Im plem entation of New G ASB Standards Government Finance Officers Association of Louisiana 2009 Fal Conference October 8, 2009
Today s Discussion Accountants: FAF GASB FASB Auditors: AICPA GAO Impact on preparers and auditors Use of GASB Comprehensive Implementation Guide
Current GASB Implementation Issues Current Statement Challenges Statement No. 31 Accounting and Financial Reporting for Certain Investments and for External Investment Pools Statement No. 33 Accounting and Financial Reporting for Nonexchange Transactions Statement No. 34 Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments Statement No. 40 Deposit and Investment Risk Disclosures an amendment of GASB Statement No. 3 Statement No. 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions Statement No. 46 Net Assets Restricted by Enabling Legislation an amendment of GASB Statement No. 34
G ASB Statem ent No. 31 Statement No. 31–Accounting and Financial Reporting for Certain Investments and for External Investment Pools Governmental entities, including governmental external investment pools, should report investments at fair value in the balance sheet (or other statement of financial position). Fair value is the amount at which a financial instrument could be exchanged in a current transaction between wil ing parties, other than in a forced or liquidation sale.
G ASB Statem ent No. 33 Statement No. 33– Accounting and Financial Reporting for Nonexchange Transactions Statement establishes accounting and financial reporting standards for nonexchange transactions involving financial or capital resources (for example, most taxes, grants, and private donations). In a nonexchange transaction, a government gives (or receives) value without directly receiving (or giving) equal value in return. This is different from an exchange transaction, in which each party receives and gives up essential y equal values. The principal issue addressed in this Statement is the timing of recognition of nonexchange transactions that is, when should governments recognize them in the financial statements
G ASB Statem ent No. 34 Statement No. 34–Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments Statement establishes new financial reporting requirements for state and local governments throughout the United States. When implemented, it wil create new information and wil restructure much of the information that governments have presented in the past. We developed these new requirements to make annual reports more comprehensive and easier to understand and use.
G ASB Statem ent No. 40 Statement No. 40–Deposit and Investment Risk Disclosures an amendment of GASB Statement No. 3 This Statement addresses common deposit and investment risks related to credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. As an element of interest rate risk, this Statement requires certain disclosures of investments that have fair values that are highly sensitive to changes in interest rates. Deposit and investment policies related to the risks identified in this Statement also should be disclosed.
G ASB Statem ent No. 45 Statement No. 45–Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions State and local governmental employers provide other postemployment benefits (OPEB) as part of the total compensation offered to attract and retain the services of qualified employees. OPEB includes postemployment healthcare, as wel as other forms of postemployment benefits (for example, life insurance) when provided separately from a pension plan. This Statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers.
G ASB Statem ent No. 46 Statement 46–Net Assets Restricted by Enabling Legislation an amendment of GASB Statement No. 34 Requires that limitations on the use of net assets imposed by enabling legislation be reported as restricted net assets. In the process of applying this provision, some governments have had difficulty interpreting the requirement that those restrictions be legal y enforceable. The confusion over this phrase has resulted in a diversity of practice that has diminished comparability.
FY2009 GASB Statements Statement No. 49 Accounting and Financial Reporting for Pol ution Remediation Obligations Statement No. 52 Land and Other Real Estate Held as Investments byEndowments Statement No. 55 The Hierarchy of General y Accepted Accounting Principles for State and Local Governments Statement No. 56 Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards
G ASB Statem ent No. 49 Statement No. 49–Accounting and Financial Reporting for Pollution Remediation Obligations Statement addresses accounting and financial reporting standards for pol ution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pol ution remediation activities such as site assessments and cleanups. The scope of the document excludes pol ution prevention or control obligations with respect to current operations, and future pol ution remediation activities that are required upon retirement of an asset, such as landfil closure and postclosure care.
G ASB Statem ent No. 49 Implementation Challenges Identification of active remediation projects Once one of five specified obligating events occurs, a government is required to estimate components of outlays Calculation of beginning and ending balances for the pol ution remediation obligations When to capitalize Level of disclosure Retroactive implementation required Dealing with recoveries
G ASB Statem ent No. 55 Hierarchy of Generally Accepted Accounting Principles for State and Local Governments GASB Statements and Interpretations. AICPA and FASB pronouncements applicable to state and local governmental entities by GASB. GASB Technical Bulletins. AICPA Industry Audit and Accounting Guides and AICPA Statements of Position applicable to state and local governments. AICPA Practice Bulletins applicable to state and local governmental entities. Implementation Guides (Q&A’s) published by the GASB staff. Also, practices widely recognized and prevalent in state and local government. Other accounting literature, including GASB Concepts Statements and AICPA and FASB pronouncements when not specifically made applicable to state and local governmental entities.
G ASB Statem ent No. 56 Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards Related party transactions Going concern considerations Subsequent events
FY2010 G ASB Statem ents Statement No. 51 Accounting and Financial Reporting for Intangible Assets Statement No. 53 Accounting and Financial Reporting for Derivative Instruments
G ASB Statem ent No. 51 Statement No. 51–Accounting and Financial Reporting for Intangible Assets Implementation Challenges Identifying intangible assets, which include easements, water rights, timber rights, patents, trademarks, and computer software Establishing capitalization thresholds for different classes of intangibles Retroactive application Specific rules established for the capitalization of internal y generated computer software
G ASB Statem ent No. 53 Statement No. 53– Accounting and Financial Reporting for Derivative Instruments Complex standard wil impact state and local government entities that have invested in derivative instruments or have issued bonds imbedded with derivative instruments GASB issued separate Implementation Guide Important distinctions in reporting relate to the effectiveness of hedged transactions Retroactive statements that wil require restatement
FY2011 G ASB Statem ents Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions
G ASB Statem ent No. 54 Statement No. 54–Fund Balance Reporting and Governmental Fund Type Definitions Statement wil impact any agency with governmental funds Establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds Fund balance is initial y separated between: Nonspendable fund balance Not in spendable form (inventory) Legal y or contractual y required to be maintained Spendable fund balance Such as cash, investments, receivables Classified further into restricted, limited, assigned, and unassigned fund balances
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