Marcy Twyman, Managing Shareholder Crawford & Associates, P.C.
Well, the GASB has been busy at work since the last blog. And so have I. Here’s a summary of the new standards, listed by date of required implementation. And early implementation is encouraged for these new standards. So you don’t have to wait to implement these, for those eager beavers out there.
For periods beginning after June 15, 2015:
GASB Statement No. 79, Certain External Investment Pools and Pool Participants – This is one standard that has multiple implementation dates. Certain sections (paragraphs 18, 19, 23-26, and 40) have a later implementation date for periods beginning after December 15, 2016. This standard establishes criteria for an external investment pool to qualify to making the election to measure all of its investments at amortized cost for financial reporting purposes. Certain criteria have to be met in order to qualify for this type of reporting. The criteria addresses 1) how the external investment pool transacts with participants; 2) requirements for portfolio maturity, quality, diversification, and liquidity, and 3) calculation and requirements of a shadow price.
And if an external investment pool meets the criteria in this Statement and measure all its investments at amortized cost for financial reporting purposes, the pool’s participants should also measure their investments in that external investment pool at amortized cost for financial reporting purposes.
For periods beginning after December 15, 2016:
GASB Statement No. 77, Tax Abatement Disclosures – Many governments offer tax abatements, particularly to encourage economic development. When a government has an agreement between itself and an individual or entity where the government agrees to forgo tax revenues and the individual or entity promises to subsequently take specific action that contributes to economic development or otherwise benefits the government or its citizens, there will now be certain disclosure requirements to tell about these tax abatements. This is one standard that doesn’t require additional accounting –only disclosures.
GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans – This statement limits the scope and applicability of Statement 68. This standard will apply in a case where pensions are provided to employees of state or local governmental employers in a cost-sharing multiple-employer defined benefit pension plan that meets these 3 points:
1. Not a state or local governmental pension plan;
2. Provides defined benefit pensions both to employees of state or local governmental employers AND to employees of employers that are NOT state or local governmental employers, AND
3. Has no predominant state or local governmental employer (either individually or collectively with other state or local governmental employers that provide pensions through the pension plan)
For periods beginning after June 15, 2016:
GASB Statement No. 80, Blending Requirements for Certain Component Units—An Amendment of GASB Statement No. 14 – This Statement amends Statement No. 14, The Financial Reporting Entity, as amended, to require blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. However, the additional criterion does not apply to component units included in the financial reporting entity pursuant to the provisions of Statement No. 39, Determining Whether Certain Organizations Are Component Units.
GASB Statement No. 82, Pension Issues—an amendment of GASB Statements No. 67, No. 68, and No. 73 – You may wonder what happened to Standard No. 81. Did they void one? No, the implementation date is just later, perhaps because additional time is needed to implement that one. Also, this statement is another one with multiple implementation dates. All but paragraph 7 are required to be implemented for periods beginning after June 15, 2016.
Paragraph 7 requirements are effective for the employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. Paragraph 7 relates to the selection of assumptions.
But this standard was written to address certain items in the new pension standards that needed “tweaking”. The “tweaked” items relate to:
1) Presentation of payroll-related measures in required supplementary information--In Statements 67 and 68, it required presentation of covered-employee payroll, which was the gross payroll of employees provided with pensions. This Statement amends that to define covered payroll as the payroll on which contributions to the pension plan are based, and applies that to ratios that use that measure.
2) Selection of assumptions and treatment of deviations from guidance in an Actuarial Standard of Practice for financial reporting purposes – the statement clarifies that a deviation (as that term is defined in Actuarial Standards of Practice issued by the Actuarial Standards Board), from the guidance in an ASOP is not considered to be in conformity with the requirements of Statement 67, Statement 68, or Statement 73 for the selection of assumptions used in determining the total pension liability and related measures.
3) Classification of payments made by employers to satisfy employee (plan member) contribution requirements – Clarification was made to note that payments made by an employer to satisfy contribution requirements identified as plan member contribution requirements should be classified as plan member contributions for purposes of Statement 67 and as employee contributinos for purposes of Statement 68. It also requires that an employer’s expense and expenditures for those amounts be recognized in the period for which the contribution is assessed and classified in the same manner as the employer classifies similar compensation other than pensions (for example, as salaries and wages or as fringe benefits).
For periods beginning after December 15, 2016:
GASB Statement No. 81, Irrevocable Split-Interest Agreements – Split-interest agreements are a type of giving agreement used by donors to provide resources to two or more beneficiaries, including governments. In these types of agreements, a donor transfers resources to an intermediary to hold and administer for the benefit of a government and at least one other beneficiary. Examples include charitable lead trusts, charitable remainder trusts, and life-interests in real estate.
The Statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. It also requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. The government would recognize revenue when the resources become applicable to the reporting period.
Until next time….Thunder Up!