New Hampshire Government Finance Officers Association 25 th Annual Meeting & Seminar GASB Update─5/7/2010 The views expressed in this presentation are

New Hampshire Government Finance Officers Association

25th Annual Meeting & Seminar

GASB Update─5/7/2010

The views expressed in this presentation are those of Mrs. Parker. Official positions of the GASB are determined only after extensive due process and deliberation.

Where Are We Now?

Effective Dates—June 30

June 30, 2010 Statement 45—Employer’s OPEB—Phase III Statement 51—Intangible Assets Statement 53—Derivative Instruments Statement 57—OPEB Measurements by Agent Employers and Agent Multiple-

Employer Plans—provisions related to the use and reporting of the alternative measurement method (paragraphs 6 and 7)

Statement 58—Chapter 9 Bankruptcies

Effective Dates—June 30

June 30, 2011 Statement 54—Fund Balance and Governmental

Fund Type Definitions

June 30, 2012 Statement 57—OPEB Measurements by Agent

Employers and Agent Multiple-Employer Plans—provisions related to the frequency and timing of measurements (paragraph 8)

Recent GASB Pronouncements Statement 54─Fund Balance Reporting

and Governmental Fund Type Definitions Statement 55─The Hierarchy of Generally

Accepted Accounting Principles for State and Local Governments

Statement 56─Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards

Recent GASB Pronouncements (Continued)

Statement 57─OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans

Statement 58─Chapter 9 Bankruptcies Comprehensive Implementation

Guide─Annual Update issued in September

Statement 54

Fund Balance and Governmental Fund Type Definitions

Statement No. 54

Issued February 2009

Origins of the Project

Significant variation in how standards are applied, leading to significant divergence in practice

Widespread confusion about terminology Mismatch between what governments are reporting

about fund balance and what users of financial statements actually need

Invitation to Comment issued October 2006 Exposure Draft issued February 2008

Fund Balance

Reporting and Disclosures

What Do you Need to Know About Statement 54?

New fund balance presentation hierarchy is based primarily on the degree of spending constraints placed upon use of resources for specific purposes versus availability for appropriation

5 new presentation classifications go from non-spendable down through three levels of less binding spending constraints to an unassigned level, which is available for any spending of the government

New Fund Balance Classifications

Fund Balance Reporting Nonspendable Restricted Committed * Assigned Unassigned

*Proposal called this classification “limited”

Essentially what is now reserved

Essentially what is now unreserved

Essentially what is now designated

Nonspendable Fund Balance

Represents amounts that cannot be spent because they are either:Not in spendable form

Inventory and prepaids Long-term receivables and loans or property

acquired for sale (unless proceeds are restricted, committed, or assigned, then the receivables should be reported in those categories)

Legally or contractually required to be maintained intact (Ex. Corpus of a Permanent fund)

Restricted Fund Balance

Same definition as for net assets in Statement 34 (as amended by Statement 46)

Constraints placed on the use of amounts for a specific purpose by either: 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

Committed Fund Balance Constraint on use imposed by the government

itself, using its highest level of decision-making authority

Amounts classified as “committed” are not subject to legal enforceability like restricted resources; however, the constraint can be removed or changed only by taking the same highest level action

Action to constrain resources should occur prior to the end of the fiscal year, though the exact amount may be determined subsequently EX. 50% of surplus to be devoted to pay debt service

Assigned Fund Balance Amounts that are intended by the government

to be used for a particular purpose, but are neither restricted nor commited, should be reported as assigned fund balance.

Intent should be expressed by: the governing body itself or a subordinate high-level body or official possessing

the authority to assign resources to be used for specific purposes in accordance with policy established by the governing body.

Assigned Fund Balance

Amounts in governmental funds other than the general fund that are not restricted or committed are reported as assigned The act of transferring resources to another

governmental fund is considered an assignment of those resources to the purpose of that fund

Appropriation of existing fund balance to eliminate a projected budgetary deficit in the next year’s budget is an assignment of fund balance

Unassigned Fund Balance

Available for any purpose Reported only in the general fund, except in

cases of negative fund balance Negative balances in other governmental funds are

reported as unassigned (if spent more for the purpose intended than had available then the resources must have come from the unassigned resources of the general fund)

Stabilization (or Rainy Day) Arrangements:

Before 54 Under existing standards, rainy-day or

“stabilization” amounts generally should be reported as unreserved-undesignated, not as reservedMany stabilization amounts are not

constrained in a manner that qualifies as reserved

More importantly, stabilization was not previously considered a specific purpose—it is a circumstance


Before 54 Under almost no circumstances should

stabilization amounts be reported in special revenue funds under the existing standardsStabilization amounts generally are not

restrictedStabilization amounts generally do not derive

from a specific revenue source


Under 54 Stabilization can be considered a specific

purpose if: Constraints on stabilization amounts meet the criteria

to be reported as restricted or committed The formal action imposing the constraint on

spending identifies and describes in sufficient detail the specific circumstances under which a need for stabilization arises

The circumstances are not expected to occur routinely—needs to be uncommon

Stabilization Note Disclosures It is possible that many amounts previously

reported as reserved for stabilization or in a separate rainy-day fund will now be reported as unassigned fund balance in the general fund. But Statement 54 requires these disclosures; Minimum fund balance policies Stabilization arrangements

Authority for establishing Requirements for additions Conditions under which amounts may be used

Encumbrances Right now encumbrances are reported as

reservations of fund balance—Statement 54 does nothing to encumbrance accounting, for financial reporting purposes only

Encumbrances should not be displayed separately within the restricted, committed, and assigned categories

Significant encumbrances—disclosed in the notes by major funds and nonmajor funds in the aggregate in conjunction with required disclosures about other significant commitments

Displaying Fund Balance Categories and Classifications

Restricted fund balance may be displayed in a manner that distinguishes between the major restricted purposes, or it may be displayed in the aggregate

Committed and assigned fund balances may be displayed in sufficient detail so that the purposes of the major limitations and assignments are evident, or each classification may be displayed in the aggregate

Reader needs to be able to understand the major purposes

Major Major

Debt CapitalGeneral Highway School Aid Service Projects Other

Fund Fund Fund Fund Fund Funds TotalFund balances: Nonspendable: Inventory 125,000$ 108,000$ 16,000$ — — — 249,000$ Permanent fund principal — — — — — 164,000$ 164,000 Restricted for: Social services 240,000 — — — — — 240,000 Parks and recreation 80,000 — — — — — 80,000 Education 55,000 — — — — — 55,000 Highways — — — — 444,000$ — 444,000 Road surface repairs — 24,000 — — — — 24,000 Debt service reserve — — — 206,000$ — — 206,000 School construction — — — — 301,000 — 301,000 Law enforcement — — — — — 214,000 214,000 Other capital projects — — — — 51,000 — 51,000 Other purposes 30,000 — — — — — 30,000 Committed to: Zoning board 16,000 — — — — — 16,000 Economic stablization 210,000 — — — — — 210,000 Homeland security 110,000 — — — — — 110,000 Education 50,000 — 103,000 — — — 153,000 Health and welfare 75,000 — — — — — 75,000 Assigned to: Parks and recreation 50,000 — — — — — 50,000 Library acquisitions 50,000 — — — — — 50,000 Highway resurfacing — 258,000 — — — — 258,000 Debt service — — — 306,000 — — 306,000 Public pool — — — — 121,000 — 121,000 City Hall renovation — — — — 60,000 — 60,000 Other capital projects 50,000 — — — 471,000 — 521,000 Other purposes 80,000 — 73,000 — — 176,000 329,000 Unassigned: 525,000 — — — — — 525,000 Total fund balances 1,746,000$ 390,000$ 192,000$ 512,000$ 1,448,000$ 554,000$ 4,842,000$

Major

Special Revenue Funds

This level of detail is not required for display on the face of the balance sheet. Fund balance categories and classifications may be presented in detail or in the aggregate if sufficient detail is provided in the notes to the financial statements.

Specific purpose details displayed

Major Major

Debt CapitalGeneral Highway School Aid Service Projects Other

Fund Fund Fund Fund Fund Funds TotalFund balances: Nonspendable 125,000$ 108,000$ 16,000$ — — 164,000$ 413,000$ Restricted 405,000 24,000 — 206,000$ 796,000$ 214,000 1,645,000 Committed 461,000 — 103,000 — — — 564,000 Assigned 230,000 258,000 73,000 306,000 652,000 176,000 1,695,000 Unassigned 525,000 — — — — — 525,000 Total fund balances 1,746,000$ 390,000$ 192,000$ 512,000$ 1,448,000$ 554,000$ 4,842,000$

Major

Special Revenue Funds

Classification totals displayed—details disclosed in the notes

What Do You Need to Know About Statement 54—Fund Type

Definitions Governmental Fund Type Definitions

Special revenueCapital projectsDebt service

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. The term “proceeds of specific revenues sources” establishes that one or more specific restricted or committed revenues should be the foundation for a special revenue fund.

Used to say just legally restricted Now need a real revenue as the funds base—not a transfer Agrees with new Fund Balance categories

Proceeds of Specific Revenue Sources

Establishes that one or more specific restricted or committed revenues should be the foundation for a special revenue fund

Restricted or committed proceeds of specific revenue sources should comprise a substantial portion of the inflows reported in the fund—can put other resources there But the fund may also include other restricted,

committed, and assigned resources

Capital Projects Funds Capital projects funds are used to account for and

report financial resources that are restricted, committed, or assigned to expenditure for capital outlays including the acquisition or construction of capital facilities and other capital assets—agrees with new Fund Balance categories

Now can be used to report the acquisition or construction of capital assets that clearly comprise facilities (for example, buildings, infrastructure assets) AND those that clearly do not (for example, buses, computer workstation equipment)─OLD DEFINITION INCLUDED ONLY FACILITIES

Debt Service Funds Debt service funds are used to account for and

report financial resources that are restricted, committed, or assigned to expenditure for principal and interest—agrees with new Fund Balance categories

Should be used to report resources if legally mandated—in old definition

Financial resources that are being accumulated for principal and interest payments maturing in future years also should be reported in debt service funds—in old definition

Proposed Effective Date and Transition

Effective for financial statements for periods beginning after June 15, 2010

Changes to the fund balance information presented in a statistical section may be made prospectively, although retroactive application is encouraged If the information for previous years is not

restated, governments should explain the nature of the differences from the prior information

Statements 55 and 56

GAAP Hierarchy and AICPA Omnibus

Statements 55 and 56

Issued March 2009

What Do You Need to Know about Statements 55 and 56?

Accounting and financial reporting guidance currently found in the AICPA’s Statements on Auditing Standards brought into the GASB literature “as is”, but set in a governmental context

Statement 55─GAAP HierarchyFirst step in the potential reexamination of

current multi-level hierarchy Statement 56─AICPA Omnibus

Related party transactions, subsequent events, and going concern considerations

GAAP Hierarchy SummaryEstablished Accounting PrinciplesEstablished Accounting Principles

GASB Statements and Interpretations plus AICPA and FASB GASB Statements and Interpretations plus AICPA and FASB pronouncements if made applicable to state and local governments by a pronouncements if made applicable to state and local governments by a GASB Statement or InterpretationGASB Statement or Interpretation

GASB Technical Bulletins, and the following pronouncements if specifically GASB Technical Bulletins, and the following pronouncements if specifically made applicable to state and local governments by the AICPA: AICPA made applicable to state and local governments by the AICPA: AICPA Industry Audit and Accounting Guides and AICPA Statements of PositionIndustry Audit and Accounting Guides and AICPA Statements of Position

Consensus positions of the GASB Emerging Issues Task Force Consensus positions of the GASB Emerging Issues Task Force (has not (has not been established) been established) and AICPA Practice Bulletins if specifically made and AICPA Practice Bulletins if specifically made applicable to state and local governments by the AICPA applicable to state and local governments by the AICPA (none currently (none currently exist)exist)

““Qs and As” published by the GASB staff, as well as industry practices Qs and As” published by the GASB staff, as well as industry practices widely recognized and prevalentwidely recognized and prevalent

Other Accounting LiteratureOther Accounting Literature

Other accounting literature, including GASB Concepts Statements; Other accounting literature, including GASB Concepts Statements; pronouncements in the first four categories of the hierarchy for pronouncements in the first four categories of the hierarchy for nongovernmental entities when not specifically made applicable to state and nongovernmental entities when not specifically made applicable to state and local governmentslocal governments

Statement 57

OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans

Statement 57

Issued December 2009

OPEB Measurements by Agent Employers and agent Multiple-

Employer Plans Objectives─to address issues related to:

The use of the alternative measurement method The frequency and timing of measurements by

employers that participate in agent multiple-employer other postemployment benefit (OPEB)

Statement 57 Expands option for qualified agent employers to use the

alternative measurement method permits an agent employer that has an individual-

employer OPEB plan with fewer than 100 total plan members to use the alternative measurement method

Amends agent multiple plan reporting requirements permits the requirement that a defined benefit OPEB

plan obtain an actuarial valuation - be satisfied for an agent multiple-employer OPEB plan by reporting an aggregation of results of actuarial valuations of the individual-employer OPEB plans or measurements resulting from use of the alternative measurement method for individual-employer OPEB plans that are eligible

Statement 57

Clarifies measurement frequency and timing requirements for agent employerswhen actuarially determined OPEB measures

are reported by an agent multiple-employer OPEB plan and its participating employers, those measures should be determined as of a common date and at a minimum frequency to satisfy the agent multiple-employer OPEB plan’s financial reporting requirements

Statement 57 Other Postemployment Benefits – Certain

Implementation Issues Effective Date:

Provisions related to the use and reporting of the alternative measurement method are effective immediately

Provisions related to the frequency and timing of measurements are effective for actuarial valuations first used to report funded status information in OPEB plan financial statements for periods beginning after June 15, 2011

Earlier application is encouraged.

Statement 58

Accounting and Financial Reporting for Chapter 9 Bankruptcies

Statement 58

Issued December 2009

Statement 58

Chapter 9 (“municipal”) bankruptcies excludes state and tribal governments

As of 2009 only 24 states authorized Chapter 9 filings by their municipal governmentsNew Hampshire governments– Not authorized

for Chapter 9 filings

Accounting and Financial Reporting for Chapter 9 Bankruptcies

Objective─to provide accounting and financial reporting guidance for governments that have petitioned for protection from creditors by filing for bankruptcy under Chapter 9 of the United States Bankruptcy Code

Chapter 9 Bankruptcies Accounting and Financial Reporting for Chapter 9

BankruptciesRequires governments to remeasure liabilities

that are adjusted in bankruptcy when the bankruptcy court confirms (approves) a new payment plan

Governments not expected to emerge from bankruptcy as going concerns─requires remeasurement of assets to a value that represents the amount expected to be received

Classifies gains or losses resulting from remeasurement of liabilities and assets as extraordinary items

Chapter 9 Bankruptcies Accounting and Financial Reporting for Chapter 9

BankruptciesDisclosure requirements include:

Pertinent conditions and events giving rise to the petition for bankruptcy

Expected gain Effects upon services

Proposed Statement would be effective for reporting period beginning after June 15, 2009 (6/30/10 or 12/31/10)

Comprehensive Implementation Guide

2009-2010 Edition

Comprehensive Implementation Guide

Includes updates, and supplements all prior guides issued through June 30, 2009More than 1,800 questions and answers

Adds more than 100 new questions and answers including the material from the Implementation Guide to Statement 53 on Derivative InstrumentsAlso includes appendices to provide Q&As

without the effects of Statement 53 for those governments for which the Statement is not yet effective

Other Current Projects

Other Current Projects Concepts Statement

Recognition and Measurement Attributes Service Efforts and Accomplishments (SEA) Reporting

Voluntary Guidelines Pension Accounting and Reporting Pre-November 30, 1989 FASB Pronouncements Service Concession Arrangements (SCA) Financial Instruments Omnibus Statement 14 Reexamination Economic Condition Reporting: Fiscal Sustainability

Recognition and Measurement Attributes Concepts Statement

Develop recognition criteria for whether information should be reported in state and local government financial statements and when that information should be reported

Consider the measurement attribute or measurement attributes (for example, historical cost or fair value) that conceptually should be used

GASB working with Federal Accounting Standards Advisory Board (FASAB)

Suggested Guidelines For Voluntary Reporting, SEA Performance Information

Final document─June 2010

Conceptually based suggested guidelines for voluntary reporting of

Service Efforts and Accomplishments (SEA) Performance Information

•What the project is:Focus on voluntary reportingFocus on suggested guidelinesFocus on clarifying GASB’s role

•What the project is not:Establishing performance measuresEstablishing performance benchmarksEstablishing reporting standardsRequiring SEA reporting

Suggested Guidelines For Voluntary Reporting, SEA Performance InformationSole Focus

Of GASB

Efforts

1

EXTERNAL

REPORTING

Internal

Reporting

Evaluating Performance

Managing Work Processes

Performance- Based

Budgeting

Selecting

Performance Measures

Program or

Activity Planning

Strategic Planning

Government Performance Management

System


Suggested Guidelines for Voluntary Reporting, SEA Performance Information composed of three parts:

Four essential components of an effective SEA report

Six qualitative characteristics that are appropriate for reporting SEA performance information

A discussion of how to effectively communicate SEA performance information


FOUR ESSENTIAL COMPONENTS

Provide guidance to assist preparers of SEA reports in effectively communicating SEA performance information to users

Purpose and Scope Major Goals and Objectives Key Measures of SEA Performance Discussion and Analysis of Results and

Challenges


SIX QUALITATIVE CHARACTERISTICSProvide further guidance in the application of the

essential components—assist users in comprehending and assessing government programs and services

Timeliness Understandability

Comparability Consistency Relevance Reliability


EFFECTIVE COMUNICATION

Provide further guidance on the effective communication of SEA performance information

Intended Audiences Forms of Communication Multiple Levels of Reporting

Scope of the Postemployment Benefits Project

•Includes reexamination of Pension Statements No. 25 (Plans) and 27 (Employers) to assess effectiveness and consider potential improvements in financial reporting

•More than 115 responses received to the ITC


•Basic Approach Funding based with parameters─harmonize accounting with actuarial funding methodology by

Using the annual employer contributions calculated originally for funding purposes as the basis for accounting expense measurement Using the UAAL as the measure of an employer’s unfunded accrued benefit obligation for accounting and financial reporting purposes

Liability based─report the effects of the employment exchange─what they believe is the employer’s liability to employees for unfunded pension benefits that employees have earned by virtue of their services to date and terms of the plan

Something in between


•How the actuarial liability should be measured

Should the projection of pension benefits include or exclude projected future changes─Salary projections, COLA’s

What should be the basis for determining the discount rate used for discounting projected pension benefits to their present value for accounting purposes─estimated long-term investment yield for the plan, risk-free rate, employer’s borrowing rate, average return on high-quality municipal bonds


•Plan reporting─What a pension plan should report as its liability in regard to pension benefits─liability for benefits currently due and payable, the accrued benefit obligationWhether a presentation of changes in the unfunded accrued benefit obligation should be a required part of general purpose financial reporting

•Cost sharing allocations for employers─Whether the relationship between a cost-sharing employer and the cost sharing multiple-employer plan in which it participates differ enough in economic substance from the relationship that a sole or agent employer has with the plan in which it participates to support different requirements with regard to liability and expense recognition


•Liability and expense recognition─

•Use of actuarial methods─


Preliminary Views Document – June 2010 with comments accepted through September 28, 2010

A type of due process document that sets forth tentative conclusions of the GASB for comment prior to Exposure Draft stage Sometimes used when views of the Board members are split, or, as in this case, when views of interested constituents are expected to be split

Postemployment Benefits Project

Tentative decisions to date include: Employment exchange creates an obligation that meets

the conceptual definition of a liability The pension plan is the primary obligor for benefit

obligations to the extent of assets in the plan trust The employer is the primary obligor for any unfunded

obligations and is the secondary obligor for plan obligations

The unfunded pension obligation should be recognized as a liability

Measurement of the Net Pension Liability – Tentative Decisions Projection of benefits:

Should include automatic COLAs and generally should include projected future salary increases and projected future service credits

Also should include ad hoc COLAs in circumstances where essentially not different from automatic

Discount rate: Long-term expected rate of return for projected benefit payments

covered by current and projected future plan net assets High-quality municipal borrowing rate (tax exempt) for benefit

payments, if any, beyond point at which plan net assets are projected to be fully depleted

Measurement of the Net Pension Liability – Tentative Decisions (cont.)

Attribution of the present value of projected benefit payments to periods: A single actuarial cost measurement method should

be used to attribute employee service cost to periods: entry age, applied on a level-percentage-of-payroll basis

Attribution period: service life of each employee Employer’s net pension liability = Accumulated

value of service costs attributed to past periods – minus – Amount equal to plan net assets (including investments at fair value)

Attribution of Changes in the Net Pension Liability to Periods Current-period employee service cost and

interest on the beginning liability should be recognized as expense currently

Effects of other changes in the (total) liability should be recognized as expense over the remaining service lives of individual plan members (or, if there is no remaining service life, recognized immediately)

Attribution of Changes in the Net Pension Liability to Periods (cont.) Differences between expected and actual

earnings on plan net assets should not be recognized as expense within a corridor:No expense recognition so long as net

cumulative deferred outflows or net cumulative deferred inflows remain within a corridor 15% above or below target

Immediate recognition of excess if net cumulative deferred amount would otherwise exceed the 15% corridor

Recognition By Cost-Sharing Employers Pension obligations of cost-sharing employers arise from

employment exchanges with employees Cost-sharing is a way of sharing benefit risks and

pooling assets A cost-sharing plan is primarily responsible for the

shared obligation only to the extent of plan net assets; the unfunded obligation is the primary responsibility of the employers collectively

Each cost-sharing employer is implicitly primarily responsible for a proportionate share of the collective unfunded pension obligation

An employer’s share of the collective unfunded pension obligation: Meets the definition of a liability Is measurable with sufficient reliability to support recognition

Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements

•Why November 30, 1989?•FAF reaffirmed jurisdictional arrangement and determined that subsequent FASB pronouncements should be considered other accounting literature unless specifically adopted by the GASB

•Why do this project now?•Older literature harder to find, may be exacerbated by the FASB’s codification project•Inconsistencies in practice─what applies, what does not apply

•What has been addressed?•AICPA─Accounting Research Bulletins and Opinions•FASB─Statements and Interpretations

•Exposure Draft─January 31, 2010, with a comment period through July 31, 2010

Accounting and Financial ReportingFor Service Concession Arrangements

What is a service concession arrangement?

•Arrangement

•Between a transferor (a government) and an operator

(governmental or nongovernmental) in which:

1) the transferor conveys to an operator the right

and related obligation to provide services through the use of

infrastructure or another public asset (facility) AND

2) the operator collects fees from third parties


Major Board tentative decisions

•To qualify as a service concession arrangement (SCA) and be included in the scope of the final Statement, an arrangement’s transferor (government) is required to:

retain a residual interest in the facility at the end of the arrangement that represents a significant portion of the service capacity of the facility determine what services the operator is required to provide determine to whom the operator is required to provide the services determine the price ranges or rates that can be charged for the services



•To not provide guidance at this time on recognition issues associated with financial statements prepared using the current financial resources measurement focus─being consider on a conceptual basis in the Recognition and Measurement Attributes Project•The transferor and operator should capitalize improvements made by the operator to the facility over the term of an SCA as they are made•The transferor should not be required to depreciate the facility if the operator is required to return the facility in its original or an improved condition



•An operator participating in a revenue sharing arrangement in an SCA should always record the gross amount of revenues generated from the operation of a facility

•A transferor participating in a revenue sharing arrangement in an SCA should recognize revenue when it is earned in accordance with the terms of the arrangement

•A transferor participating in a revenue sharing arrangement in an SCA should record a receivable at the inception of the SCA for the present value of unconditional payments expected to be received over the term of the arrangement


MAJOR UNRESOLVED ISSUE

Classification of the transferor’s liability or deferred inflow

Tentative conclusion:

Receipt of up-front or installment payments or a new or improved facility creates a liability or deferred inflow for the transferor to permit the operator access to the facility

Provisions of this proposed Statement would be effective

for periods beginning after Jun 15, 2011 ( FY’s ending

June 30, 2012 or December 31, 2012)

Provisions generally would be required to be applied

retroactively for all periods presented.



Exposure Draft was issued in June 2009 with a comment deadline of September 30, 2009

Final Statement or a revised Exposure Draft expected in June 2010

Financial Instruments Omnibus•Exposure Draft issued in June 2009 with a comment deadline of October 30, 2009•Proposes revisions of existing financial reporting requirements to address issues that have arisen since the release of:

•Statement 31─Investment and External Investment Pools•Statement 40─Deposit and Investment Risk Disclosures•Statement 53─Derivative Instruments

Financial Instruments OmnibusAmendments include:

Statement No. 31, Accounting and Financial Reporting for Certain Investments and

for External Investment Pools

Amended to indicate that a 2a7-like pool, as described in Statement 31, is an

external investment pool that is not registered with the SEA as an investment

company but that operates in a manner compliant with the SEC’s Rule 2a7.

Will provide practitioners with improved guidance on the relevance of

complying with the SEC requirements!

Statement No. 40, Deposit and Investment Risk Disclosures

Amended to indicate that interest rate risk information should be disclosed

only for bond mutual funds that do not meet the requirements of a 2a7-like pool.

Will provide better guidance regarding the applicability of interest rate

risk disclosures!


Statement No. 53, Accounting and Financial Reporting for Derivative

Instruments

Amended to clarify that the net settlement characteristic of

Statement 53 that defines a derivative instrument would not be

satisfied by a contract provision for a penalty payment for

nonperformance.

Amended to provide that certain financial guarantees would no

longer be exempted from the scope of Statement 53─certain

financial guarantees, specifically certain credit default swaps, would

be measured at fair value.


Statement No. 53, Accounting and Financial Reporting for Derivative

Instruments

Amended to clarify that certain contracts based on a specific

volume of sales or service revenues would be excluded from the

scope of Statement 53.

Amended to provide that the “leveraged yield” criteria of Statement

53 would be met if the initial rate of return on the companion

instrument has the potential for at least a doubled yield.

Will refine which financial instruments are within the scope of

Statement 53-Clarifies four practice issues!

Financial Instruments Omnibus

Provisions of this proposed Statement would be effective

for periods beginning after Jun 15, 2010 ( FY’s ending

June 30, 2011 or December 31, 2011)

Earlier application would be encouraged

Statement 14 Reexamination

•Retain current reporting entity framework. This framework includes:

(1)the criteria for inclusion of component units and(2)the methods of presenting component units

•In addition to meeting the fiscal dependency criterion, a financial benefit/burden relationship should be present for a potential component unit to be included in the primary government’s financial statements based on the financial dependency criterion.

•The “misleading to exclude” notion will be retained in Statement 14, but amendments to the guidance will clarify the professional judgment aspect of the guidance.

Statement 14 Reexamination

•Component units will be blended if the component unit’s governing body is substantively the same as the governing body of the primary government and either:

(1) A financial benefit/burden relationship exists with the primary government or

(2) Management of the primary government has operational responsibility for the component unit. Debt issuing component units would qualify for blending if primary government resources are used to retire their debt.

•Exposure Draft issued March 2010

Economic Condition Reporting: Fiscal Sustainability

•Identify the information that users need to assess a government’s economic condition and its components, including information regarding fiscal sustainability,

•Compare those needs with the information users currently receive in the comprehensive annual financial report (CAFR) and other sources, and

•Consider whether guidance or guidelines should be considered for additional information.

•Basic Facts about GASB’s Project can be found at http://www.gasb.org/facts/Economic_Condition_Reporting_Fact_Sheet.pdf

•Article can be found at http://www.gasb.org/newsletter/fiscal_sustainability_dec2009.html

Research

Agenda

Research Agenda Electronic Financial Reporting—GASB to monitor and

encourage use Government Combinations—consider the financial

reporting requirements for government combinations that are accomplished through annexation, consolidation, acquisition, or other means

Fair Value Measurement—alternatives for the further development of the definition of fair value, the methods used to measure fair value, and potential disclosures about fair value measurements

Demand Bonds—Interpretation 1 Reexamination—Does Interpretation No. 1, Demand Bonds Issued by State and Local Governmental Entities continue to address the relevant accounting and reporting issues and meet financial statement user needs?

Calling All Issues

Agenda is full; however, emerging issues still need to be addressedGASB is not fishing for issues

If you have identified an issue that you believe warrants the GASB’s attention, please submit that issue via email to [email protected]

Agenda reviewed three times a year the GASB

Questions?

Telephone—(203) 847-0700Web site—www.gasb.org

Documents

New Hampshire Government Finance Officers Association 25 th Annual Meeting & Seminar GASB Update─5/7/2010 The views expressed in this presentation are