GASB Update. ACI-NA June 5, Views expressed are those of Wesley Galloway. Official positions of the GASB are established via due process.

Transcription

1 GASB Update ACI-NA June 5, 2006 Views expressed are those of Wesley Galloway. Official positions of the GASB are established via due process. Slide 1

2 Funding the GASB Funding deficits for several years Sarbanes-Oxley stopped private donations Worked with major players NASACT GFOA BMA Half penny per $1000 bond Slide 2

3 Statement 20 & Applicability of FASB Pronouncements FIN 47 Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143 No provisions of NCGAS 4, paragraphs 9 and 14, as amended by GASBS 10 and GASBS 34, paragraph 69, apply Slide 3

4 Statement 46 Net Assets Restricted by Enabling Legislation Slide 4

5 Background Statement 34 identifies three sources of restrictions on net assets external parties, constitutional provisions, and enabling legislation Enabling legislation is a type of legislation that authorizes the raising of a new revenue (i.e., it does not earmark existing revenues) and that contains a legally enforceable restriction on the purpose for which those revenues can be used Slide 5

6 Legal Enforceability Means that an external party such as citizens, a public interest group, or the judiciary can compel a government to abide by the restriction Remains a matter of professional judgment, which may include: Reviewing determinations for similar legislation Obtaining the advice of legal counsel Other actions Slide 6

7 Reporting Requirement The portion of net assets restricted by enabling legislation should be disclosed in the notes to the financial statements The Exposure Draft proposed to require separate display of enabling legislation restrictions on the face of the statement of net assets, but the Board changed the requirement to disclosure in response to the public comments it received Slide 7

8 Statement 47 Accounting for Termination Benefits Slide 8

9 Scope Establishes accounting and reporting requirements for all forms of termination benefits Supersedes guidance in NCGAI 8 for special termination benefits Voluntary termination benefits Inducements to hasten the termination of services Ex.: early-retirement incentives Involuntary termination benefits Benefits provided as a consequence of the early termination of services Ex.: severance pay Includes COBRA Excludes unemployment compensation Slide 9

10 Termination Benefits vs. OPEB Determine whether the nature of arrangement is to provide benefits: In exchange for the early termination of services (a termination benefit), or As compensation for services (OPEB) Consider all relevant factors, including: Employer s intent Employees view of the benefits Whether conditioned on termination of employment prior to normal retirement age Length of time benefits have been made available Slide 10

11 Measurement Healthcare-related: Projection of benefits Healthcare cost trend rate Discount rate Non-healthcare-related: If specific amounts are payable at fixed times Use discounted PV of expected future benefits If not, option to use undiscounted total at current cost Slide 11

12 Recognition Requirements Accrual Basis Voluntary termination benefits: Liability and expense recognized when: Employees accept the offer Amounts can be estimated Measurement updated at end of each subsequent reporting period Involuntary termination benefits: Generally, liability and expense recognized when: Plan of termination approved and communicated Amounts can be estimated Measurement updated at end of each subsequent reporting period Slide 12

13 Recognition Requirements Accrual Basis (cont.) Involuntary termination benefits (cont.) If plan of termination requires future service Liability and expense for the portion of involuntary termination benefits that will be provided only after completion of future service should be recognized ratably over the future service period Future service period begins when plan of termination has been approved and communicated and the amounts can be estimated Measurement of liability updated at end of future service period and incremental liability/expense recognized ratably over remaining future service period Slide 13

14 Recognition Requirements Modified Accrual Liabilities and expenditures recognized to extent the liabilities are normally expected to be liquidated with expendable available financial resources See paragraph 14 of Interpretation 6 Slide 14

15 Note Disclosures Significant methods and assumptions Benefits not recognized because not estimable In period employer becomes obligated: Description of termination benefit arrangement Ex.: type(s) of benefits, # of employees affected, period of time benefit are expected to be provided Cost of termination benefits, if not otherwise identifiable If benefits affect a defined benefit pension or OPEB plan, employer should disclosure the change in the actuarial accrued liability attributable to the termination benefits Slide 15

16 Effective Date and Transition Generally, effective for periods beginning after June 15, 2005 However, those that affect defined benefit OPEB simultaneous implementation with Statement 45 In initial year, requirements should be applied to any previous commitments of termination benefits that remain unpaid at effective date Slide 16

17 Financial Statements Issued After June 30, 2006 Proposed Technical Bulletin Accounting and Financial Reporting by Employers and OPEB Plans for Payments from the Federal Government Pursuant to the Provisions of Medicare Part D Slide 17

18 Basis View that Medicare D reimbursements are transactions separate from the exchange of salaries and benefits for services received by the state or local government. Slide 18

19 Proposed Accounting Payments to employers Voluntary nonexchange transactions (Statement 33) Payments made directly to an OPEB plan On-behalf payments (Statement 24) Calculations of actuarial accrued liabilities, the ARC, and annual OPEB cost Apply Statement 43 and 45 without reduction for Medicare Part D payments Slide 19

20 How Should Derivatives Be Reported? The Trillion Dollar Question Slide 20

21 Fair Value With Hedge Accounting The suspension of accounting conventions to arrive at a predetermined outcome primarily because of mixed-attribute model. FASB world qualifying hedges Cash flow hedges changes in effective hedges reported in comprehensive income Fair value hedges changes reported as an adjustment of associated asset or liability GASB world qualifying hedges Deferred until terminated Slide 21

22 Future GASB Implementation Periods beginning after Dec. 15, 2005 OPEB Plan reporting (GASB 43), Phase I Periods beginning after June 15, 2006 Retroactive Infrastructure reporting, Phase II Periods beginning after Dec. 15, 2006 OPEB Plan reporting, Phase II OPEB Employer reporting (GASB 45), Phase I (& any termination benefits) Slide 22

23 Forthcoming GASB Standards Periods beginning after Dec. 15, 2006 Proposed Statement 48 Sales and Pledges of Receivables and Future Revenues Periods beginning after June 15, 2007 Proposed Statement 49 Accounting and Financial Reporting for Pollution Remediation Obligations Liabilities would have to be measured at beginning of implementation period so beginning net assets can be restated Obligating Events recognition approach Expected Cash Flow measurement technique Other project listed at GASB.org Slide 23