upcoming gasb changes
DESCRIPTION
Upcoming GASB Changes. Presented by Darla Iverson Glenna Musselman Chief Financial Officer Senior Accountant. July 25, 2013. GASB stands for… G overnmental A ccounting S tandards B oard - PowerPoint PPT PresentationTRANSCRIPT
Upcoming GASB Changes
1
Presented by
Darla Iverson Glenna MusselmanChief Financial Officer Senior Accountant
July 25, 2013
What Is GASB?
2
GASB stands for…GovernmentalAccountingStandards Board
To learn more about GASB, go to the GASB website at www.gasb.org.
New Accounting Standards
• Two new GASB statements
– Statement No. 67 applies to the PLAN.
• IPERS’ fiscal year 2014 – Statement No. 68 applies to EMPLOYERS
who utilize GAAP reporting.
• The fiscal year that begins after 6/15/2014
3
Breaking the Link
• Currently actuarial valuation numbers used for accounting and funding purposes.
• Funding measures still valid and essential but no longer reported in financial reports.
• The new standards change the way public pension obligations are reported in financial reports.
• Accounting and funding are no longer linked.
4
Financial Numbers
Total pension liability (TPL): actuarial present value of projected benefit payments allocated during past periods of employee service.
Net pension liability (NPL): TPL minus market value of assets.
Pension expense (PE): the difference between the NPL from the prior fiscal year to the current fiscal year, with some adjustments.
5
Total Pension Liability
What is total pension liability?Similar to actuarial accrued liability in the valuation, but may use a different discount rate.
What will IPERS do with this number?It will be disclosed in our CAFR and Required Supplementary Information (RSI).
6
Discount RateDiscount rate
The actuarial assumed investment return, set by the Investment Board, is currently used for both accounting and funding purposes.
Blended rateThis is a new discount rate for financial reporting used when the projected net assets are NOT sufficient to cover projected benefit payments.It is a blended rate using the actuarial assumed investment return and a 20-year municipal bond index rate.
7
What is net pension liability?TPL minus market value of IPERS’ assets = NPL
What will IPERS do with this number?This will be apportioned among the employers and reported on their financial statements.
Net Pension Liability
8
Pension Expense
What is pension expense?The difference in NPL from the previous year to the current year, with some adjustments the calculations will take into account.
What is done with this number? This will be apportioned among the employers and reported on their financial statements.
9
Employer Allocation
• IPERS is a multiple-employer, cost-sharing pension plan.
• There are over 2,100 participating employers. • Under the new standards, each employer utilizing
GAAP reporting will record their share of the net pension liability and pension expense based on their proportion of contributions paid to IPERS.
10
Proportionate Shares
11
Employer AEmployer BEmployer CEmployer DEmployer E
$170$240
Collective NPL = $1,000This example shows
how the collective NPL and PE are apportioned among the employers
based on the percentage of
contributions made by each employer
compared to total contributions.
$330$140
$120
Employers’ Responsibilities
• Employers will have to recognize their share of the net pension liability (NPL).
• And a new measure of the pension expense (PE) on their financial statements.
12
This is NEW and IMPORTANT:
Employers’ Responsibilities
Additional notes and disclosures will be required.
Some of the new Notes include:– Expanded pension plan description– Information about employer’s
proportionate share of NPL
13
Employers’ Responsibilities
RSI and Notes to RSI• 10-year schedules
– Employer’s proportionate share of NPL – Contributions paid compared to
contributions required– Information about significant
changes/trends– Build schedules prospectively
14
What This Means…• A pension liability on the employer’s
financial statements.– Current standards require pension liability only
if contractual contributions not paid.
• A pension expense different from the current expense of contributions paid.
Contributions are determined by actuarial methods, not accounting standards.
15
Education & Outreach
For employers– The Latest Word newsletter– Reporting officials training– Office of Auditor of State – Presentation to the School Administrators of
Iowa (SAI) - Aug. 7 and Aug. 14– Presentation to the Iowa Association of School
Board Officials (IASBO) – Sept. 26
16
Questions?
• If you have questions about this presentation, please send them to:[email protected]
• We will do our best to provide you with the information you need.
17
Stay Tuned!
Additional online resources– GASB: www.gasb.org – NIRS: www.NIRSonline.org – GFOA: www.GFOA.org – Gabriel Roeder Smith & Company:
www.gabrielroeder.com– Cavanaugh Macdonald Consulting:
www.CavMacConsulting.com
18