GASB Update: NSBA session on Governmental Accounting Standards Board

"I always like it when I get in front of a group because everyone gets to the front of their chairs in excitement"
not accounting 101, but give you some things to look for in your finances
(he's got some helpful slides here, which I'll add later)
Governmental Accounting Standards Board gets authority for the fifty states, who came together to say that they'd like a single set of rules of procedure
GASB follows the due process activities described in Rules of Procedure
due process is subject to oversight by Board of Trustees
"designed to encourage broad public participation by: financial statement preparers, users, and auditors"
Board meets every six weeks for a two and a half day period
open to public and broadcast live on their website
individual types of governments also represented within the discussions
based on research results and input from board and stakeholders, Board votes on adding a project to current technical agenda
issues due process documents
stakeholder input leads to vote; sometimes post-decision reconsiderations
"important to get the policy and decision-makers to the table"
research provides an opportunity to be involved; surveys, task force members
"only ideas that are off the table with us are the ones that aren't shared"

Pensions and OPEB
GASB statements 67 & 65 on pensions
guidance issued in 2012 plans for ending June 2014 and later ; for employers ending in June 2015 and later
GASB statements 74 &75 on OPEB
guidance issued in 2015: plans for ending June 2017 and later; for employers ending in June 2018

much attention is gathered right now around funding status of pension plans
on OPEB side, plans are generally not funded at all; "they're generally pay as you go"
could exceed pension liability
doesn't matter how you pay your OPEB requirements
view cost within the context of an ongoing, career-long employment decision
uses accounting-based versus funding-based approach to measure net pension liabilities
"funding decisions are a policy decision you will be making"
requires communication and coordination efforts between the plan, employers, actuary, and auditor

Changes: net pension and/or net OPEB liability will appear on face of financial statements
it was always there, now on front
"the issue is that people weren't paying enough attention" to the need
"you're going to end up realizing a net liability" regardless of what kind of plan you have
discounting limited, only one actuarial value, asset smoothing eliminated, amortization eliminated for most changes and greatly shortened in others (no longer using 30 years on health insurance), more disclosure on health insurance
much more extensive required supplemental schedules
"the economics haven't changed" but the reporting has changed
"have a chance to look at both the benefit side and the contribution side"
"make sure that when your employees leave service that you can actually meet the payments that you've promised them"

Q (comment, maybe?) from actuary who doesn't know where we're going to go with all of this, given assets
Q: state comptroller tells us what the contribution is that has to be made, then number on a sheet for people to complain about
"I don't know what we can do about it, and I spend my time at meetings talking about this rather than the children"
"we're in a period of very low interest rates, and unless that changes dramatically, it's not clear where we're going to go"

efforts to support implementation: two pension implementation guides on their website
"plain English, plain language: you don't have to be an actuary, you don't have to be an accountant"

external investment pools: revised accounting and financial reporting standards for 2a7-like investment pools
had issued rules parallel to SEC rules, but those were updated in a way making it difficult for external investment pools to meet criteria for reporting
dollar for dollar amortized cost
GASB Statement December 2015: effective June 2016 FY and later
"allows you continue to elect to use amortized costs as long as you meet the criteria in the new statement"

tax abatement disclosures: Statement 77 approved August 2015
information about the revenues governments forgo is "essential to financial statement users"
effective for financial statements for periods ending December 2016 and later
Q: would that apply to TIF's?
Doesn't matter what you call it; if it meets the definition of a tax abatement, it needs to be reported

fifteen year review of financial reporting standards: now being reviewed
due process document on document expected by end of 2016
project expected to extend into 2020/21
currently a top priority for GASB; started with two years of stakeholder research then input via roundtable, surveys, interviews, presented findings to Board in 2015
places to improve:

• governmental fund financial statements: modified accrual basis of accounting: how to adjust?
• as of statement 34, government-wide financial statements now exists. Time to look at those? would a cash flow statement be useful? 
• debt service funds don't have enough activity to be presented separately; should there be a disclosure?
• management's discussion and analysis (MD & A): eliminate duplication; talks about changes, but doesn't talk about WHY

proposed statements: 

fiduciary activities:holding trusts for others (think student activity funds)

no definition of fidicuary activity

public hearing on it April 21 in Chicago

Proposal: 

• Gov't controls asset of activity
• not derived solely from gov't source revenue AND
• certain other conditions apply: asset being used for benefit of org or another gov't that are neither part of financial reporting entity OR recipients of gov't's goods or services

Leases: proposal in Feb 2016, comment through May 31

"right to use asset"

Pre-agenda research (might become a project, might not)

• debt disclosure: (more bank borrowing rather than bonding...how to disclose? be sure to disclose fully?)
• going concern: very difficult to apply in government: experiencing several financial stress; are there indicators? What disclosures are necessary? indicators that don't give false positives or false negatives
• revenue recognition