slide 1 appa business and financial spring meeting april 20, 2007 gasb update the views expressed in...
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Slide 1
APPA Business and Financial APPA Business and Financial Spring MeetingSpring Meeting
April 20, 2007April 20, 2007
GASB UpdateThe views expressed in this presentation are those of Mr. Galloway. Official positions of the GASB are determined only after extensive due process and deliberation.
Slide 3
Effective Dates
Periods beginning after Dec. 15, 2005– Statement 43, OPEB Plan reporting—
Phase I
Periods beginning after June 15, 2006– Statement 34 (Retroactive Infrastructure—
Phase II Governments)
Slide 4
Effective Dates
Periods beginning after Dec. 15, 2006– Statement 43, OPEB Plan reporting—Phase II– Statement 45, OPEB Employer reporting—Phase I
(& any termination benefits)– Statement 48, Sales and Pledges of Receivables
and Future Revenues and Intra-Entity Transfers of Assets and Future Revenue
Slide 5
Effective Dates
Periods beginning after Dec. 15, 2007– Statement 43, OPEB Plan reporting—Phase III– Statement 45, OPEB Employer reporting—Phase
II– Statement 49, Accounting and Financial
Reporting for Pollution Remediation Obligations. (Measurement required at beginning of period!)
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Statement 43 (for Plans)
Subject: reporting on steward-ship of plan assets by (a) a trustee or plan administrator that is a governmental entity (stand-alone plan reporting) or (b) an employer or plan sponsor with a fiduciary responsibility for the plan assets that includes the plan as a trust or agency fund in its own financial reportIncludes provisions for reporting of (a) plans administered as trusts and (b) multiple-employer plans that are not administered as trusts
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Statement 45 (for Employers) Primary Focus Today
Accounting and reporting by employers for their OPEB expenses and obligationsApplies to all employers that provide OPEB (that is, the employer pays all or part of the cost of the benefits, including implicit rate subsidies)Requires accrual-basis accounting for expenseRequires measurement and disclosure of actuarial accrued liabilities and funded status (UAAL)
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OPEB Myths
GASB has “created” the liabilityGASB is causing OPEB cutbacksStatement 45 requires plan fundingEnormous liabilities will be recognizedFund balances will take a big hit
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Some Implementation PlanningConsiderations
Measure(Find Out the Financial Implications of Your Government’s OPEB Commitments) – Schedule and make arrangements for an actuarial
valuation.– Prepare for the valuation.– Absorb the information developed by the valuation.
Overcome initial shock by taking a few deep breaths. Calmly engage analytical faculties.
Accrual-Basis Illustration(Year 2 of Applying Statement 45)
Normal cost (current service cost) $ 350,000Amortization of the UAAL (for past periods) 600,000
Annual required contribution (ARC) 950,000
Interest on beginning net OPEB obligation 50,000ARC adjustment (58,500)
Annual OPEB cost = expense 941,500
Actual employer contribution (PAYG method of financing) (250,000)
Increase in net OPEB obligation 691,500
Net OPEB obligation—beginning 650,000Net OPEB obligation—ending 1,341,500
Slide 12
Additional Guidance:OPEB Implementation Guide
A GASB staff document, issued in July 2005, created primarily to provide guidance (classified as level D GAAP) to preparers and auditors on the implementation of the Statements
Includes:– 258 questions and answers (212 on
Statement 45 and 46 on Statement 43)
– Standards sections, glossaries, and illustrations from the Statements
– Additional illustrations related to the
alternative measurement method
For ordering information, see the GASB website, www.gasb.org
Slide 13
Due Process Documents
Derivatives
Intangibles
Pension disclosures
Fund balance and fund definitions
Land and other real estate
Slide 15
Definition
An intangible asset as an asset that possesses all of the following characteristics:– Lack of physical substance – Nonfinancial nature– Initial useful life extending beyond a
single reporting period.
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Types of Intangibles
Computer software– Purchased– Internally developed
Right-of-ways
Easements
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Basic Guidance
All intangible assets should be classified as capital assets, and all existing authoritative guidance related to capital assets should be applied to these intangible assets.
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Internally GeneratedOutlays incurred related to an internally generated intangible asset that is considered identifiable should be capitalized only upon the occurrence of all of the following:– Determination that an objective for the project is to create a specific
internally generated intangible asset;– Determination of the nature of the service capacity that is expected
to be provided by the asset upon its completion;– Demonstration of the technical or technological feasibility for
completing the project so that the asset will provide its expected service capacity;
– Demonstration of the current intention, ability, and presence of effort to complete or, in the case of a multiyear project, continue development of the intangible asset.
Slide 19
Project Timetable
December 2006—Exposure draft
Comment Deadline—March 23, 2007
Public hearings—April
Final statement—June?
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Pension Disclosures
Goal is to conform the pension disclosures with the OPEB disclosuresNotes to financial statements would disclose the funded status of the plan as of the most recent actuarial valuation date. – Defined benefit pension plans also would disclose
actuarial methods and significant assumptions used in the most recent actuarial valuation in notes to financial statements instead of in notes to RSI.
Slide 22
Project Timetable
Exposure Draft release in December 2006
Comment Deadline was February 28
Final statement expected by June
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Land and Other Real Estate
Statement 31, paragraph 2– Historical costs is the default for reporting
investments
Land and real estate next step– Fair value—limited to endowments and permanent
funds (not quasi-endowments)
Investment Omnibus—a more comprehensive look at the “left behind” investments—after derivatives is completed
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Other Current Projects
Concepts Statements– Elements of Financial Statements
• Final—June 2007
– Recognition and Measurement Attributes• Deliberations to begin later this year
Intergovernmental Financial Dependency Risk
Service Efforts and Accomplishments Reporting– Concepts 2 update– Guidelines—due process document
Slide 25
SEA
What the project is:– Focus on reporting– Focus on guidelines– Focus on clarifying GASB’s role
What the project is not:– Establishing performance measures– Establishing performance benchmarks– Establishing reporting standards
Slide 27
Research Agenda
Economic Condition Reporting
Electronic Financial Reporting
Pension Accounting and Reporting
Public and Private Partnerships
Reporting Units/Statement 14 Revisited
Slide 28
Calling All Issues
Agenda is full; however, emerging issues still need to be addressed
If you have identified that warrants the GASB’s attention, please submit that issue via email to [email protected]
Agenda reviewed three times a year the GASB