April 22, 2014
The Governmental Accounting Standards Board (GASB) has recently released several documents that may impact state budget offices. The information deals with such issues as pension reporting, the measurement of assets and liabilities, and GASB’s scope of authority. (GASB is an independent organization that establishes and strives to improve standards of accounting and financial reporting for state and local governments.)
Statement on Accounting and Financial Reporting for Pensions
On January 30, GASB published an implementation guide for GASB Statement 68 on Accounting and Financial Reporting for Pensions. The guide is designed to help state and local governments implement the reporting changes outlined in the statement, which is effective June 15, 2014. Topics addressed in the guide include:
- The scope and applicability of the statement
- Considerations regarding the identification of special funding situations
- Measurement of defined pension liabilities, note disclosures and required supplementary information
- Issues related to cost-sharing employers
- Transition to the new standards
Also related to Statement 68, on March 11, GASB released an online pension implementation toolkit that is designed to help preparers, auditors, and users of state and local government financial reports understand and apply the revised pension accounting and financial reporting standards. Finally, on March 24, GASB voted not to delay the implementation of GASB Statement 68. A number of state and local stakeholder groups had argued that a delay was necessary until related auditing procedures had been implemented for a sufficient period. In a statement, GASB Chairman David A. Vaudt said, “The Board agreed that the issues raised by its stakeholders warranted thoughtful consideration. In response, we undertook a significant effort to gather meaningful input as quickly as possible in order to address these concerns on a timely basis.” He added, “However, the Board does not believe that delaying implementation will benefit its stakeholders in general.”
Statement on the Measurement of Assets and Liabilities
On April 14, GASB issued Concepts Statement 6, the Measurement of Elements of Financial Statements. The statement is intended to guide GASB in establishing accounting and financial reporting standards for state and local governments regarding the measurement of assets and liabilities. The statement establishes two approaches to measuring assets and liabilities:
- Initial amounts, which are determined at the time an asset is acquired or a liability is incurred
- Remeasured amounts, which are determined as of the date of each year’s financial statements.
Statement 6 also establishes four measurement attributes: historical cost, fair value, replacement cost, and settlement amount.
GASB’s Scope of Authority
Last year, on November 19, the Financial Accounting Foundation (FAF), which oversees GASB, adopted a new policy that clarifies the characteristics of the information GASB may incorporate into its concepts, standards and guidance that it issues for state and local governments. Under the new policy, GASB will classify government financial information into one of three categories:
- Information that is clearly within its standard setting authority
- Information that is clearly outside its standard setting authority
- Information that meets at least one of the objectives of governmental financial accounting
If the government financial information falls into the last category, and GASB believes the activities are within its scope, GASB will consult with the FAF oversight committee. This consultation would occur in the pre-agenda phase. State and local associations, including NASBO, were very supportive of this change due to strong concerns that GASB was entering into policy areas beyond accounting standards.