GASB DEVELOPMENTS

1
GASB DEVELOPMENTS

• GASB 34
• Update
• GASB 41
• Budgetary Comparison Schedules Perspective
  Differences
• Statement No. 40
• Deposit and Investment Risk Disclosures
• Statement No. 39
• Determining Whether Certain Organizations Are
  Component Units

2
GASB DEVELOPMENTS (contd)

• Technical Bulletin
• Disclosure Requirements for Derivatives Not
  Presented at Fair Value on the Statement of Net
  Assets
• Exposure Draft
• Accounting and Financial Reporting by Employers
  for Post-Employment Benefits Other Than Pension
  (OPEB)
• Exposure Draft
• Impairment of Capital Assets

3
Statement No. 41, Budgetary Comparison Schedules
Perspective Differences

• Purpose
• amendment to Statement 34, clarifies the
  budgetary presentation requirements for
  governments.
• Issue
• presenting budgetary comparisons when
  perspective differences exist.
• Perspective differences exist when the structure
  of the financial information for budgetary
  purposes differs from the fund structure defined
  in Statement 34.

4
Statement No. 41, Budgetary Comparison Schedules
Perspective Differences

• Governments with perspective differences are
  required to present budgetary comparison
  schedules as required supplementary information
  based on the structure used for its legally
  adopted budget.
• Statement requirements should be implemented with
  Statement 34. If Statement 34 implemented prior
  to this Statement, requirements are effective for
  periods beginning after June 15, 2002.
• Statement requirements apply only to legally
  adopted budgets.

5
Statement No. 40, Deposit and Investment Risk
Disclosures

• Purpose
• Inform financial statement users about deposit
  and investment risk that could affect a
  governments ability to provide services and meet
  obligations.
• Issue
• State and local governments are exposed to
  risks that could result in
• losses.
• Establishes and modifies disclosure requirements
  related to investment risk credit risk, interest
  rate risk, and foreign currency risk.

6
Statement No. 40, Deposit and Investment Risk
Disclosures

• Governments should disclose policies related to
  the following deposit or investment risk
• Credit Risk
• Concentration of Credit Risk
• Interest Rate Risk
• Disclose credit quality rating of investments in
  debt securities
• Obligations of the U.S. Government or guaranteed
  by the U.S. Government are not considered to have
  credit risk and no disclosure is required.
• Credit quality ratings of external investment
  pools is required.
• Disclose by amount and issuer, investments in any
  one issuer that represent 5 or more of total
  investments.

7
Statement No. 40, Deposit and Investment Risk
Disclosures

• Disclose interest rate risk
• A government is required to disclose information
  about the interest rate sensitivity of their debt
  investments.
• Interest rate sensitivity is disclosed by
  communicating either investment maturities or
  information developed about portfolio volatility
  under different scenarios.
• Effective for periods beginning after June 15,
  2004.

8
Statement No. 39, Determining Whether Certain
Organizations Are Component Units

• Purpose
• Provides criteria for determining whether certain
  organizations should be reported as component
  units based on the nature and significance of
  their relationship with the primary government.
• Issue
• Inconsistencies in applying GASB 14, The
  Financial Reporting Entity

9
Statement No. 39, Determining Whether Certain
Organizations Are Component Units

• A legally separate, tax-exempt organization
  should be reported as a component unit if all of
  the following are met
• The economic resources are entirely or almost
  entirely for the direct benefit of the primary
  government, its component units or its
  constituents.
• The primary government, or its component units is
  entitled to or is able to assess a majority of
  the economic resources.
• The economic resources are significant to the
  primary government.
• Requirements are effective for periods beginning
  after June 15, 2003.

10
GASB Exposure Draft, Accounting and Financial
Reporting by Employers for Post-Employment
Benefits Other Than Pension (OPEB)

• In the public sector, post-employment benefits
  are usually financed on a pay-as-go basis.
• Proposed requirements will require an accrual
  basis of accounting for post-employment benefits.
• The exposure draft requires that the expected
  cost of post-employment benefits for all
  participants be projected into the future, then
  discounted back to the measurement date.

11
GASB Exposure Draft, Accounting and Financial
Reporting by Employers for Post-Employment
Benefits Other Than Pension (OPEB)

• An actuarial valuation will be required. Smaller
  plans will be exempt from valuation requirement.
• Annual OPEB cost would be equal to the employers
  annual required contribution to the plan
  determined by the actuarial valuation.
• An OPEB obligation would be required to be
  reported if there is a difference between
  required contributions and actual contributions.
• Governmental organizations would be required to
  disclose information on each defined OPEB plan in
  which they participate.
• Implementation occurs in three phases based on
  total revenues in the first fiscal year ending
  after June 15, 2003.

12
Exposure Draft Impairment of Capital Assets

• Impairment
• A significant, unexpected decline in the service
  utility of a capital asset.
• Service Utility
• The usable capacity expected to be used to
  provide service.
• No evaluation of future recoverability included
  in evaluation of impairment.

13
Exposure Draft Impairment of Capital Assets

• Two factors to weigh when determining whether an
  asset is impaired
• Magnitude of decline in service utility
• Unexpected nature of decline in service utility
• Three methods to determine amount of impairment
• Restoration Cost Approach
• Service Units Approach
• Deflated Depreciated Replacement Cost Approach