GASB DEVELOPMENTS

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GASB DEVELOPMENTS

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Title: 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
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