GASAC Feedback on Fund Balance Reporting and Governmental Fund Type Definitions Project
GASB member Marcia Taylor led a discussion of the fund balance reporting and governmental fund type definitions project with the assistance of GASB senior technical advisor Ken Schermann. The discussion highlighted tentative decisions made by the Board in response to constituent comments on the Exposure Draft issued for the project, including modifications to the proposed categories in which fund balance would be reported and clarifications of fund type definitions.
Several GASAC members expressed their satisfaction with the Board’s decisions and with the tentative categories and definitions. Some GASAC members were concerned about the provision that capital projects funds could account only for projects involving facilities, arguing that a broader interpretation that included other capital assets would be more consistent with practice and therefore less disruptive. A request was made that the Board clearly state in the Basis for Conclusions that governments can still have encumbrances, even though encumbrances would not be specifically identified on the balance sheet. Differing views were shared regarding the Board’s tentative decision, in response to constituent comments, to remove the label “spendable” from the categories of fund balance.
Report of Task Force on GASAC Project Prioritization
GASAC member Bob Dacey, chair of the Project Prioritization Task Force, reported on the task force efforts and presented to the GASAC members a document for consideration. The document, which laid out criteria that GASAC members should consider when evaluating the relative priorities of the GASB technical projects, was revised based on feedback from the GASAC members at the July 2008 meeting. The members generally were satisfied with the document as revised, making several editorial suggestions.
GASAC Feedback on Postemployment Benefits Accounting and Financial Reporting Project
GASB member Bill Holder led a discussion of the postemployment benefits accounting and financial reporting project with the assistance of GASB project managers Michelle Czerkawski and Karl Johnson. The Board is planning to issue an Invitation to Comment that will set out the major issues raised during the research conducted by the GASB staff in reviewing the effectiveness of GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers. The GASAC members were given, in advance of the meeting, an outline of the Invitation to Comment that presented the major questions that would be raised in the document. There were concerns about the terminology used in the outline, such as unfunded accrued benefit obligation, because of similarities with existing terminology. Concerns about the possibility of significant changes in the existing standards to align them more with private sector practices, despite what certain GASAC members consider to be important reasons for governments following a different accounting approach.
GASAC Feedback on Reporting Unit Presentations/Statement 14 Reexamination Project
GASB member Jim Williams led a discussion of the reporting unit presentations/Statement 14 reexamination project with the assistance of GASB project manager Wes Galloway. GASAC members were briefed on the issues that the Board will be considering in this project, for which deliberations began recently. Mr. Williams reported that the Board has tentatively decided to retain the basic framework of Statement No. 14, The Financial Reporting Entity. The Board also tentatively decided to limit the other portion of the project to reporting unit reports that purport to follow generally accepted accounting principles (GAAP).
Regarding Statement 14, a number of members raised a variety of questions about the effectiveness of the existing criteria for determining whether an entity is a component unit and whether it should be presented discretely from, or blended with, its primary government. Some members cited instances in which they did not think the criteria were working properly. Some questions were posed regarding the Board’s plan to define the term fiduciary responsibility as it is used in Statement 14, and opinions were shared regarding its meaning.
During the discussion of reporting unit presentations, GASAC members were asked if they believed a reporting unit financial report should include all of the elements of a general purpose external financial report, such as management’s discussion and analysis (MD&A) and other required supplementary information (RSI). Several members supported the notion that MD&A and RSI should be presented if the report purports to follow GAAP.
GASAC Feedback on Issues Raised by the Credit Crisis
David Bean, GASB director of research and technical activities, led a discussion of potential accounting and financial reporting issues that have come to light as a result of recent economic changes and might need to be addressed through standards setting. The GASB already has been conducting research on issues related to Chapter 9 bankruptcy, a project the GASAC discussed at a prior meeting.
Mr. Bean asked the members if they were aware of issues that the GASB should be addressing related to the credit crisis. Several suggestions of narrow issues related to the credit crisis were offered, including the provision of more information about counterparty risk, concentrations of risk in the firms insuring a government’s bonds, and the financial results of terminations of derivatives that have occurred.
Departing GASAC Members
Chairman Ebersole ended the first day of the meeting by recognizing the GASAC members whose terms were ending in December 2008—Doug Benton, Mike Crawford, Martha Garner, Bill Hirata, Jesus Nava, Neil Sullivan, and Henry Wulf. Mr. Ebersole stated his gratitude for the departing members’ many years of service to the GASAC.
Report on Meetings and Activities of the Financial Accounting Foundation
The second day of the meeting began with a report from the Financial Accounting Foundation, led by FAF trustee John Radford. Mr. Radford highlighted several activities of the FAF since the last GASAC meeting, including:
1. Changes in the structure and operations of the FAF and the two Boards.
2. Mark Siegel was selected to replace George Batavick as a member of the FASB.
3. A search for a replacement for former GASB member Girard Miller was in process.
4. A nominee to replace Doug Ellsworth as one of the government trustees of the FAF had been interviewed.
5. A letter was sent to Christopher Cox, chairman of the Securities and Exchange Commission, regarding political interference with FASB Statement No. 157, Fair Value Measurements.
6. FAF chairman Robert Denham had outlined priorities for the FAF, such as searching for his replacement and for new trustees, moving forward on convergence with international standards, and GASB funding.
Mr. Radford brought the members up to date on the progress toward a permanent funding structure for the GASB. Terri Polley, FAF President and COO updated the Council on changes in the FAF structure that were implemented since the last GASAC meeting. Additionally, she commented on the GASB budget. She informed the Council that the budget was being carefully examined by the finance committee.
Report of the Chairman of the Governmental Accounting Standards Board
GASB chairman Robert Attmore provided an update on the GASB’s work since the last GASAC meeting. His full written report was provided to each Council member in advance of the meeting.
- The GASB has issued three documents since the July GASAC meeting:
o A Request for Response, Suggested Guidelines for Voluntary Reporting of SEA Performance Information—The Board would be holding a user discussion forum about this document following the GASAC meeting, as well as a public hearing the next week in Orlando, in conjunction with the National League of Cities’ Congress of Cities and Exposition.
o Two Exposure Drafts—The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments and Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards—that would move accounting guidance from the AICPA auditing literature to the GASB’s literature, where it will be more easily accessible to the financial statement preparers responsible for applying the guidance.
- A plain-language summary of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, has been posted to the GASB website.
- Speaking engagement activity by the Board and staff has been significant throughout 2008.
Report of the Director of Research and Technical Activities and GASAC Feedback on Technical Agenda Issues
David Bean provided an overview of several technical agenda matters.
- Progress was being made on the conceptual framework: recognition and measurement attributes project.
o The first document issued in this project likely will be a Preliminary Views.
o The Board has held lengthy deliberations regarding how to define the current financial resources measurement focus, and to explain the rationale for its use in the governmental funds. The staff will be conducting additional research to inform the Board’s discussions.
o The Board’s recent discussions have focused on measurement attributes, asking whether initial (historical cost) or remeasured (fair value) measurement attributes are appropriate measures for assets and liabilities in a government environment. The Board has discussed the application of these measurement attributes in the accrual-based financial statements, but it is waiting to discuss the governmental fund financial statements until the recognition issues related to current financial resources have been fully explored.
- The 2008–2009 edition of the Comprehensive Implementation Guide was released in October. The process of collecting questions for next year’s edition has already begun.
The staff is preparing to distribute draft questions and answers for the Statement 53 Implementation Guide to the advisory committee. Publication is planned for February 2009.
The GASB then sought GASAC feedback on additional potential technical projects. A draft project prospectus and a draft project proposal were provided to the GASAC members in advance of the meeting, as well as a list of existing GASB standards eligible for review. The project proposal related to a research project on OPEB implementation issues. The project prospectus related to a potential current technical agenda practice issue project on “Accounting and Financial Reporting by Governmental Entities Under Chapter 9 of the U.S. Bankruptcy Code.” GASAC members were provided, in advance, with a project prospectus document for consideration. The Council discussed the project prospectus and the background surrounding recent events that prompted the consideration of this topic as a research project. GASAC members were asked to comment on whether they concurred with the GASB staff recommendation that this project be added to the GASB’s research agenda.
GASAC feedback supported the addition of the OPEB implementation issues research project to the research agenda. In addition, the GASAC feedback supported the addition of a practice issues project to the current technical agenda. Suggestions were made to expedite this project and issue timely guidance considering the recent developments with government funding difficulties and because existing guidance regarding bankruptcies may not be considered appropriate for state and local governments.
Mr. Bean then discussed a list of existing GASB standards that had been in place long enough to be evaluated for their effectiveness. He told the GASAC members that, beginning in 2009, a new section would be added to the GASB’s technical plan, containing potential reexamination projects to review these standards. The list will be included in the GASAC’s next project prioritization in March 2009.
The GASAC members discussed a list of technical inquiries received by the GASB staff since the last GASAC meeting. No potential new projects were identified as a result of the GASAC’s review of the inquiries report.
GASAC Feedback on Communications and Public Relations Issues
Dean Mead, GASB research manager and staff liaison to the GASAC, provided an update on communications and public relations activities. GASAC members were provided with examples of effective communication efforts by GASAC members and their organizations. GASAC members were provided with a GASAC Performance Measures Report as of the end of October 2008, based on year-to-date reporting by GASAC members. The measures were considerably improved over those presented in July, when only 10 of the GASAC members had completed the Internet survey that collects data for the measures.
Mr. Moon presented a template for providing the members with basic information about each of their organizations. Mr. Mead was asked to distribute the template to the GASAC members, who would complete and return it to him. It was suggested that the completed forms be shared with the incoming GASAC members as part of their orientation package.
GASAC Feedback on Service Efforts and Accomplishments (SEA) Reporting Project
GASB member Dick Tracy, assisted by GASB staff members Lisa Parker and Ashley Boateng and GASB consultant Jay Fountain, provided a summary of the activities of this project since the last GASAC meeting. Prior to the meeting, GASAC members were provided with a proposed draft of Concepts Statement 5, which would amend certain portions of Concepts Statement 2. Some believe that the revisions should have gone further in limiting the GASB’s role in SEA. They questioned whether SEA was a part of the GASB’s mission or if the GASB was the right body to be addressing SEA. GASB chairman Attmore reminded the members that the FAF trustees had voted in late 2006 to affirm that SEA was indeed a part of general purpose external financial reporting and, therefore, a part of the GASB’s mission. Other members expressed support for the proposed changes to the Concept Statement and pointed out the importance of SEA to accountability. Still other members expressed neither pro nor con positions but remarked that the GASB had been responsive to the concerns expressed in the past by GASAC members and their organizations.
GASAC Feedback on Public/Private Partnerships Project
Lisa Avis, GASB practice fellow, presented a summary of the activities of this project since the last GASAC meeting. Prior to the meeting, GASAC members were provided with a paper listing the Board’s tentative decisions to date. GASAC members offered insights into public/private partnerships that they were aware of or were directly involved in. Several members offered to provide GASB staff with materials related to those arrangements to assist the Board in its deliberations.
Report from the Executive Committee
Chairman Dan Ebersole provided a report on the results of the Executive Committee meeting. Highlights of the report included the following: The committee discussed an offer from the AGA to host the 2010 GASAC meeting in conjunction with their annual conference. AGA has offered to host in 2010, July 12 and 13, in Orlando at the Marriott World Center. The GASAC already has accepted the offer of NASRA to host the 2009 meeting—August 3 and 4, 2009, in Savannah, GA. The Executive Committee recommended to the full GASAC that the AGA offer be accepted. The other meeting dates for 2009 are March 12–13 in Norwalk, CT, and December 3 and 4 in New York City.