National Association of State Auditors, Comptrollers and Treasurers

1. National Association of State Auditors, Comptrollers and Treasurers GASB Update August 17, 2009 The views expressed in this presentation are those of Mr. Attmore. Official positions of the GASB are determined only after extensive public due process and deliberation.

2. What’s New at the FAF and the GASB?

3. Board of Trustees SEC Administration and Support Functions Governmental Accounting Standards Board Financial Accounting Standards Board Governmental Accounting Standards Advisory Council Financial Accounting Standards Advisory Council

4. FAF Governance Changes • 14 to 18 Trustees who serve one 5 year term • New FAF Chairman has expanded responsibility • Jack Brennan, Chairman – The Vanguard Group • Additional New Trustees: • Jeffrey Diermeier, Former CEO & President - CFA Institute • Cynthia Eisenhauer – Consultant and Former Chief of Staff, Iowa Governor Thomas J. Vilsak • Dennis Kass, Chairman & CEO - Jennison Associates • FAF Oversight Advisory Committee

5. Current Events and Financial Reporting Implications

6. Recent GASB Pronouncements • Statement 54 - Fund Balance Reporting and Governmental Fund Type Definitions • Statement 55 - The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments • Statement 56 - Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards

7. Recent GASB Pronouncements(Continued) • Cons # 5 - Amendment of Concepts Statement # 2 – SEA Reporting • Derivative Instruments Implementation Guide • Comprehensive Implementation Guide

8. Statement 54 Fund Balance Reporting and Governmental Fund Type Definitions

9. What Do You Need To Know About Statement 54? • Governmental fund type definitions have been clarified • New Fund balance presentation classifications have been established • Addresses classification of “stabilization” or “rainy day” amounts • Effective for periods beginning after June 15, 2010

10. Governmental Fund Type Definitions • Special revenue fund—used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. • Capital projects fund—used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlaysincluding the acquisition or construction of capital facilities and other capital assets.

11. Fund Balance Classifications • New presentation hierarchy based primarily on spending constraints placed upon use of resources versus availability for appropriation • New fund balance presentation classifications: • Non-spendable—Inventory, long-term receivables • Restricted—Statement 34/46 definition • Committed—Formal action of governing body • Assigned—Similar to designations expressing intent • Unassigned

12. Committed Fund Balance • Constraint on use imposed by the government itself, using its highest level of decision making authority • Constraint can be removed or changed only by taking the same highest level action • Action to constrain resources should occur prior to end of fiscal year, though the exact amount may be determined subsequently

13. Assigned Fund Balance • Amounts intended to be used for specific purposes • Intent is expressed by • The governing body • A body (budget or finance committee) or official authorized by the governing body • Residual amounts in governmental funds other than the general fund are assigned

14. What Do You Need to Know About Statements 55 and 56? • Accounting and financial reporting guidance currently found in the AICPA’s Statements on Auditing Standards brought into the GASB literature “as is.” • Statement 55—GAAP Hierarchy • First step in the potential reexamination of current multi-level hierarchy • Statement 56—AICPA Omnibus • Related party transactions, subsequent events, and going concern considerations

15. Statement 55 • Incorporates GAAP hierarchy guidance found in SAS No. 69, The Meaning of “Present Fairly in Conformity With Generally Accepted Accounting Principles, basically “as is.” • Some modifications made to clarify and update the guidance and reflect the government environment

16. Statement 56 • Incorporates guidance found in SASs basically “as is.” • Related party transactions • Subsequent events • Going concern • Again, modifications were made to clarify and update the guidance and reflect the government environment

17. Current Agenda Projects Postemployment Benefits Service Concession Arrangements (formerly known as Public Private Partnerships) Chapter 9 Bankruptcies Financial Instruments Omnibus Certain OPEB Implementation Issues Service Efforts and Accomplishments Reporting Statement 14 (Reporting Entity) Reexamination Recognition and Measurement Attributes – Concepts Statement Codification of FASB Pronouncements (pre-November 1989)

18. Scope of the Postemployment Benefits Project • Basic approach • Funding base with parameters • Liability driven • Something in between • Liability and expense recognition • Use of actuarial methods • How the actuarial liability should be measured • Salary projections • Discount rate • Cost sharing allocations for employers • Plan reporting

19. Pension Accounting and Financial Reporting Invitation to Comment Response Date: July 31,2009

20. Current Projects—Due Process Documents Issued in late June 2009 for Public Comments: • OPEB Implementation Issues ED • Chapter 9 Bankruptcy ED • Service Concession Arrangements ED • Financial Instruments Omnibus ED • Service Efforts and Accomplishments Reporting—Voluntary Guidelines Proposal

21. Chapter 9 Bankruptcies • Not a signal that GASB knows that more bankruptcies are coming • Proposes to provide guidance on liability restructuring, recognition and measurement of changes, and required disclosures • Exposure Draft response deadline is August 28, 2009

22. Service Concession Arrangements • Who should report the capital assets involved in a service concession arrangement—transferor versus the operator? • The transferor determines or regulateswhat services the operator is required to provide and how the operator is required to provide them with the property, to whom the operator is required to provide them, and the price ranges or rates that can be charged for services; • The transferor is entitled to—through ownership, beneficial entitlement, or otherwise—significant residual interest in the property at the end of the arrangement. • When should upfront payments be recognized? • Generally, over the life of the agreement.

23. SEA Proposals • Suggested guidelines for voluntary reporting • Essential components of SEA reports • Purpose and scope • Major goals and Objectives • Key measures of SEA performance • Discussion and analysis of results and challenges • Qualitative Characteristics of SEA performance information • Effectively communicating SEA performance information

24. Other Current Projects—Not Yet Ready for Prime Time • Concepts Statements • Recognition and Measurement Attributes • Statement 14 Reexamination (Reporting Entity) • Codification of Pre-1989 FASB and AICPA Pronouncements Applicable to State and Local Governments

25. Why The Conceptual Framework Is Important • The “Map Quest” or “Google Earth” of standards • Most recent concepts statement, Elements of Financial Statements, already has had an affect on standards • Intangible assets • Derivative instruments • Recognition and Measurement Attributes will do the same • Governmental funds—what belongs in a fund for financial reporting purposes • Fair value (remeasured value) versus historical cost (initial value)

26. Statement 14 Reexamination(Reporting Entity) • Fiscal dependency—is it enough? • Misleading to exclude criteria for inclusion • Blending versus discrete presentation • Criteria for major component units • Fiduciary activities • Disclosures

27. Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements • Why November 30, 1989? • FAF reaffirmed jurisdictional arrangement and determined that subsequent FASB pronouncements should be considered other accounting literature unless specifically adopted by the GASB • Eliminated “negative” standard setting • Why do this project now? • Older literature harder to find, may be exacerbated by FASB codification project • Inconsistencies in practice—what applies, what does not apply

28. Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements • Identify provisions of FASB pronouncements, APBs, and ARBs issued before 11/30/89 that are potentially applicable to S&L governments • Identify provisions to exclude that conflict with or contradict GASB pronouncements • Which applicable provisions should be: • Incorporated “as is” into GASB literature, or • Modified and incorporated

29. Research Agenda • Economic Condition Reporting • Electronic Financial Reporting • Fair Value Measurement • Government Combinations • Interpretation 1—Demand Bonds

30. Questions? Telephone—(203) 847-0700 Web site—www.gasb.org