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GASB No. 62, 63 & 65 Workshop

by Helen Y. Painter, CPA

October 16, 2013

Nature Coast Chapter of the FGFOA

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Effective Dates – September 302013

Statement 60 – Service Concession Arrangements Statement 61 – Reporting Entity Statement 62 – Codification of AICPA and FASB Statement 63 – Deferrals Presentation

2014 Statement 65 – Assets and Liabilities – Reclassification and

Recognition Statement 66 – Technical Corrections Statement 67 – Financial Reporting for Pension Plans

2015 Statement 68 – Accounting and Financial Reporting for Pensions Statement 69 – Government Combinations and Disposals of

Government Operations

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2013

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Statement 62 – Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements

Objective of StatementIncorporate into GASB’s authoritative literature (pre Nov

1989) which does not conflict with or contradict GASB pronouncements:1. FASB Statements and Interpretations2. Accounting Principles Board Opinions (APBs)3. Accounting Research Bulletins of the AICPA Committee on

Accounting Procedure(ARBs)

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Statement 62 – Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements

Statement 62 eliminated the election contained in paragraph 7 of GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, as amended, for enterprise funds and business-type activities to apply post November 30, 1989, FASB pronouncements.

MUST CONSIDER1. Disclosure reference to pre-1989 use of FASB standards to be

removed2. All references to FASB should be removed (unless a specific

adoption to a FASB ASC is elected)3. Disclosure should be made to the adoption of this standard also

if prior period adjustment occurred4. Communicated to Those Charged With Governance (Optional if

it does not materially affect statements?)5. Auditor’s Report as Emphasis of Matter if adoption materially effects financial statements.

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Statement 62 – Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements

How the Changes in This Statement will Improve Financial Reporting

“The requirements in this Statement will improve financial reporting by contributing to the GASB's efforts to codify all sources of generally accepted accounting principles for state and local governments so that they derive from a single source. This effort brings the authoritative accounting and financial reporting literature together in one place, with that guidance modified as necessary to appropriately recognize the governmental environment and the needs of governmental financial statement users. “

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Statement 62 – Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements

Organization of This Statement

• By Topic-each topic contains provisions derived from FASB and AICPA pronouncements that address the subject matter.• Some language has been changed to be more specific

• i.e. “Business-Type or Governmental Activities”

• The order in which the topics are presented corresponds to the order of the primary locations within the GASB Codification of Governmental Accounting and Financial Reporting Standards, where the topics are codified.

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Statement 62 – Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements

-Accounting Changes adopted to conform

• Applied retroactively by restating prior periods

• If restatement not practical-the cumulative effect reported as a restatement of beginning net asset, fund balances, or fund equity

• The F/S should disclose the nature of any restatement and its effect

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Since FASB introduced its codification, its original pronouncements are nonauthoritative

• Action-No longer reference FASB (unless exception)

GASB 34, p. 17 required application of pre-November 30, 1989 FASB statements, etc.

• Action-No longer need to elect to apply post 11.30.1989. can apply when it does not conflict with GASB guidance

Summary

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Capitalization of interest costs (FAS 34, 62) Statement of net position classification (ARB

43, APB 12, FAS 6) Special and extraordinary items (APB 30) Comparative financial statements (APB 30) Related Parties (FAS 57) Prior-period adjustments (FAS 16, APB 9) Accounting changes and error corrections (APB

20, FIN 20) Extinguishment of debt (APB 36, FAS 76) Troubled debt restructuring (FAS 15)

Guidance brought into GASB Literature

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Inventory (ARB 43) Contingencies (FAS 5, FIN 14) Leases (FAS 13,22,98, FIN 23,26,27) Regulated operations (FAS 71, 90, 101)

Guidance brought into GASB literature

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GASB No. 66 Technical Corrections-2012

An amendment of GASB Statements 10 and 62• Amends GASB 10 to comply with GASB No. 54 and No. 34

regarding fund type classifications

• Amends GASB 62 modifying guidance on accounting for 1. Operating lease payments that vary from a straight-line

basis2. The difference between the initial investment (purchase

price) and the principal amount of a purchased loans3. Servicing fees related to mortgage loans that are sold

Changes clarify how to apply:• GASB 13-Accounting for Operating Leases with Scheduled

Rent Increases• GASB 48-Sales and Pledges of Receivables and Future

Revenues and Intra-Entity Transfers of Assets and Future Revenues

• Effective periods beginning after December 15, 2012.

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Questions??

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Statement 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position

Background

Concept Statement 4 and 5 (June 2007) identifies 5 elements that make up a statement of financial position:

Assets Liabilities Deferred outflows of resources Deferred inflows of resources Net position

This differs from the composition currently required by Statement 34,which requires the presentation of assets, liabilities, and net assets in astatement of financial position

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Statement 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position

Definitions

Assets Resources with present service capacity that the gov’t controls

Liabilities Present obligations to sacrifice resources

Deferred outflows of resources A consumption of net assets applicable to a future reporting period

has a positive effect on net position, similar to assetsDeferred inflows of resources

An acquisition of net assets applicable to a future reporting period has a negative effect on net position, similar to liabilities

Net position The residual of all elements presented = assets + deferred outflows – liabilities – deferred inflows

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Statement 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position

Reporting Requirements

Report these new classifications in the following manner: deferred outflows in a separate section following assets deferred inflows in a separate section following liabilities May subtotal deferred outflows with assets and deferred inflows

with liabilities

Net Position components resemble net asset components under Statement 34 but include the effects of deferred outflows and inflows

Net investment in capital assets Restricted Unrestricted

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Statement 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position

Formatting Requirements

Economic Resources Measurement Focus Preferred:

assets + deferred outflows – liabilities – deferred inflows = net position

The traditional balance sheet is still acceptable: assets + deferred outflows = liabilities + deferred inflows +

net position

Current Resources Measurement Focus Required: assets + deferred outflows = liabilities + deferred

inflows + fund balance

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Questions?

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2014

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Statement 65 – Items Previously Reported as Assets and Liabilities

Concept Statement No. 4 Elements of Financial Statements and GASB 63 limited recognition of deferred inflows and outflows to balances examined through GASB due process, previously only GASB No. 53 Accounting and Financial Reporting for Derivative Instruments & No. 60 Accounting and Financial Reporting for Service Concession Arrangements.

The objective of this statement is reexamine existing guidance on balances through due process:

properly classify certain items that were previously reported as assets and liabilities as deferred outflows/inflows of resources or

recognize certain items that were previously reported as assets and liabilities as outflows of resources (expenses or expenditures) or inflows of resources (revenues)

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Statement 65 – Items Previously Reported as Assets and Liabilities

Deferred InflowsGrants earned in advance of meeting timing requirements (availability criteria)

Deferred amounts from refunding of debt (credits)Proceeds from sales of future revenuesDeferred gain from sale-leaseback“Regulatory” credits Unavailable revenue related to the application of modified accrual accounting

Deferred OutflowsGrants incurred in advance of timing requirementDeferred amount from refunding of debt (debits)Cost of acquire rights to future revenues (intra-entity)Deferred loss from sale-leaseback transaction

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Statement 65 – Items Previously Reported as Assets and Liabilities

Outflows of Resources (Expenditures or Expenses)Debt issuance costs (other than insurance)Initial costs incurred by lessor in an operating leaseAcquisition costs for risk poolsLoan Origination costs

Loan origination feesCommitment fees (after exercise or expiration)

Inflows of Resources (Revenues)

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Classification has not changed for:◦ Prepayments◦ Resources advanced to another government in

relation to a government-mandated nonexchange transaction or a voluntary nonexchange transaction when eligibility requirements other than time requirements have not been met

◦ The purchase of future revenues from a government outside the financial reporting entity

◦ Circumstances in which a pension plan’s net position exceeds the total pension liability

Assets

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Classification has not changed for◦ Resources received in advance in relation to a

derived tax revenue nonexchange transaction◦ Resources received in advance in relation to a

government-mandated nonexchange transaction or a voluntary nonexchange transaction when eligibility requirements other than time requirements have not been met

◦ Resources received in advance of an exchange transaction

◦ Refunds imposed by a regulator

Liabilities

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Revenue recognition in governmental funds

Revenue-measureable and available

Revenue-not available

Revenues and other governmental fund financial resources should be recognized n the accounting period in which they become both measureable and available

When an asset in recorded in governmental fund financial statements, but the revenue is not available, the government should report a deferred inflow of resources until such time as the revenue becomes available

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Statement 65 – Items Previously Reported as Assets and Liabilities

Other ChangesThe term deferred revenues should no longer be used:

Could be confused with deferred inflows/outflows No guidance on a replacement term

Recommend use of advance as the accounting for the availability and earned criteria are now distinct

There have been no changes to the Major Fund criteria except the following:

Deferred outflows should be combined with assetsDeferred inflows should be combined with liabilities

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Effective Date

Effective

September 30, 2014 (Years

beginning after 12/15/2

012)

Early application is

encouraged

Required to be applied retroactively for all

periods present

ed

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Questions?