as practicable

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• Selection of Assumptions– Selection of assumptions used to calculate the net pension

liability and related measures– A deviation, as the term is used in Actuarial Standards of

Practice issued by the Actuarial Standards Board, from the guidance in an Actuarial Standard of Practice should not be considered to be in conformity with the requirements of Statement 67, Statement 68, or Statement 73.

– Effective for employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017 (employer’s pension liability is measured at a date other than the employer’s most recent fiscal year end)

– Applied prospectively

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Statement No. 82 – Pension Issues –Cont’dEffective FYE 2017 or later

• Classification of Employer Paid Member Contributions– Payments made by the employer to satisfy

contribution requirements identified by plan terms• No. 67 – classified as plan member contributions• No. 68 – classified as employee contributions, including

for determining cost-sharing employer’s portion• Recognized in period which contribution is assessed • Restated for all prior periods as applicable• Required Supplementary Information should be restated

for all years presented, as practicable

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GASB Update

Standards to be Implemented in 2018

No. Title Effective Date

75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions

Fiscal years beginning after June 15, 2017

81 Irrevocable Split‐interest Agreements Fiscal years beginning after December 15, 2016

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GASB Statements – effective 2018

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Statement No. 75 – OPEB

• Addresses accounting and financial reporting by governmental entities that provide other post employment benefits (OPEB) to their employees or employees of other governmental units, such as retiree health insurance, not just those administered by a Trust.

• Establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures.

– Defined benefit OPEB - identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service.

– Defined contribution OPEB - requires recognition of OPEB expense for the amount of contributions or credits to employees’ accounts that are defined by the benefit terms as attributable to employees’ services in the period, net of forfeited amounts that are removed from employees’ accounts

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• Replaces GASB Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and GASB No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans.

• Similar to GASB 68 for pension accounting and reporting

• GASB Statement No. 75 (GASB 75) along with Statement No. 74 significantly change the how governments calculate and report annual costs and long term obligations associated with OPEB.

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GASB 75 requirements are defined separately for OPEB plans administered through trusts.

• Governments that do not provide OPEB through a trust meeting the following criteria will report the total OPEB liability related to their employees.

– Contributions to the OPEB plan from the government and other entities, as well as earnings on those contributions, are irrevocable.

– OPEB plan assets are dedicated to providing OPEB to the plan members in accordance with benefit terms.

– OPEB plan assets are protected from creditors67


GASB 75 further defines requirements are based on:• Number of Employees• Whether OPEB obligations and OPEB plan assets are shared

by the employers:– Single Employers – OPEB plans in which OPEB is provided

to the employees of only one employer – Agent Employers - OPEB plans in which plan assets are pooled

for investment purposes but separate accounts are maintained for each individual employer so that each employer’s share of the pooled assets is legally available to pay the benefits of only its employees.

– Cost Sharing Employers - OPEB plans in which the OPEB obligations to the employees of more than one employer are pooled and plan assets can be used to pay the benefits of the employees of any employer that provides OPEB through the OPEB plan.

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• Net OPEB liability = Total OPEB liability – OPEB plan’s fiduciary net position

(Total OPEB liability = portion of the present value of projected benefit payments to be provided to current active and inactive employees that is attributed to those employees’ past periods of service (total OPEB liability) less the amount of the OPEB plan’s fiduciary net position.)

• Total OPEB liability generally required to be determined through an actuarial valuation every two years with more frequent valuations or calculations encouraged.

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Valuation of total OPEB liability:• Alternative method may be used in place of an

actuarial valuation to determine value of the liability if less than 100 (active and inactive) employees

• If no actuarial valuation or calculation - total OPEB liability is required to be based on update procedures to roll forward amounts from an earlier actuarial valuation or alternative measurement method calculation (performed as of a date no more than 30 months and 1 day prior to the employer’s most recent fiscal year-end)

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Projection of benefit payments:• Must be based on claims costs, or age-adjusted premiums

approximating claims costs, and the benefit terms and legal agreements existing at the measurement date.

• Required to be discounted to their actuarial present value using the single rate that reflects – (1) a long-term expected rate of return on OPEB plan

investments to the extent that the OPEB plan’s fiduciary net position is projected to be sufficient to make projected benefit payments and OPEB plan assets are expected to be invested using a strategy to achieve that return and

– (2) a yield or index rate for 20-year, tax-exempt, highly-rated (AA/Aa of higher) municipal bond to the extent that the conditions for use of the long-term expected rate of return are not met.

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Projection of benefit payments (cont.):

• Required that the actuarial present value of projected benefit payments be attributed to periods of employee service using the entry age actuarial cost method with each period’s service cost determined as a level percentage of pay.

• If fewer than 100 employees (active and inactive) -alternative measurement method is an approach that includes the same broad measurement steps as an actuarial valuation however, it permits simplification of certain assumptions.

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Single and Agent Employers

• The net OPEB liability measured as of a date no earlier than the end of the employer’s prior fiscal year and no later than the end of the employer’s current fiscal year (the measurement date)

• Changes in the net OPEB liability are reported as OPEB expense, deferred outflows or deferred inflows or resources– Most changes in the net OPEB liability should be included in

OPEB expense in the period of the change– Employer contributions subsequent to the measurement date of

the net OPEB liability which are required to be reported as deferred outflows of resources.

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Single and Agent EmployersNotes to the Financial Statements– types of benefits provided – number and classes of employees covered by the benefit terms– for the current year, sources of changes in the net OPEB liability– Significant assumptions and other inputs used to calculate the

total OPEB liability– the date of the actuarial valuation or calculation using the

alternative measurement method used to determine the total OPEB liability

– information about changes of assumptions or other inputs and benefit terms

– the basis for determining employer contributions to the OPEB plan, and information about the purchase of allocated insurance contracts, if any.

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Single and Agent EmployersRequired Supplementary InformationDetermined as of the measurement date, for each of the 10 most recent fiscal years:– Sources of changes in the net OPEB liability– The components of the net OPEB liability and related ratios, including

the OPEB plan’s fiduciary net position as a percentage of the total OPEB liability, and the net OPEB liability as a percentage of covered-employee payroll.

– Actuarially determined contribution, contributions to the OPEB plan, and related ratio, if applicable

– Contribution requirement that is established by statute or contract, if applicable

– Significant methods and assumptions used in calculating the actuarially determined contributions, if applicable

– Employer is required to explain certain factors that significantly affect trends in the amounts reported in the schedules

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Cost-Sharing Employers • Recognize a liability for its proportionate share of the net OPEB

liability• Recognize OPEB expense and report deferred outflows of

resources and deferred inflows of resources related to OPEB for its proportionate share– Effects of the following are to be recognized as expense in a

systematic and rational manner • a change in the employer’s proportion of the collective net OPEB liability • differences during the measurement period between certain of the

employer’s contributions and its proportionate share of the total of certain contributions from employers included in the collective net OPEB liability are required to be determined.

– Employer contributions to the OPEB plan subsequent to the measurement date of the collective net OPEB liability also are required to be reported as deferred outflows of resources related to OPEB.

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Cost-Sharing Employers Notes to the Financial Statements– Descriptive information about the OPEB plans through which

the OPEB is provided. – The discount rate and assumptions made in the

measurement of their proportionate shares of net OPEB liabilities

– How contributions to the OPEB plan are determined

Required Supplementary Information10-year schedules containing: – The net OPEB liability and certain related ratios– Information about statutorily or contractually required

contributions, contributions to the OPEB plan, and related ratios, if applicable.

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Defined Benefit OPEB - administered through trusts that did not meet the specified criteria

• Employers that provide insured benefits– premiums are paid by employers while employees are in active

service– insurance company unconditionally undertakes an obligation to

pay the OPEB of those employees• Record expense/expenditures equal to the amount of

premiums /payments in accordance with the agreement with the insurance company.

• Disclose arrangement

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Special Funding Situations

• Defined as circumstances in which a non-employer entity is legally responsible for providing certain forms of financial support for OPEB of the employees of another entity.

• Measurement of expenses, deferred outflows and deferred inflows of resources are similar to Cost-Sharing Employers

• Notes to financial statements - information about the amount of support provided

• Required Supplementary Information - similar to Cost-Sharing Employers

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Statement No. 81 – Irrevocable Split-Interest Agreements

Purpose: Improves accounting and financial reporting by providing recognition and measurement guidance for situations in which a government is a beneficiary of a split-interest agreement.

Define: A split-interest agreement is an agreement used by donors to provide resources to two or more beneficiaries. A donor transfers resources to an intermediary to hold and administer for the benefit of a government and at least one other beneficiary.

Recognition:A government recipient recognizes assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, GASB 81 requires recognition of assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. Revenue is recognized when the resources become applicable to the reporting period.

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Contact Information

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Adam McCane, CPA Roger Tovar, CPAPartner Senior Manager512.609.1968 [email protected] [email protected]

Documents

GASB Update2016 McCane - Weaver · Fair Value Measurement and Application Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later • Defines “fair value” and “investment”