NAFOA's GASAC Representative

GASB Issues Statement 64

2011-07-13T10:40:00.000-07:00

Statement 64 will improve financial reporting by state and local governments by clarifying the circumstances in which hedge accounting continues to be applied when a swap counterparty, or a swap counterparty’s credit support provider, is replaced.

Statement 64 clarifies that when certain conditions are met, the use of hedge accounting should not be terminated. Those conditions are: (1) the collectability of swap payments is considered to be probable, (2) the replacement of the counterparty or credit support provider meets the criteria of an assignment or in-substance assignment as described in the Statement, and (3) the counterparty or counterparty credit support provider (and not the government) has committed the act of default or termination event. When all of these conditions exist, the GASB believes that the hedging relationship continues and hedge accounting should continue to be applied.

GASB Statement No. 53 provides for the use of hedge accounting for derivatives that are effective hedges. Hedge accounting entails reporting fair value changes of a hedging derivative as either deferred outflows of resources or deferred inflows of resources, rather than recognizing those changes in investment income. When a hedging derivative is terminated, Statement 53 requires that hedge accounting cease and all accumulated deferred amounts be reported in investment income.

As Statement 53 was being implemented, questions had arisen regarding situations in which a government has entered into a hedging interest rate swap or a hedging commodity swap and the swap counterparty (or the swap counterparty’s credit support provider) commits or experiences an act of default or a termination event under the swap agreement through no fault of the government. When a swap counterparty (or a swap counterparty’s credit support provider) is replaced through an assignment or an in-substance assignment, the GASB concluded that the government’s financial position remains unchanged.

Statement 64 is effective for periods beginning after June 15, 2011, again with earlier application encouraged.

GASB Issues Statement 63

2011-07-13T10:37:00.000-07:00

Statement 63 is intended to improve financial reporting by providing citizens and other users of state and local government financial reports with information about how past transactions will continue to impact a government’s financial statements in the future.

Statement 63 provides a new statement of net position format to report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position (which is the net residual amount of the other elements). The Statement requires that deferred outflows of resources and deferred inflows of resources be reported separately from assets and liabilities.

A deferred outflow of resources is a consumption of net assets that is applicable to a future reporting period. An example of a deferred outflow of resources is a government’s hedging interest rate swap agreement in which the fair value becomes negative. If the hedge is determined to be effectively offsetting the changes in fair value of the debt, the decrease in the fair value of the derivative instrument would be reported as a liability with a corresponding deferred outflow of resources to reflect the fact that this decrease is not expected to be recognized in investment income in future periods.

A deferred inflow of resources is an acquisition of net assets that is applicable to a future reporting period. An example of a deferred inflow of resources is a service concession arrangement that involves a public toll road. If the government receives an up-front payment from an operator, the revenue associated with that payment will be recognized in future years because the arrangement that generated the up-front payment relates to those periods.

Statement 63 also amends certain provisions of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, and related pronouncements to reflect the residual measure in the statement of financial position as net position, rather than net assets.

The provisions of Statement 63 are effective for financial statements for periods beginning after December 15, 2011, with earlier application encouraged.

GASB Proposes Major Improvements for Pension Reporting

2011-07-11T13:24:00.000-07:00

Norwalk, CT, July 8, 2011—The Governmental Accounting Standards Board (GASB) has issued two Exposure Drafts proposing improvements to financial reporting of pensions by state and local governments: Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans. The documents would propose amendments to the existing pension standards to improve how the costs and obligations associated with the pensions that governments provide to their employees are calculated and reported.

The first Exposure Draft, Accounting and Financial Reporting for Pensions (Pension Exposure Draft), primarily relates to reporting by governments that provide pensions to their employees. A second related Exposure Draft, Financial Reporting for Pension Plans, (Pension Plan Exposure Draft), addresses the reporting by the pension plans that administer those benefits.

The Exposure Drafts, including instructions on how to submit written comments, are available for download at www.gasb.org. The deadline for submitting written comments is September 30, 2011.

In addition, the GASB has released a comprehensive plain-language supplement to assist non-accountant users of financial statements in commenting on the Pension Exposure Draft. The supplement is also available for download at www.gasb.org.

The GASB will host public hearings on the Exposure Drafts on October 3, October 13, and October 20, 2011, and user discussion forums on October 4, 14, and 21. Locations and other details, including instructions for registering to participate, are explained in the Exposure Drafts.

GASB Issues Preliminary Views on Recognition and Measurement of Elements of Financial Statements

2011-07-11T13:19:00.000-07:00

Norwalk, CT, July 11, 2011—The GASB today issued a Preliminary Views on concepts related to recognition of elements of financial statements and measurement approaches. The Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches, is intended to set forth and seek comments on the Board’s early views on how and when an item should be reported (recognition) on state and local government financial statements and how the amount of the item reported on those statements should be determined (measurement approach).

Constituents are urged to review the Preliminary Views and provide comments by September 30, 2011. Copies of the document may be downloaded free of charge from www.gasb.org.

GASB is Seeking Volunteers

2011-07-11T13:11:00.000-07:00

The GASB is seeking volunteers to participate in a field test of its proposed pension accounting and financial reporting standards. The proposals are contained in two Exposure Drafts that will be available to download from the GASB website, www.gasb.org, beginning on July 8, 2011.

Field tests are a part of the GASB’s due process activities and help the GASB to establish effective standards. You can find more information about field tests in general at the GASB’s website by clicking the following link: Field Test

This field test will help the GASB to discover issues you as a practitioner might have in applying the proposed standards, and to weigh the costs associated with implementation and ongoing application of the proposed standards against the benefits of the information they provide.

In addition, by volunteering you will be able to go through the exercise of “implementing” the proposed standards as if they were in place, while working directly with the GASB staff and providing feedback directly to the GASB regarding that process. This information will be considered by the Board in development of the final standards. The input provided could also be used in a question-and-answer Implementation Guide.

If you are interested in participating in the pension field test, or would like additional information, please contact me either by email at DMMEAD@gasb.org or by telephone at (203) 956-5294.

We look forward to working with you on this important project!

Two Exposure Drafts Approved

2011-07-05T16:52:00.000-07:00

The GASB has approved two Exposure Drafts that would significantly change how governments account for and report on the pensions they provide to their employees. The Exposure Drafts are:

Accounting and Financial Reporting for Pensions

Financial Reporting for Pension Plans

The documents will be available on the GASB website on July 8.

Podcasts Are Available

2011-06-22T09:12:00.000-07:00

Podcasts are available on GASB's website for various topics.

See the following link

http://www.gasb.org/jsp/GASB/Page/GASBSectionPage&cid=1176158425011

Set up RSS Feeds!

2011-06-22T09:09:00.000-07:00

Good day to you!

If you want to set up an RSS Feed from NAFOA's GASAC Blog, please use the following:

http://nafoa.blogspot.com/feeds/posts/default?alt=rss

Thank you,

Ryan Claw
NAFOA's GASAC Representative

User Guide Update from GASB

2011-06-16T12:07:00.000-07:00

The GASB’s user guide series, which introduces the financial reports of state and local governments to a broad, nonaccountant audience, is currently being revised and updated for publication. The What You Should Know guides—originally published in 2000–2001—provide a comprehensive, easy-to-read introduction to the annual financial reports of local governments, school districts, and—new for 2011—business-type activities, such as utilities, hospitals, and colleges. The titles in the revised series will be:

What You Should Know about Your Local Government’s Finances
What You Should Know about Your School District’s Finances
What You Should Know about Your Government’s Business-Type Activities
An Analyst’s Guide to Government Financial Reports.

The 2011 editions of the first three guides will cover more note disclosures and supporting information and include the major new pronouncements issued since the publication of the original guides, including those on other postemployment benefits, derivative instruments, and fund balance.

An Analyst’s Guide, which is aimed at experienced, regular users of governmental financial statements, will update and combine the current guide with What Else You Should Know about a Government’s Finances, the GASB’s guide to notes and supporting information, to create a comprehensive updated guide to the full financial report.

The 2011 editions of the guides are scheduled for publication during the summer and fall. The new guides will be available in the store section of the GASB website, www.gasb.org/store, by clicking on the User Guides item in the menu on the left-hand side of the screen.

Deferred Inflows of Resources and Deferred Outflows of Resources Omnibus Project

2011-03-16T21:29:00.000-07:00

The objective of this project would be to identify, in existing authoritative literature, requirements to recognize balances that may appear to meet the definitions in Concepts Statement No. 4, Elements of Financial Statements, of deferred outflows of resources or deferred inflows of resources, and to determine whether those balances should continue to be recognized as assets or liabilities or reclassified for financial reporting purposes as deferred outflows or deferred inflows of resources, respectively.

A deferred outflow of resources is a consumption of net assets by the government that is applicable to a future reporting period.

A deferred inflow of resources is an acquisition of net assets by the government that is applicable to a future reporting period.

The following items could potentially qualify as deferred outflow or deferred inflow of resources:
Deferred revenue

Deferred revenue related to food stamps

Deferred revenues related to taxes and grant programs and advances

Loan commitment fees

Operating leases

Differences between reacquisition price and net carrying amount of old debt

Premium, discounts, and issue costs

Sale of future revenues

Capital leases-accounting for sales-type and direct financing leases by the lessor

Capital leases-accounting by the lessee for refunding by the lessor of tax-exempt debt

Sale-leaseback transactions

Cable television systems-Hookup revenue and costs

Lending activities- loan origination fees and commitment fees and costs

Results of application of the interest method to net fees or costs that are required to be recognized as yield adjustments over the life of a loan

Mortgage banking activities-loan origination fees and costs associated with loans held for resale or investment

Regulated operations-rate action of a regulator when current rates are intended to recover costs that are expected to be incurred in the future

Regulated operations-rate action of a regulator when the regulator requires that a gain or other reduction of net allowable costs be given to customers over future periods

Economic Condition Reporting: Fiscal Sustainability

2011-03-16T21:20:00.000-07:00

The objective of this project is to consider whether guidance or guidelines should be considered for additional information as part of general purpose external financial reporting to enhance a user's ability to assess a government's economic condition. The consideration of additional information would include risks associated with a government's intergovernmental financial dependencies, which previously was a separate project in the technical plan but was deferred for consideration as part of this project.

Pension Accounting and Financial Reporting Project

2011-03-16T21:02:00.000-07:00

The Board expects to release an exposure draft in June 2011 on pension accounting and financial reporting issues for employers and for defined benefit pension plans.

One objective of this project is to improve accountability and the transparency of financial reporting in regard to the financial effects of employers' commitments and actions related to pension benefits. This objective includes improving the information provided to help financial report users assess the degree to which interperiod equity has been achieved. The other objective of this project is to improve the usefulness of information for decisions or judgments of relevance to the various users of the general-purpose external financial reports of government employers and pension plans.

Technical Plan Project Priorities

2011-03-16T20:43:00.000-07:00

At every March GASAC meeting, each GASAC member has the opportunity to provide individual feedback on GASB's Technical Plan by ranking projects important to him or her. Of the 42 listed projects, I ranked the following projects as high or medium priority (in random order):

Electronic Financial Reporting, Fair Value Measurement, Fiduciary Responsibilities, Financial Guarantees, Exchange-like Revenues, GAAP Hierarchy, Tax Abatement Disclosures, Reexamination-Capitalization of Interest Costs, Reexamination-Leases-NCGA 5 and Statement 13, Reexamination-Nonexchange Transactions-Statements 33 and 36, Reexamination-Reporting Model-Statement 34, 35, and 37, and Reexamination-Accounting for Prior-Period Adjustments, Accounting Changes.

GASB Issues Exposure Draft Addressing Application of Hedge Accounting Termination Provisions

2011-03-16T20:16:00.000-07:00

The GASB issued an Exposure Draft, Derivative Instruments: Application of Hedge Accounting Termination Termination Provisions, an amendment of GASB No. 53. The ED clarifies the application requirements in Statement No. 53 which address the termination of hedge accounting.

It clarifies what constitutes a termination event for accounting and financial reporting purposes.

The need for clarity is necessary to address quesions with regard to the application of the termination provisions in Statement 53 when a counterparty or a counterparty's credit support provider of an interest rate swap or commodity swap is replaced because the original counterparty, or counterparty's credit support provider, failed to comply with the specific terms of a swap agreement.

The proposed effective date would be for financial statement periods beginning after June 15, 2011. The ED comment deadline is April 15, 2011.

GASAC - Agenda for Meeting on March 3 and 4

2011-03-16T19:56:00.000-07:00

March 3:
Approval of October 2010 minutes

GASB Chairman's Report

GASAC member feedback on Pension Accounting and Financial Reporting Project

GASAC member feedback on Economic Condition Reporting: Fiscal Sustainability Project

March 4:
Report of the FAF

GASB member comments

GASB Director of Research and Technical Activities Report

GASAC member feedback on Deferred Inflows of Resources and Deferred Outflows of Resources Omnibus Project

GASAC member review of GASB Project Proposals and Prospectuses

GASAC member feedback on New Technical Agenda Project Priorities

Report on GASAC member discussion regarding New Technical Agenda Project Priorities

GASAC communications - member outreach efforts

Executive Committee Report

GASB Issued Statement 62

2010-12-29T10:17:00.001-08:00

GASB issued Statement 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This statement is intended to enhance the usefulness of its Codification by incorporating guidance that previously could only be found in certain FASB and AICPA pronouncements.

The Statement incorporates into the GASB's authoritative literature the applicable guidance previously presented in the following pronouncements issued before November 30, 1989.

FASB Statements and Interpretations
Accounting Principles Board Opinions
Accounting Research Bulletins of the AICPA's Committee on Accounting Procedure

By incorporating and maintaining this guidance in a single source, the Statement reduces the complexity of locating and using authoritative literature needed to prepare state and local government financial reports. It improves financial reporting by eliminating the need for financial statement preparers and auditors to determine which FASB and AICPA pronouncement provisions apply to state and local governments, thereby resulting in a more consistent application of relevant guidance in financial statements of state and local governments. Finally, it contributes to the GASB's efforts to codify all sources of GAAP for state and local governments so that they can be found within a single source.

The requirements of Statement 62 are effective for financial statement periods beginning after December 15, 2011.

Comments on New Statement

2010-12-16T15:20:00.000-08:00

GASB issued an Exposure Draft on November 24 for Financial Reporting for Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The deadline to submit comments is February 25, 2011.

The ED proposes reporting requirements for deferred outflows of resources, deferred inflows of resources and net position.

A copy of the ED can be downloaded from the GASB website, http://www.gasb.org/.

GASB Updates Reporting Entity Standards

2010-12-16T14:53:00.000-08:00

The GASB issued statement No. 61 - the Financial Reporting Entity: Omnibus. The statement is designed to improve financial reporting for governmental entities by amending the requirements of Statements No. 14 and No. 34 to better meet user needs and address reporting entity issues that have come to light since those statements were issued in 1991 and 1999, respectively.

The statement will improve the information presented about the financial reporting entity, which is comprised of a primary government and related entities (component units). The amendments to the criteria for including component units allow users of financial statements to better assess the accountability of elected officials of the primary government by ensuring that the financial reporting entity includes only organizations for which the elected officials are financially accountable or that the government determines would be misleading to excldue.

The criteria for blending is also amended. The amendments to the criteria for blending will help ensure that the primary government includes only those component units that are so interwined with the primary government that they are essentially the same as the primary government, and will clarify which component units have that characteristic.

GASB Issues Statement No. 60

2010-12-16T14:44:00.000-08:00

Norwalk, CT - December 16, 2010 - The GASB issued statement 60, Accounting and Financial Reporting for Service Concession Arrangements. It addresses how to account for and report service concession arrangements (SCAs), a type of public-private or public-public partnership that state and local governments are increasingly entering into.

The Statement provides guidance on whether the transferor or the operator should report the capital asset in its financial statements, when to recognize up-front payments from an operator as revenue, and how to record any obligations of the transferor to the operator.

The requirements for Statement 60 are effective for financial statements for periods beginning after December 15, 2011.

GASB Issues Statement No. 59, Financial Instruments Omnibus

2010-06-23T19:18:00.000-07:00

Norwalk, CT - June 24, 2010 - The GASB issued Statement No. 59, Financial Instruments Omnibus. The Statement updates and improves existing standards regarding financial reporting of certain financial instruments and external investment pools. The Statement is effective for financial statements prepared by state and local governments for periods beginning after June 15, 2010, with earlier application encouraged.

Statement 59:

Emphasizes the applicability of U.S. Securities and Exchange Commission requirements to certain external investment pools - known as 2a7-like pools - to provide users more consistent information on qualifying pools.
Addresses the applicability of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, to certain financial instruments to clarify which financial instruments are within the scope of that pronouncement and to provide greater consistency in financial reporting.
Applies the reporting provisions for interest-earning investment contracts of Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, to unallocated insurance contracts to improve the consistency of reporting by pension and OPEB plans.

GASB Statement 59 is available for purchase at www.gasb.org.

GASB Issues Revised Proposal on Service Concession Arrangements

2010-06-23T19:07:00.000-07:00

Norwalk, CT - June 17, 2010 - The Board issued its revised Exposure Draft (ED), Accounting and Financial Reporting for Service Concession Arrangements. The revised ED was unanimously approved for reexposure. The deadline for submitting written comments on the revised ED is August 17, 2010.

The objective of this project is to provide accounting and financial reporting guidance for service concession arrangements (SCAs), which are a subset of public-private partnerships. This involves determing whether existing authoritative guidance is sufficient to address the accounting and financial reporting issues resulting from SCAs, or whether new standards are necessary to address these issues.

The original ED was issued in June 2009.

The GASB urges interested parties to review the revised ED and provide input on areas in which they agree or disagree regarding significant changes from the previous ED.

The revised ED, including instructions for submitting written comments, may be downloaded free of charge from the GASB's website at www.gasb.org.

GASB Issues Preliminary Views on Potential Improvements to Pension Standards

2010-06-23T18:43:00.000-07:00

Norwalk, CT - June 16, 2010 - The GASB has issued a Preliminary Views on Pension Accounting and Financial Reporting By Employers. The document presents the Board's current views on what it believes are the most fundamental issues related to recognition and measurement of pension obligations by state and local government employers. The purpose of the document is to obtain comments from constituents on those views before developing more detailed proposals for changes to the existing accounting and financial reporting standards. In addition to the issues addressed in the Preliminary Views, the Board will begin deliberations in July on pension note disclosures and supporting information for government employers and pension plan reporting issues.

The Preliminary Views, including instructions on how to submit written comments, is available for download at www.gasb.org. The deadline for submitting written comments is September 17, 2010. The GASB will host a public hearing on Preliminary Views on October 13, 2010 at the Hyatt Regency Dallas-Fort Worth Airport, on October 14, 2010 at the KPMG offices in San Francisco, and October 27, 2010 at the Crown Plaza LaGuardia in New York City.

GASB Pronouncements Becoming Effective

2010-02-13T14:29:00.000-08:00

December 15, 2008 Statement 45 phase three OPEB

June 15, 2009 Statement 51 Intangible Assets

June 15, 2009 Statement 53 Derivatives

June 15, 2011 Statement 57 paragraph 6 and 7; OPEB

June 15, 2009 Statement 58 Chapter 9 Bankruptcy

June 15, 2010 Statement 54 Fund Balance

June 15, 2011 Statement 57 paragraph 8; OPEB

* Comments on Proposed Statement are due July 31, 2010 *

2010-02-02T19:56:00.000-08:00

Norwalk, CT, January 29, 2010— The Governmental Accounting Standards Board (GASB) today issued an Exposure Draft (ED) of a proposed Statement, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The proposed Statement is intended to enhance the usefulness of its Codification by incorporating guidance that previously could only be found in certain Financial Accounting Standards Board (FASB) and American Institute of Certified Public Accountants (AICPA) pronouncements. This literature has not been maintained for the state and local government environment. By incorporating and maintaining this guidance in a single source, the GASB will reduce the complexity of locating and using authoritative literature needed to prepare state and local government financial reports.

This proposed Statement would incorporate into the GASB’s authoritative literature the applicable guidance previously presented in the following pronouncements issued before November 30, 1989:

1. FASB Statements and Interpretations
2. Accounting Principles Board Opinions
3. Accounting Research Bulletins of the AICPA’s Committee on Accounting Procedure.

It would improve financial reporting by eliminating the need for financial statement preparers and auditors to determine which FASB and AICPA pronouncement provisions apply to state and local governments, thereby resulting in a more consistent application of relevant guidance in financial statements of state and local governments. It would also contribute to the GASB’s efforts to codify all sources of generally accepted accounting principles for state and local governments so that they can be found within a single source. “This will make it easier for practitioners to identify the applicable authoritative guidance without searching through and interpreting multiple sources of potential guidance,” said GASB Chairman Robert Attmore.
GASB constituents are encouraged to review the ED and provide written comment by July 31, 2010. The ED may be downloaded from the GASB’s website at www.gasb.org/exp. Instructions on how to submit comments are contained in the ED.

GASB Seeking Comment on Pension Standards Reexam through July 31

2009-07-13T09:01:00.000-07:00

The Governmental Accounting Standards Board is continuing to seek comments on its Invitation to Comment (ITC) on Pension Accounting and Financial Reporting through July 31. The ITC is designed to elicit comment at an early stage of the reexamination of GASB’s pension accounting and financial reporting standards and your thoughts about it are valuable to us.

The ITC addresses key pension accounting and financial reporting issues raised during research regarding the application and effectiveness of the standards set forth in 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, as amended. The process now underway is designed to provide the Board an opportunity to consider whether modifications to the pension standards are required.

The ITC is available through the GASB website at www.gasb.org/exp.

GASB Proposes Statements on Service Concession Arrangements and Financial Instruments

2009-07-01T08:56:00.000-07:00

Norwalk, CT, June 30, 2009—The Governmental Accounting Standards Board (GASB) issued two Exposure Drafts (EDs) of proposed Statements, Accounting and Financial Reporting for Service Concession Arrangements, and Financial Instruments Omnibus. The proposed Statements are intended to increase transparency in these financial activities.

The proposed Statement on service concession arrangements (SCAs) would establish accounting and financial reporting requirements for these types of partnership arrangements between governments and private entities and between multiple governmental entities. An SCA is an arrangement between a government (the transferor) and an operator in which (a) the transferor conveys to an operator the right and related obligation to provide services through the use of infrastructure or another public asset (a “facility”) and (b) the operator collects fees from third parties. Recent examples of SCAs include long-term arrangements associated with toll roads. The proposal provides guidance on determining whether the transferor should report the facility subject to the SCA as its capital asset, and reporting guidance for addressing upfront or installment payments related to the SCA. It also provides reporting guidance for governments acting as operators in an SCA.

“As governments increasingly partner with private and other public entities to provide services to citizens, taxpayers and other financial statement users need clear, understandable, and comparable information about the costs, revenues, and obligations associated with these partnerships,” said Robert Attmore, chairman of the GASB.

The proposed Statement on financial instruments is intended to update and improve existing standards regarding financial reporting and disclosure requirements of some financial instruments for which significant issues have been identified in practice. The amendments would:

· Extend the use of fair value measurement to unallocated insurance contracts to improve the consistency of reporting by pension and OPEB plans
· Emphasize the applicability of SEC requirements to certain external investment pools—known as 2a7-like pools—to provide practitioners with improved guidance
· Limit interest rate risk disclosures for investments in mutual funds to bond mutual funds to eliminate disclosures that may not provide decision-useful information
· Address the applicability of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, to certain financial instruments to clarify which financial instruments are within the scope of that standard and provide greater consistency in financial reporting.

Mr. Attmore stated, “We encourage our constituents to review both EDs and provide feedback on whether or not they think they would indeed lead to improved reporting in these areas.”

The EDs, and instructions on submitting written comments, can be downloaded free of charge at www.gasb.org/exp. The deadline for submitting written comments on Accounting and Financial Reporting for Service Concession Arrangements is September 30, 2009, and a public hearing on the proposal is scheduled for October 6, 2009. Written comments on the Financial Instruments Omnibus ED are due by October 30, 2009.

GASB Proposes Suggested Guidelines for Voluntary Reporting of SEA Performance Information

2009-07-01T08:50:00.000-07:00

Norwalk, CT, June 30, 2009—The Governmental Accounting Standards Board (GASB) issued Proposed Suggested Guidelines for Voluntary Reporting, SEA Performance Information. The purpose of this document is to obtain feedback from constituents on suggested guidelines intended to provide a common framework for the effective external communication of SEA performance information.

The reporting of SEA performance information provides more information about a government’s actual performance in providing services to its citizens than can be included in traditional financial statements, and is therefore an important method of demonstrating accountability and stewardship. The suggested guidelines are intended to help state and local governments that choose to communicate SEA performance information to citizens, elected officials, and other interested parties to do so more effectively.

While it is beyond the scope of the GASB to establish the goals and objectives of state and local government services, to develop specific nonfinancial measures or indicators of service performance, or to set benchmarks for service performance, research has shown that many constituents consider it appropriate at this time for the GASB to issue conceptually based suggested guidelines for voluntary reporting of SEA performance information.

Constituents are invited to provide feedback on the suggested guidelines, which include what the GASB has identified as the four essential components of an effective SEA report, the six qualitative characteristics of SEA performance information, and three keys to effective communication.

The four components identified are purpose and scope, major goals and objectives, key measures of SEA performance, and discussion and analysis of results and challenges. The six qualitative characteristics, as set forth in Concepts Statement No. 1, Objectives of Financial Reporting, are relevance, understandability, comparability, timeliness, consistency, and reliability. The three keys to effective communication are intended audiences, multiple levels of reporting, and forms of communication.

Constituents are encouraged to review the proposed suggested guidelines and provide feedback. Written comments are due by October 30, 2009. The document—including instructions on submitting comments—can be downloaded from the GASB’s website at www.gasb.org/exp. Individuals can also obtain one copy of the Proposal free of charge by contacting the GASB Order Department at 1-800-748-0659.

2009 GASAC Project Prioritization

2009-07-01T08:01:00.000-07:00

The following are projects idenfitied as priorities by the GASAC

OPEB: Certain Implementation Issues
Codification of Pre-November 30, 1989 FASB Pronouncements
Fair Value Measurement
Government Combinations
Economic Condition Reporting: Fiscal Sustainability
Reexamination-Demand Bonds-Interpretation 1
Tax Abatement Disclosures
Electronic Financial Reporting
Reexamination-Securities Lending-Statement 28
Financial Transactions with Characteristics of Both Loans and Grants
Financial Performance Measurements
Reexamination-Compensated Absences-Statement 16
Reexamination-Conduit Debt-Interpretation 2
Exchange-like Revenues
Reexamination-Debt Refundings-Statements 7 and 23
Reexamination-Deferred Compensation Plans-Statement 32
In-Kind Contributions
Reexamination-Risk Financing-Statements 10 & 30 and Interpretation 4
Present Value
Reporting Unit Presentations
Irrevocable Charitable Trusts
Popular Reporting
Reexamination-Escheat Property-Statement 21
Preservation Method
Reexamination-Landfills-Statement 18

GASB Issues Two Exposure Drafts on OPEB Measurements and Chapter 9 Bankruptcies

2009-06-26T13:14:00.000-07:00

Norwalk, CT, June 26, 2009—The Governmental Accounting Standards Board (GASB) today issued two Exposure Drafts (EDs) of proposed Statements, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, and Accounting and Financial Reporting for Chapter 9 Bankruptcies. The EDs contain proposals intended to improve consistency in the financial reporting and the measurement of retiree health insurance and other postemployment benefits (OPEB) and the effects of Chapter 9 bankruptcy. Users and preparers of state and local governmental financial reports are encouraged to review and provide comment on the proposed Statements.

The proposed Statement on OPEB measurements addresses issues related to measurement of OPEB obligations by employers participating in agent multiple-employer OPEB plans, and would amend Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. (In agent multiple-employer plans, separate liabilities are calculated and separate asset accounts are kept for each participating government, rather than being administered and accounted for as a single plan as is done in a cost-sharing plan.) Specifically, it addresses the circumstances in which certain agent employers are eligible to use the alternative measurement method; the requirement that a defined benefit OPEB plan obtain an actuarial valuation; and requirements in Statements 43 and 45 regarding the frequency and timing of determining OPEB measures by agent multiple-employer plans and participating employers.

The proposed Statement on Chapter 9 bankruptcies would provide guidance for state and local governments that have petitioned for protection from creditors by filing for bankruptcy under Chapter 9 of the United States Bankruptcy Code. It would establish requirements for recognizing and measuring the effects of the bankruptcy process on assets and liabilities, and for classifying changes in those items and related costs.

“With the current economic environment putting stress on state and local government resources, it became necessary for the GASB to address the financial reporting issues associated with local governments filing for bankruptcy protection under Chapter 9,” said Robert Attmore, chairman of the GASB.

“By issuing these EDs, the GASB is directly addressing issues raised by practitioners and users of governmental financial statements,” stated Mr. Attmore. “We encourage constituents of the GASB to review the proposals and provide their feedback.”

The EDs can be downloaded free of charge at www.gasb.org/exp. The deadline for written comments on both documents is August 28, 2009.

GASB Marks Its 25th Anniversary

2009-06-19T13:10:00.000-07:00

The GASB has posted a new video to its website. In this three-minute video presentation, GASB Chairman Robert H. Attmore and David R. Bean, the GASB’s director of research and technical activities, offer a message marking the 25th anniversary of the GASB.

The GASB Video Series features Board members and project staff members addressing new standards and pronouncements and other GASB topics in brief video presentations.

The video may be viewed at www.gasb.org.

GASB Standards and Guidance Subscriptions

2009-05-20T13:47:00.000-07:00

The GASB offers three subscription plans that provide finance and accounting professionals and users of governmental financial information with the critical tools necessary for staying up-to-date on all the latest changes in governmental GAAP.

The GASB Subscription provides you with printed copies of new pronouncements as soon as they are issued, as well as the GASB’s monthly newsletter, The GASB Report. You also will receive notification when Exposure Drafts, discussion documents, and selected research reports are released. Stay ahead of the curve with access to the current information a GASB Subscription provides.

The GASB Board Package gives you the inside scoop on GASB projects by delivering the full complement of public materials provided to the Board members for their deliberations. You will receive the materials on a convenient CD-ROM that is mailed shortly after each Board meeting.

The Governmental Accounting Research System (GARS) on CD-ROM provides ready access to all the necessary governmental accounting literature on your personal computer or in a stand-alone network configuration. GARS has been demonstrated to significantly reduce research time.

Call (800) 748-0659 or visit www.gasb.org and click on GASB Store to order.

GASB Adds Projects to Its Current and Research Agendas

2009-05-20T13:37:00.000-07:00

In April, GASB Chairman Robert H. Attmore added a number of new projects to the Board’s current and research agendas. The changes to the technical plan were made in part based on feedback from the Governmental Accounting Standards Advisory Council (GASAC). The GASAC reviewed the GASB’s research projects and potential projects list at its meeting in March and provided input on which projects they considered the highest priorities.

Two practice issues addressing (1) the codification of pre-November 30, 1989, FASB pronouncements that apply to governments and (2) implementation issues relating to other postemployment benefits (OPEB), were moved from the research agenda to the current agenda. In addition, two projects were added to the research agenda addressing demand bonds and government combinations and spin-offs. All four of these projects were rated as high-priority by the GASAC.

Codification of Pre-November 30, 1989 FASB Pronouncements
The objective of this project is to identify specific provisions in Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the AICPA Committee on Accounting Procedure, issued on or before November 30, 1989, that do not conflict with or contradict GASB pronouncements. The GASB will incorporate those provisions into its own literature. An expert group that will provide the Board technical feedback has been formed, and deliberations are scheduled to begin in July.

OPEB Implementation Issues
The objective of this project is to consider whether to modify certain requirements related to the measurement of actuarial liabilities for OPEB by agent employers. This project includes consideration of (1) the timing and frequency of the measurement of actuarial liabilities for OPEB by agent employers and (2) the guidelines regarding use of the alternative measurement method by agent employers with small individual OPEB plans. Project deliberations began in May and an Exposure Draft should be issued at the end of June.

Demand Bonds—Interpretation 1 Reexamination
The objective of this project is to evaluate the effectiveness of GASB Interpretation No. 1, Demand Bonds Issued by State and Local Governmental Entities, in terms of whether the standards continue to address the relevant accounting and reporting issues and meet the information needs of financial statement users. Interpretation 1, which was issued in December 1984, addresses the classification—either short-term or long-term—of demand bonds. The major issues to be discussed are whether Interpretation 1 can effectively be applied in the current economic environment and whether the accounting and disclosures required by the Interpretation continue to provide decision useful information.

Government Combinations and Spin-offs
The primary objective of this project is to consider the financial reporting requirements when governmental entities are combined through annexation, consolidation, acquisition, or other means. This project will include an analysis of government combinations that have taken place in both the general governmental area (city/county consolidations and consolidated school districts, for example) and the business-type activities area (healthcare organizations, for example). In addition, the project will address certain devolution or ”spin-off” issues.

Additional information about these projects is available on the GASB’s website at www.gasb.org in the Project Pages section.

Technical Inquiries? Check this out...

2009-05-14T13:26:00.000-07:00

If anyone is searching for a question that you think GASB could answer, see its website at www.gasb.org.

By clicking on the "Technical Inquiries" button on the left side menu, you will be able to send an email to GASB staff members directly.

The website also shows the status of current GASB projects and effective dates of GASB statements. The questions posed to GASB could also include an interpretation of an accounting standard.

GASB Video Podcast Series

2009-04-29T08:20:00.000-07:00

The GASB has posted the first in a series of informative video podcasts to its website. The four-minute video presentation features GASB Chairman Robert H. Attmore addressing a series of questions about Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions.

The new podcast series, which allows viewers not only to view the videos through the website but also to download and share them, will feature Board members and project staff members addressing new standards and pronouncements and other GASB topics in brief video presentations.

The GASB Video Podcast, Fund Balance Reporting, may be viewed at www.gasb.org.

GASB Issues Guide to Implementation of Statement 53

2009-04-21T08:36:00.000-07:00

The Governmental Accounting Standards Board today issued its Guide to Implementation of Statement 53 on Derivative Instruments. The purpose of the guide is to assist preparers and auditors of governmental financial statements and those who advise them in implementing the GASB’s recently issued standard on accounting and financial reporting for derivative instruments.

The guide provides answers to more than 100 questions on topics relating to the implementation of Statement 53, including:

· Scope and applicability of Statement 53 with special emphasis on the normal purchases and normal sales scope exception;
· Definition of derivative instruments focusing on the distinguishing characteristics of a derivative instrument—settlement factors, leverage, and net settlement;
· Embedded derivative instruments, and when an embedded derivative instrument results in a hybrid instrument;
· Hedge effectiveness criteria, and how to apply the methods of evaluating effectiveness—the consistent critical terms, the synthetic instrument, the dollar-offset, and the regression analysis methods;
· Disclosures; and
· Effective date and transition.
In addition to the illustrations that were included in Statement 53, the journal entries that support the transactions in the illustrations have now been added.

Implementation of Statement 53 starts with fiscal years beginning after June 15, 2009.
The GASB Guide to Implementation of Statement 53 on Derivative Instruments is available for order by logging on to www.gasb.org.

GASB Issues Statement 56

2009-04-15T16:19:00.000-07:00

The GASB today issued Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards. This Statement incorporates accounting and financial reporting guidance previously only contained in the American Institute of Certified Public Accountants (AICPA) auditing literature into the GASB’s accounting and financial reporting literature for state and local governments. The Statement 56 guidance addresses three issues from the AICPA’s literature—related party transactions, going concern considerations, and subsequent events.

This Statement brings existing guidance (to the extent appropriate in a governmental environment) without substantive changes into the GASB’s body of standards. Statement 56 is part of the GASB’s effort to codify all generally accepted accounting principles for state and local governments so that they derive from a single source. This is intended to make it easier for preparers of state and local government financial statements to identify and apply relevant accounting guidance.Statement 56 is effective immediately. To obtain a copy of the Statement log on to www.gasb.org or call 1-800-748-0659

GASB Seeks Comment in Reexamination of Pension

2009-04-07T08:01:00.000-07:00

The Governmental Accounting Standards Board (GASB) has issued an Invitation to Comment (ITC) on Pension Accounting and Financial Reporting. The ITC is intended to obtain feedback from constituents at an early stage of the Board’s reexamination of its pension accounting and financial reporting standards. Interested parties are encouraged to review and provide input on the ITC by July 31, 2009.

The ITC addresses key issues related to pension accounting and financial reporting that were raised during the research phase of this project. The topics considered in the ITC include the process on which pension accounting and financial reporting should focus; recognition of liabilities and expenses; measurement of unfunded pension obligations; the use of actuarial methods; and reporting by government employers in cost-sharing multiple-employer pension plans and reporting by pension plans themselves.

The input received in response to the ITC will help the Board determine whether modifications to current pension standards should be proposed in order to better meet the financial reporting objectives of accountability and decision usefulness, including enabling users of financial reports to assess the extent to which interperiod equity has been achieved.

“The GASB is committed to ensuring that its standards, including those associated with pension benefits, lead to information reported that is useful for making decisions, and assists users of financial reports to assess accountability,” said Robert H. Attmore, GASB chairman.

Written comments may be submitted through an Internet-based form or addressed to the Director of Research and Technical Activities, Project No. 34, and emailed to director@gasb.org or mailed to the GASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.

A public hearing on the ITC is scheduled during the Board’s regular meeting on August 26, 2009, beginning at 8:30 a.m., at the GASB offices in Norwalk, CT. Interested individuals or organizations may participate in the public hearing in person or by telephone. The deadline for written notice of intent to participate in public hearing: July 31, 2009.

GASB Issues Statement No. 55

2009-03-30T15:28:00.000-07:00

The Governmental Accounting Standards Board (GASB) today issued GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The Statement incorporates the hierarchy of generally accepted accounting principles (GAAP) for state and local governments into the GASB’s authoritative literature. It is intended to make it easier for preparers of state and local government financial statements to identify and apply the “GAAP hierarchy,” which consists of sources of accounting principles used in the preparation of financial statements so that they are presented in conformity with GAAP and the framework for selecting those principles.

The Statement will improve financial reporting by contributing to the GASB’s efforts to codify all GAAP for state and local governments so that they derive from a single source.
Prior to the Statement, the GAAP hierarchy was set forth in the American Institute of Certified Public Accountants’ (AICPA) Statement on Auditing Standards (SAS) No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, rather than in the authoritative literature of the GASB. Statement 55 moves relevant portions of that SAS to the GASB literature without substantive changes. Because the GASB chose not to reconsider the guidance provided in the SAS, the order of priority for accounting and financial reporting guidance will remain unchanged in practice.

“The Board concluded that the GAAP hierarchy should reside in the accounting literature established by the GASB,” said Robert Attmore, GASB chairman. “This Statement will accomplish that objective while making it easier for preparers of state and local government financial statements to locate and apply important guidance that they previously had to look to the auditing literature to find.”

Statement 55 is effective immediately. To obtain a copy of the Statement, call the GASB Order Department at (800) 748-0659 or log on to www.gasb.org for more information.

GASB Statement Brings Greater Clarity and Consistency to Fund Balance Reporting

2009-03-25T12:55:00.000-07:00

Fund balance refers to the difference between assets and liabilities in the governmental funds balance sheet. This information is one of the most widely used elements of state and local government financial statements.

Of central importance to the credit reviews performed by municipal bond analysts, fund balance information also is used by taxpayer associations, research organizations, oversight bodies, state, county and local legislators and their staffs, and reporters. Financial statement users examine fund balance information to identify the available liquid resources that can be used to repay long-term debt, reduce property taxes, add new governmental programs, expand existing ones, or enhance the financial position of the government.

The GASB has found that, despite its popularity and usefulness, the value of fund balance information is significantly diminished by misunderstandings regarding the messages it conveys and inconsistency in governments’ financial reporting practices.

In order to enhance how fund balance information is reported and improve its decision-usefulness, in March 2009 the GASB issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions.

How Will Fund Balance Be Reported?

This Statement is designed to improve financial reporting by establishing fund balance classifications that are easier to understand and apply. In essence, it establishes a hierarchy based largely on the extent to which a government is bound to observe spending constraints that govern how it can use amounts reported in the governmental funds balance sheet.

Statement 54 establishes the following classifications depicting the relative strength of the constraints that control how specific amounts can be spent:

· Nonspendable fund balance includes amounts that are not in a spendable form (inventory, for example) or are required to be maintained intact (the principal of an endowment fund, for example).
· Restricted fund balance includes amounts that can be spent only for the specific purposes stipulated by external resource providers (for example, grant providers), constitutionally, or through enabling legislation (that is, legislation that creates a new revenue source and restricts its use). Effectively, restrictions may be changed or lifted only with the consent of resource providers.
· Committed fund balance includes amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision-making authority. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally.
· Assigned fund balance comprises amounts intended to be used by the government for specific purposes. Intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund.
· Unassigned fund balance is the residual classification for the general fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. If another governmental fund has a fund balance deficit, then it will be reported as a negative amount in the unassigned classification in that fund. Positive unassigned amounts will be reported only in the general fund.

How Have the Fund Type Definitions Been Clarified?

The Statement also is designed to improve the usefulness of fund balance information by clarifying certain parts of the definitions of governmental fund types that have led to confusion and adversely affected the interpretation of fund balance information. It makes clear, for example, that special revenue funds are created only to report a revenue source (or sources) that is restricted or committed to a specified purpose, and that the revenue source should constitute a substantial portion of the resources reported in the fund.

The basic definition of the debt service fund type remains essentially unchanged. However, the terminology in the definition of the capital project fund type has been clarified to focus on the broader, more consistently understood notion of capital outlays, and to better capture the breadth of capital activities in today’s environment.

“Rainy-Day’’ Funds

The GASB’s research indicates that information about amounts set aside for emergencies is very important to financial statement users. Because of the importance associated with these balances, Statement 54 clarifies how rainy-day amounts can be reported by treating stabilization arrangements as a specified purpose. Consequently, amounts constrained to stabilization will be reported as restricted or committed fund balance in the general fund if they meet the other criteria for those classifications. However, stabilization is regarded as a specified purpose only if the circumstances or conditions that signal the need for stabilization (a) are identified in sufficient detail and (b) are not expected to occur routinely. Governments are required to disclose in the notes key information about their stabilization arrangements, including the authority by which they were established, provisions for additions to the stabilization amount, and circumstances under which those amounts may be spent.

Some governments create stabilization-like arrangements by establishing formal minimum fund balance policies. Because users are interested in information about those minimum fund balance policies and how governments comply with them, governments are required to explain their minimum fund balance policies, if they have them, in notes to the financial statements.

What Other Note Disclosures Will Be Required?

Under Statement 54, governments will disclose their accounting policies that indicate the order in which restricted, committed, assigned, and unassigned amounts are spent, in circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications. For example, a town may have a state grant for public safety activities (restricted), proceeds from a portion of its own property tax that the town council voted could only be used for public safety (committed), and general revenues available for public safety spending (unassigned). The disclosure would identify the order in which the town will spend those resources. Governments already are required to make similar disclosures regarding restricted and unrestricted net assets.

In addition, governments are required to describe the processes through which they commit and assign fund balance amounts. Governments also are required to disclose the purpose for each major special revenue fund—identifying which specific revenues and other resources are authorized to be reported in each.

How Did the GASB Incorporate Constituent Feedback?

During the project that led to Statement 54, the GASB went through two rounds of public comment, beginning with an Invitation to Comment that was issued in October 2006. The input received from constituents in response to that due process document guided the development of changes that the GASB proposed in an Exposure Draft in April 2008.

Though the final standards retain the basic reporting requirements presented in the Exposure Draft, the GASB did make a number of changes based on public feedback and further study that are worth highlighting. With respect to fund balance classifications, the GASB significantly changed its proposal for reporting negative balances (see the earlier definition of unassigned fund balance). The GASB decided that deficits created as a result of overspending for a specific purpose should first reduce amounts assigned to other purposes within the fund. After eliminating those funds, a negative residual balance should be reported as negative unassigned fund balance.

The GASB decided to eliminate the heading spendable because constituents were concerned it might incorrectly be inferred that anything not classified as nonspendable could be considered spendable for any purpose. Also, the GASB agreed with constituents that the limited classification did not sufficiently convey the substance of the classification and determined that the term committed would be a better term.

The GASB also clarified how a government should report when it does not have an accounting policy guiding the order in which amounts from various fund balance classifications are spent. For such governments, the Statement establishes a default policy that should be applied, in which restricted amounts are used first, followed by committed, assigned, and unassigned amounts in that order, for purposes of reporting fund balance.

Finally, as mentioned previously, the GASB clarified terminology in the definition of the capital projects fund type largely in response to feedback received from respondents to the Exposure Draft.

When Do the Standards Take Effect?

Governments are required to implement Statement 54 for fiscal years first ending June 30, 2011. Fund balance reclassifications should be applied retroactively by restating fund balance for all prior periods presented in the financial statements. Changes to the fund balance information presented for prior years in the statistical section are not required, although retroactive application is encouraged. Early implementation of Statement 54 is encouraged.

Summary of November 2008 Meeting Minutes

2009-02-09T11:49:00.000-08:00

The GASAC meeting was held on November 6 and 7, in New York City. GASAC Chairman W. Daniel Ebersole called the meeting to order at 1:00 p.m. on November 6 and welcomed the members, FAF representatives, GASB members, GASB staff, and observers. The minutes of the July 15 and 16, 2008, GASAC meeting were approved as submitted.

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.

Tentative Agenda for Next GASAC Meeting

2008-10-05T08:37:00.000-07:00

LaGuardia Crowne Plaza
East Elmhurst, NY

GASAC Meeting

Thursday - November 6, 2008:

· Approval of the Minutes of the July 15 and 16, 2008 Meeting
· GASAC Feedback on Fund Balance Reporting Project
· GASAC Feedback on SEA Reporting Project
· GASAC Feedback on Public\Private Partnerships Project
· Executive Committee Meeting: 5:00–5:45 p.m.

Friday - November 7, 2008:

· FAF Report
· GASB Chairman’s Report
· Director of RTA’s Report
· GASAC Discussion of Potential Technical Agenda Issues
· Report of Task Force on GASAC Project Prioritization Process
· GASAC Discussion of Communication and Public Relations Issues
· GASAC Feedback on Postemployment Benefits Accounting and Financial Reporting Project
· GASAC Feedback on Reporting Unit Presentation and Statement 14 Reexamination Project · Discussion of GASAC Meeting Format
· Report from Executive Committee
· Other Business

User Forum - Request for Response

GASB Issued Request for Response

2008-10-05T08:28:00.000-07:00

The GASB issued a request for response on its Suggested Guidelines for Voluntary Reporting of SEA Performance Information. For a copy of this request for response, please email me at ryan@nafoa.org. GASB has scheduled a user forum immediately following the November GASAC meeting—November 7, beginning at 2:00 p.m.

Participation in this forum is open to users of SEA performance information, such as elected officials, legislative staff, citizens or citizen organizations, taxpayer associations, media representatives, and municipal analysts. Participants, either in person or by phone, will engage in an open discussion of the issues raised in the Request for Response, additional issues raised by the Board members and staff, and issues raised by other participants. All participants will be provided with the opportunity to express their views. Observers are welcome at the user forum.

The GASB also will be holding a public hearing on the Request for Response on November 14, beginning at 8:00 a.m., at the Orlando World Center Marriott Resort and Convention Center, 8701 World Center Drive,Orlando, FL. The hearing is being held in conjunction with the National League of Cities’ 2008 Congress of Cities and Exposition. Testifiers can participate in person or via telephone.

The deadline for submitting written comments is October 31, 2008.

Report on July 2008 GASAC Meeting

2008-07-17T20:16:00.000-07:00

Kansas City, MO – On July 15-16, 2008, GASAC members sat in on a GASB conference call for SEA performance (suggested guidelines document) and Annual Required Contribution (ARC) Adjustment (technical bulletin). During the conference call, the GASB members provided comments on wording. Particularly, the comments were on the readability and understandability of phrases, charts and tables.

After the GASB conference call, the GASAC meeting was called to order. The meeting was held in conjunction with the NaCO Conference.

The following are some of the highlights of the meeting.

Public/Private Partnership
This is a topic that is currently on the technical agenda. It is expected to be released in the first quarter of 2010. This project will address the complex arrangements for public and private sector entity partnerships. Particularly, it focuses on service concession arrangements. These arrangements are the partnership between a public sector entity and private sector entity whereby the private sector entity delivers a government asset or service. Initial research shows that the accounting and financial reporting for operation concessions and other types of arrangements are not clear.

There were issues raised about the scope of the project. Should the project have a narrow or broad scope? Overall there was general consensus that the scope of the project should include all of the different types of arrangements and that it not be narrowed to a few of the complex types of arrangements. Additionally, it was also the general consensus that the project includes public/public partnerships as well.

The discussion then turned to the types of approaches to reporting under the different types of arrangements.

The options included:
1. Risk and reward
2. Control
3. Rights and obligations

The first two approaches generally are all or nothing approaches in that the assets are assigned to either one entity based on which has the risk, reward or control. However, the third item takes into consideration rights and obligations and assigning assets accordingly to each entity. However, it was thought that this approach, while sounding positive in theory, would be difficult to implement.

Project Prioritization
At the previous meeting, a task force was established to develop a set of factors to consider when evaluating research proposals to add to GASB's research agenda.

The four factors developed were:
1. Significance of issue
2. Pervasiveness of issue
3. Feasibility
4. Cost/benefit

After some discussion, the GASAC task force reported that they will incorporate and address the comments and suggestions from the discussion and report back at the next meeting of changes made.

Chapter 9 Bankruptcy Research Proposal
The GASB staff reported on the importance and need to address Chapter 9 bankruptcy. The research project will look at the financial reporting of governments and the consequences for governments declaring Chapter 9 protection. The staff felt this was an important topic to address given the current economic situations faced by the Nation. The project will look at recognition and measurement for governments who have protection under Chapter 9, particularly the valuation of assets and liability. The consensus of GASAC members was to add this project to GASB's research agenda.

Effective dates
David Bean, Director of Research and Technical Activities, requested feedback on effective dates. Should the GASB coordinate effective dates of statements on a calendar year basis and allow phase in effective dates (like GASB statement 34) or should GASB have effective dates where up to four Statements are effective in any one year and wait two or three years before another effective date? The general consensus was that the calendar year/phase in approach was best (the current methodology). In general, the GASAC responded that, "It takes time to address new statements, Having four statements a year would be difficult to implement, Some statements result in needed policy decisions, so having them phase in or allowing time for policy decisions to be made would be the best approach."

Director of RTA report (David Bean)
Reporting from GASB’s technical agenda, David Bean touched on the following topics:
1. Fund Balance Reporting – He would still like to hear from the user community of financials on this topic.
2. Reporting Units – This will be further deliberated in September 2008.
3. AICPA Omnibus and GAAP Hierarchy – the FASAB (Federal) will have a joint meeting in August 2008 with GASB
4. ARC technical bulletin – This should be issued very soon. It was clarified that actual amounts can be used.
5. Comprehensive Implementation Guide – This should be issued by August or September 2008
6. Derivative Implementation Guide – This should be issued by February 2009.

(As a side note, the GASB reported that the new Casino guide will make some references to Tribal casinos.)

Research Projects included the following:
1. Codification of Pre-November 30, 1989
2. Economic Condition Reporting
3. Electronic Financial Reporting
4. Fair Value Measurements
5. Investment Omnibus
6. Chapter 9 bankruptcy

FAF Report by John Radford, FAF Trustee
The Bond assessment revenue report was positive. There was unexpected revenue of about $146,000. This resulted in the revenue exceeding its budget by $123,000. However, the Fair Share and Single Audit revenues were not as significant.

It is still the goal of the FAF to seek long-term independent funding for GASB. Some organizations have stepped up to provide funding. Additionally, the outlook appears positive.

The FAF, NASACT, and GFOA have been working on a plan to have states support GASB. This plan would entail states possibly funding about $7.5 million per year. The amount would be allocated by a proposed 50/50 formula (50% split equally among states and 50% split by population). There is a chance some states may opt out of this plan; however John Radford believes they will get 100% participation. This state funded program may not be effective until July 2010. In the interim, the fair share program will continue.

GASB Chairman’s report
Girard Miller is stepping down as a GASB member. He is taking a position that will be working with OPEB issues. He will be involved with strategy with his new consulting position. He feels this will conflict with his duties as a GASB member.

There will be a public hearing in Atlanta Georgia for Service Efforts and Accomplishments (SEA) conceptual framework at the AGA annual meeting. Also, the Chairman reported that the suggested guidance document for SEA has the following components.

Part 1 – Essential components
1. Purpose Scope
2. Major goals and objectives
3. Key performance measures
4. Discussion and analysis of results

Part 2 – Qualitative Characteristics
1. Relevance
2. Understandability
3. Comparability
4. Consistency
5. Timeliness
6. Reliability

It is expected that this guidance only address separate documents communicating SEA. It doesn’t address SEA reported in other documents such as a CAFR.

Recognition and Measurement
This project addresses conceptual framework issues with the current financial resources measurement focus. The project will develop criteria for recognition and measurement for the current financial resources measurement focus.

However, the GASB staff had questions on the types of information that should come from fund based financial statements and whether it should include some interperiod equity. Lastly, they asked how budgeting plays a role in current financial resources measurement focus.

Some of the questions discussed and comments made and at most times were rhetorical are as follows:
1. How long do you extend accruals?
2. What about OPEB accruals?
3. Are fund based statements useful?
4. Long term debt is often not reported in fund statements, but should it?
5. It seems like the fund based statements are reconciled to Government wide for it to be useful to users, or reconciled to budget basis for budgetary purposes.

Post Employment Benefits
The premise for this project is to address post employment accounting and financial reporting issues in general. However, the most prominently discussed issue in the pension arena today relates to how pension obligations and assets should be valued for accounting purposes.
The project will include an invitation to comment.

Other Items

The next meeting for GASAC is November 6 and 7, 2008 at New York (LaGuardia)

GASAC accepted invitations for 2009 and 2010 annual meetings.

NASRA – July 31 through August 5, 2009 Savanna, Georgia.
ASBOI – September 24 through 27, 2010 Orlando, Florida

GASAC’s tentative meeting schedule for next year is as follows:

Norwalk, CT – March 12 and 13, 2009
Savanna, Georgia - August 3 and 4, 2009
New York – November 19 and 20, 2009

Annual Required Contribution (ARC) adjustment Technical Bulletin

2008-07-17T18:57:00.001-07:00

Norwalk, CT—The Governmental Accounting Standards Board (GASB) will expose a draft Technical Bulletin, Determining the Annual Required Contribution for Postemployment Benefits on July 21, 2008. This document is intended to clarify that the use of actual known amounts for purposes of calculating the annual required contribution (ARC) adjustment relating to pensions and other postemployment benefits (OPEB) is consistent with the intent of existing standards.

The Technical Bulletin will further make clear that use of the known amount in place of the estimation procedure in GASB Statements No. 27, Accounting for Pensions by State and Local Governmental Employers, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, is encouraged.

For accounting purposes, the portion of the ARC calculation related to past over- and underpayments already has been recognized in the financial statements, and an adjustment needs to be made to future ARCs to avoid counting that amount twice. Statements 27 and 45 assume that the amount is not known and therefore prescribe a method of estimation that governments are required to use. However, since it has come to the GASB’s attention that some actuaries do track that portion of the ARC separately, this Technical Bulletin clarifies that governments may base the ARC adjustment on the actual amount when it is known.

``When our pension standards were enacted, many governments had been funding their plans for years and it was believed that it would be necessary to estimate the ARC adjustment,’’ said Robert H. Attmore, chairman of the GASB. ``Since many governments are implementing the OPEB standards essentially with a blank slate, there is a higher likelihood that they will have the actual amounts from the start. We want to accommodate the use of actual numbers when governments have them.”

Girard Miller, GASB member, resigns

2008-07-17T16:46:00.000-07:00

Norwalk, CT, July 14, 2008—Robert E. Denham, chairman of the Financial Accounting Foundation (FAF) Board of Trustees, announced that Girard Miller, one of six part-time members of the Governmental Accounting Standards Board (GASB) is resigning from the Board, effective July 31, 2008, to accept a senior strategic consulting position in the private sector.

The FAF is responsible for the oversight, administration, and finances of the GASB and the Financial Accounting Standards Board (FASB) and selecting their members.

Although part-time GASB members are able to hold other employment positions while serving on GASB, the organization’s code of conduct and ethical policies require that they avoid activities which may create the appearance of losing personal independence or objectivity or affect the confidence of the public in the integrity, independence, or objectivity of the GASB.

Because Miller’s future work could potentially overlap with GASB initiatives, Mr. Miller suggested his resignation from GASB was appropriate, and the FAF concurred with his decision.

GASB Statement 53 Issued

2008-07-17T16:41:00.000-07:00

The Governmental Accounting Standards Board (GASB) has issued GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. Statement 53 is intended to improve how state and local governments report information about derivative instruments—financial arrangements used by governments to manage specific risks or make investments—in their financial statements. The Statement specifically requires governments to measure most derivative instruments at fair value in their financial statements that are prepared using the economic resources measurement focus and the accrual basis of accounting.

The changes in fair value of derivative instruments that are classified as hedging derivative instruments, because they are effective as hedges of a specific risk (s), are reported in the statement of net assets as deferrals.

The changes in fair value of derivative instruments that are used for investment purposes or that are reported as investment derivative instruments, because they do not qualify as effective hedges, are reported within the investment revenue classification in the statement of resource flows.

The guidance in this Statement also addresses hedge accounting requirements and is effective for financial statements for reporting periods beginning after June 15, 2009, with earlier application encouraged.

Feedback Requested

2008-05-30T09:23:00.000-07:00

Any feedback on current accounting pronouncements or new accounting issues facing Tribes would be of great importance to me.

Some examples of the types of feedback requested (but not limited to the following) are as follows:

1. Questions about current projects on GASB's agenda.
2. Current issues or deficiencies in financial reporting that the GASB should address
3. Feedback on whether standards under development are responsive to user needs
4. Prioritization of GASB projects
5. Feedback on the understandability and cost effectiveness of new standards and other implementation issues
6. Emerging issues and developments
7. Questions about the timeliness of standards and due process of standards setting

Thanks,

Ryan
ryan@nafoa.org

GASAC Representative

2008-05-30T09:12:00.000-07:00

GASAC representatives have traditionally had two year terms. As a result, NAFOA is always on the look out for new GASAC representatives.

If you are interested in being NAFOA's GASAC representative for the upcoming year in 2009, please email me your interest at ryan@nafoa.org.

We are looking for NAFOA members who have experience working with Tribes. Characteristics from previous representatives have included individuals who have interest in the technical aspects of accounting pronouncements and who are willing to travel to GASAC meetings in Connecticut.

GASB on NAFOA's Fall Conference Agenda

2008-05-30T09:04:00.000-07:00

From the Governmental Accounting Standards Board in Connecticut, Roberta Reese will be at NAFOA's Fall Conference in Chicago to make a presentation on GASB pronouncements.

NAFOA's Conference will be held in September 3 and 4, 2008 at the Palmer House Hilton in Chicago, IL. More information on NAFOA's Fall conference can be found at www.nafoa.org.

Fund Balance Reporting

2008-05-30T08:25:00.001-07:00

The proposed statement on Fund Balance Reporting is designed to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions.

The GASB has deliberated fund balance classification and display issues for the past couple of months and has arrived at several tentative conclusions. At its August 2007 meeting the GASB agreed that governmental fund balances should be displayed in two broad components—spendable and nonspendable. The GASB also tentatively concluded that the nonspendable component would be further split into two categories representing resources that are either (a) not in spendable form (such as long-term loans receivable) or (b) are legally or contractually required to be maintained intact (such as the nonexpendable principal of a permanent fund).

Report on March 2008 GASAC Meeting

2008-05-30T08:14:00.000-07:00

The GASAC met on March 6 and 7, in the GASB offices in Norwalk, CT.

Steven Getz of the FAF provided a report that summarized the GASB funding results for 2007. FAF trustee John Radford updated the Council on recent developments and activities at the FAF, including current activities involving the nomination and selection of FAF trustees and recent FAF approved changes to structure, oversight, and operations of the FAF, FASB, and GASB. The FAF concluded that FASB and GASB set their own agenda. Mr. Radford also apprised the Council of the status of the FAF attempts to obtain a permanent funding source for the GASB and indicated that a proposal would likely be discussed at the May 2008 FAF meeting.

FAF interim Chief Operating Officer Terri Polley reported that Dan Ebersole had been appointed as the new GASAC Chairman effective January 1, 2008, and that the FAF had approved the addition of a new seat on the GASAC for the U.S. Census Bureau. Henry Wulf had been nominated as their representative and approved by the FAF.

GASAC provided feedback to the FAF specifically that permanent funding for the GASB should be sought from a variety of sources, not just state governments, and that federal funding should be considered secondarily or as a last resort.

Chairman Robert Attmore provided an update on the GASB’s work since the last GASAC meeting.

Highlights of his report included:
• Update on the issuance of the Exposure Draft on Fund Balance Reporting and Governmental Fund Type Definitions.
• Update on the status of the SEA Reporting Project and the anticipated issuance of the amended Concepts Statement 2 draft in April.
• Update on the progress made on the update of the GASB strategic plan and its website availability.
• Update on an academic research study results regarding GAAP compliance.

Bill Holder presented an update on the Derivative Instruments project and explained some of the tentative Board decisions and the rationale for those decisions. He indicated that a final Statement on derivatives was anticipated for June 2008.

David Bean, GASB director of research and technical activities, provided the GASAC with a report on the results of the GASB technical inquiries received over the past quarter. A copy of the inquiries received and a summary of the inquiries by topic were provided to GASAC members prior to the meeting. No potential new projects were identified as a result of the report and GASAC review of the inquiries.

The GASAC's feedback included the following:
• A suggestion that the summary form be amended to indicate the number of inquiries that fall into the various response categories, such as answered without interpretation, answered with interpretation, or other
• Questions asked by certain GASAC members regarding the process for identifying inquiries that are candidates for inclusion in the Comprehensive Implementation Guide.

GASAC member Bob Dacey, chair of the task force on the GASAC agenda project evaluation process, reported that the task force was tentatively considering five broad areas of criteria for individual GASAC members to consider in their evaluation of GASB projects or potential projects. The five areas include:

• Significance of the issue relative to meeting financial reporting objectives
• Pervasiveness of the issue among state and local entities
• Technical outlook and resource needs
• Convergence/alignment possibilities
• Cost/benefit.

Mr. Dacey indicated that the task force would continue to gather information and thoughts from constituent groups and be prepared to present a proposal for GASAC consideration at the next meeting.

Dean Mead, GASB research manager and liaison to the GASAC, provided an update on communications and public relations activities. Highlights of this update included:

• The availability of “plain-language articles,” including a recent one on the fund balance reporting and governmental fund type definitions project
• Encouragement of the use of GASB staff as a resource for newsletter information for GASAC member organizations
• Special recognition of the newsletters of two GASAC organizations, AGA and NASACT, for their effective use of GASB staff in developing useful information for communication to their members
• Indication that updated GASB performance results will soon be available on the GASB website.

Mr. Mead also provided GASAC members with a summary of the level of participation in the due process activities of the GASB by each GASAC member organization. He encouraged the GASAC members to share this information with their organizations and continue to encourage participation in the due process activities. There was no significant GASAC feedback on these issues.

As part of its annual discussion of project priorities, the GASAC reviewed draft prospectuses for projects that were candidates to be added to the GASB’s current agenda and draft proposals for projects that were candidates to be added to the research agenda. A written copy of each draft prospectus and proposal had been provided to GASAC members prior to the meeting.

David Bean discussed the approach to GASAC prioritization of research and potential projects. Mr. Bean and other GASB staff responded to certain GASAC inquiries regarding specific research agenda and potential projects not previously discussed. Each GASAC member was given the opportunity to discuss their own approach to determining project priorities. GASAC members were then asked to place high-, moderate-, and low-priority ratings on each of the listed projects.

The results of the prioritization from those members present indicated that the top seven
GASAC priorities were, in order of ranking:

1. Derivative Instruments Implementation Guide
2. Public/Private Partnerships
3. Reporting Unit Presentations/Statement 14 Reexamination
4. Investment Omnibus
5. Codification of Pre-November 30, 1989, FASB Pronouncements
6. Pension and Other Postemployment Benefits Accounting and Financial Reporting
7. AICPA Omnibus

GASB Research Brief: 67% to 72% of governmental entities follow GAAP

2008-04-30T21:13:00.000-07:00

State and Local Government Use of GAAP for General Purpose External Financial Reporting

How many state and local governments in the United States follow generally accepted accounting principles (GAAP) when preparing their audited financial reports? In its strategic plan for 2004–2009, the GASB committed itself to finding an answer. In 2006, the GASB contracted with researchers to conduct a study in conjunction with GASB staff of the application of GAAP by state and local governments.

The study had two parts. The first part involved a review of the laws and regulations of the 50 states to determine which states require some or all of their political subdivisions to prepare annual financial reports in conformity with GAAP. The second part of the study was a survey of governments that are not required by their states to follow GAAP.

Based on the research findings, the GASB estimates that 67 to 72 percent of the 31,221 state and local governments included in this studystate and local governmental entities included in the study follow GAAP. It also estimates that 13,594 sub-state governmental entities in the United States are required by state law or regulation to prepare GAAP financial statements, or 25.9 percent of all counties, localities, and independent school districts. This study is but a beginning of the process of establishing a comprehensive estimate of GAAP compliance among state and local governments as more than 56,000 entities were not included.

If you would like a copy of the GASB's full research brief, please email me at ryan@nafoa.org.

More on Added Agenda Items 3 - Reporting Unit Presentations/Statement 14 Reexamination

2008-04-29T13:16:00.000-07:00

Project Description: This research project has two main objectives. First, this project would consider developing requirements that could constitute generally accepted accounting principles (GAAP) for separately issued financial statements for reporting units that comprise less than a separate legal entity. That is, it would address all reporting units that are not legally separate entities, as defined in Statement No. 14, The Financial Reporting Entity. Second, this project would reexamine the requirements of Statement 14, as amended, to determine the effectiveness of the current standards, including its provisions for reporting fiduciary activities. That is, it would determine whether financial statement users, preparers, and attesters believe that reporting entities applying that standard are including all appropriate related organizations and excluding organizations that should not be included. The reexamination also would raise the question of whether the financial information of the included organizations is displayed and disclosed in the most appropriate and useful manner.

Background:

Reporting Units: Governments have issued separate statements for funds, departments, and agencies for many years and have characterized those statements as being in accordance with GAAP, even though there has never been a set of principles established for that particular reporting purpose. Government preparers and their auditors currently use professional judgment to apply existing standards to the extent they believe those standards are logical and appropriate in that reduced-scope reporting situation. The 2007 edition of the American Institute of Certified Public Accountants’ audit guide for state and local governments addresses individual fund, departmental, and agency reporting in five paragraphs (which were not cleared by the GASB).

Statement 14 Reexamination: The GASB’s strategic plan calls for a periodic reexamination of its standards. Because Statement 14 affects so many governments and because the structures and relationships of component units vary so much from government to government, many questions have arisen about Statement 14 that could be addressed during its reexamination.
Paragraph 19 of Statement 14 requires that governments include fiduciary activities (for example, employee benefit plans) as trust funds "if the primary government has a fiduciary responsibility for them," whether or not the organizations that administer them (for example, public employee retirement systems) would meet the criteria for inclusion if analyzed as potential component units. However, existing standards provide no guidance regarding characteristics that should be considered in deciding whether an employer has fiduciary responsibility, such that the employer should report a particular employee benefit plan in that way.

The GASB staff has received numerous technical inquiries as to whether an employer should report specific pension plans as pension trust funds and is aware that, in the absence of authoritative guidance, preparers and auditors have tended to interpret employer fiduciary responsibility in a variety of ways ranging from very broad or abstract, to more narrow or concrete (for example, focusing on custody of the trust assets).

More on Added Agenda Items 2 - Public/Private Partnerships

2008-04-29T13:12:00.000-07:00

Project Description: The objective of this project is to provide accounting and financial reporting guidance for public/private partnerships (PPPs). This entails determining whether existing authoritative guidance is sufficient to address the accounting and financial reporting issues resulting from PPPs, or whether new standards are necessary to address these issues.

Background: There is no single, widely-accepted definition of the term public/private partnership. However, many descriptions characterize a PPP as an arrangement between a government and a private sector entity to deliver a governmental asset (normally infrastructure or a public facility) and, often, the related public service (in some cases, the arrangement may be solely for the delivery of the public service related to an existing governmental asset). In this way, PPPs are an alternative to traditional procurement methods used by governments to accomplish a public duty or responsibility. With traditional procurement methods, most of the risks associated with the underlying project remain with the government. With a PPP, these risks generally are allocated between the government and the private sector entity. This allocation of risks to the parties involved in a PPP can be quite complex. Because of this, determining the accounting and financial reporting for the property associated with these arrangements involves the consideration of conceptual topics including control over the use of the property, the bearing of risks and rewards related to the property, and governmental accountability for infrastructure assets and the services they provide.

More on Added Agenda Items 1 - Postemployment Benefits Accounting and Financial Reporting

2008-04-29T12:54:00.000-07:00

Project Description: In this project, the Board will consider the possibility of improvements to the existing standards of accounting and financial reporting for postemployment benefits—including pension benefits and other postemployment benefits (OPEB)—by state and local governmental employers and by the trustees, administrators, or sponsors of pension or OPEB plans. One objective of this project is to improve accountability, or the transparency of financial reporting, in regard to the financial effects of employers’ commitments and actions related to pension benefits and OPEB. This objective would include improving the information provided to help financial report users assess the degree to which interperiod equity has been achieved. The other objective of this project is to improve the usefulness of information for decisions or judgments of relevance to the various users of the general-purpose external financial reports of governmental employers and pension or OPEB plans.

Background: This project follows a research project approved by the Board in January 2006 to gather information regarding how effective the standards established for pension accounting and financial reporting—Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and Statement No. 27, Accounting for Pensions by State and Local Governmental Employers—have been in improving accountability and providing decision-useful information. The research project was conducted, in part, as a result of the Board’s commitment to periodically reexamine its standards. The research project provided an opportunity to review how state and local governments and pension plans applied the requirements of Statements 25 and 27 and how financial reporting reflected the transactions and events affecting pensions from the issuance of those standards in 1996.

News from GASB

2008-04-24T08:42:00.000-07:00

Norwalk, CT, April 24, 2008—At its meeting last week, the Governmental Accounting Standards Board (GASB) added three projects to its current agenda—a review of existing postemployment benefits standards, public/private partnerships, and a reexamination of GASB Statement No. 14, The Financial Reporting Entity, including consideration of establishing reporting standards for government departments, agencies, and other units smaller than a complete reporting entity. The additions were announced by GASB Chairman Robert Attmore following discussion among GASB members at the public Board meeting last week.

The added agenda items are as follows:

1 Under the Postemployment Benefits Accounting and Financial Reporting project, the GASB will assess the effectiveness of its existing standards for accounting and financial reporting for postemployment benefits—focusing on a review of existing pension standards in 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 —and consider whether improvements need to be made.

2 Through the Public/Private Partnerships project, the Board will explore whether existing authoritative guidance is sufficient to address the accounting and financial reporting issues resulting from public/private partnership arrangements—such as contracting with private companies to operate or build toll roads or other major infrastructure assets—or if new standards are needed.

3 The Reporting Unit Presentations/Statement 14 Reexamination project has two main objectives. First, the GASB will consider developing generally accepted accounting principles (GAAP) for separately issued financial statements of reporting units that comprise less than a separate legal entity as defined in Statement 14. Second, the GASB will reexamine the requirements of Statement 14, as amended, to determine its effectiveness and to consider whether improvements are needed.

“While it is not common for three projects to be added to the current agenda at once, the GASB staff’s extensive research on these three major projects concluded at approximately the same time. The schedule also allowed the Governmental Accounting Standards Advisory Council to provide timely input on project priorities before this action was taken,” said GASB Chairman Robert Attmore. “I am confident that these important projects will result in users of financial reports having access to better information, which will allow them to make better informed decisions about the entities they are evaluating.”

In addition, the GASB will be addressing three new practice issues:

1 The AICPA Omnibus project will incorporate accounting and financial reporting standards currently found in the AICPA Statements on Auditing Standards into the GASB’s literature, including the GAAP hierarchy.

2 The ARC Adjustment project will consider providing guidance that would allow the annual required contribution (ARC) adjustment to be based on actual amounts associated with the amortization of past contribution deficiencies or excesses.

3 The Derivative Instruments Implementation Guide project will provide assistance to practitioners in applying the forthcoming derivative instruments standard.

Research also will begin in two areas:

1 Identifying provisions in Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the AICPA, issued on or before November 30, 1989, that do not conflict with or contradict GASB pronouncements, for possible codification into the GASB literature

2 Further development of the definition of fair value, the methods used to measure fair value, and potential disclosures about fair value measurements.

Next GASAC Meeting - July 2008

2008-04-17T12:14:00.000-07:00

Dear Members:

The next meeting of the GASAC will be in Kansas City, MO, in conjunction with the Annual Conference & Exposition of the National Association of Counties (NACo). The following is the schedule of GASB and GASAC events:

July 14—beginning at 9 am—GASB public hearing on the Exposure Draft, Fund Balance Reporting and Governmental Fund Type Definitions (GASAC members are encouraged to consider testifying on behalf of their organizations or on their own)

July 15—8:30 to 9:45 am (tentative)—GASB Question-and-Answer Session

July 15—1 to 6 pm—GASAC Meeting

July 16—7:30 to 8:30 am—Executive Committee Meeting

July 16—8:30 am to 2:30 pm—GASAC Meeting

If you have any questions, please email me.

Thank you,

Ryan Claw, GASAC representative

New Site for GASB Information from NAFOA

2008-04-08T11:49:00.000-07:00

Dear NAFOA members:

This site is intended to provide information from NAFOA's GASAC representative, Ryan Claw. Additionally, it is intended to receive feedback from NAFOA members on upcoming GASB pronouncements and research activities.

As you recall, the Governmental Accounting Standards Advisory Council (GASAC) meets 3 times a year. Discussions at these meetings address upcoming accounting pronouncements and research agenda items for GASB. Some of these research agenda items become new accounting pronouncements.

It is important that NAFOA report any received feedback on how these new accounting pronouncments have or will impact Native tribes. Your comments are appreciated.

Thank you,

Ryan Claw
NAFOA GASAC Representative
ryan@nafoa.org