American Accounting Association Government and Nonprofit Section

1. American Accounting AssociationGovernment and Nonprofit Section GASB Update The views expressed in this presentation are those of Mr. Bean. Official positions of the GASB are determined only after extensive due process and deliberation.

2. First a Thank You! Also a Request

3. Gil Crain Memorial Research Grant • Suzanne Lowensohn, Colorado State • Rebecca Bloch, Fairfield • Byron Henry, Bowie State University • Wie Yusuf and Meagan Jordan, Old Dominion • Judith Harris, Karen McKenzie and Randall Rentfro, Nova Southeastern • Kathryn Jervis, Rhode Island • Nolan Kido, Hawai’i at Manoa • Saleha Khumawala and Dan Neely, Houston • Craig Shoulders, North Carolina at Pembroke Previous recipients include:

4. Service to the GASB Sue Convery and Suzanne Lowensohn (Comprehensive Implementation Guide) Paul Copley and Bob Freeman (Recognition and Measurement Attributes) Catherine Plante (OPEB) Jackie Reck (GASAC and Recognition and Measurement) Smitty (GAAP Hierarchy) Daniel Smith and Odd Stalebrink (GASAC)

5. On to the Blue Covers

6. Implementation of New Standards • 2014 • Statement 65—Assets and Liabilities—Reclassification and Recognition • Statement 66—Technical Corrections • Statement 67—Pension Plans • Statement 70—Nonexchange Financial Guarantees • 2015 • Statement 68—Pension Accounting for Employer and Nonemployer Contributing Entities • Statement 69—Government Combinations and Disposals of Government Operations • Statement 71—Pension Transition for Contributions Made Subsequent to the Measurement Date

7. Suggestions For Consideration—Top Teaching Topics

8. Statement 65Items Previously Reported as Assets and Liabilities Effective for Periods Beginning After December 15, 2012

9. Statement 65—Top Teaching Topics • Deferred inflows of resources and deferred outflows of resources • Origin—Concept Statement 4 • Interperiod equity focused (objectives of financial reporting) • First operationalized in Statement 63 • GASB standards identify all deferred inflows of resources and deferred outflows of resources • Debt issuance costs, except any portion related to prepaid insurance costs, should be recognized as an expense in the period incurred. • Deferred inflows and deferred outflows apply to governmental funds • Availability period

10. Statement 66Technical Corrections—2012 Effective for Periods Beginning After December 15, 2012

11. Statement 66—Top Teaching Topics • None! • GASB housekeeping • Primarily cleaning up (clarifying) Statement 62

12. Statement 68 Accounting and Financial Reporting for Pensions Statement 67 Financial Reporting for Pension Plans

13. Pensions—Top Teaching Topics • Full liability being brought on the face of the financial statements • Move away from the funding approach (APB Opinion 8, NCGA Statement 6, GASB Statement 27) • Career-long relationship between employer and employee and interperiod equity—liability calculation • Discount rate • Entry-age cost method • Level percentage of projected pay • Interperiod equity—expense recognition • Changes in fair value • Certain actuarial gains and losses

14. Statement 69Government Combinations and Disposals of Operations Effective for Periods Beginning After December 15, 2013

15. Statement 69—Top Teaching Topics • Mergers and transfers—role of interperiod equity and cost of services • Assets, liabilities, and deferrals should be reported at carrying values • Acquisitions • Assets, liabilities and deferrals generally should be reported at acquisition value—a market-based entry price (not fair value)

16. Statement 70Nonexchange Financial Guarantees Effective for periods beginning after June 15, 2013

17. Statement 70—Top Teaching Topics • Based the same definition of nonexchange that is found in Statement 33 • Excludes exchange and exchange-like transactions • Transactions that may fall between the cracks • Recognition • Contingent liability recognition is based for the first time in GASB literature on a “more likely than not” approach

18. Concepts Statement 6 Measurement of Elements of Financial Statements

19. Concepts Statement 6—Top Teaching Topics • Conceptual framework • Concepts • Framework for application • Measurement approaches • Initial amount (including adjustments) • More suitable for assets that are used directly in providing services. • Remeasured amount • More suitable for assets that will be converted to cash (financial assets) and liabilities for which there is uncertainty about the timing and amount of payments. • Measurement attributes • Historical cost • Fair value • Replacement costs (including acquisition value) • Settlement value (with counterparties)

20. Current Technical Agenda Fair Value—Measurement and Application Fiduciary Activities GAAP Hierarchy Leases Postemployment Benefits

21. Fair Value—Top Teaching Topics • Fair Value Definition—same as the FASB and IASB • The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. • Investment Definition—Application of fair value • A security or other asset that a government holds primarily for the purpose of income or profit and its present service capacity is based solely on its ability to generate cash or to be sold to generate cash • Disclosures—amendments based on current FASB standards (including fair value hierarchy—levels 1-3)

22. Fiduciary Responsibilities—Top Teaching Topics • What belongs in the fiduciary classification • In the reporting entity or not (control of assets) • Governmental and business-type activities versus fiduciary activities (who is the beneficiary) • Trust versus custodial • Investment trust and private-purpose • Fiduciary activities continue to be reported as basic financial statements • Accountability notion

23. GAAP Hierarchy—Top Teaching Topics • Reduce GAAP Hierarchy from four levels to two levels • Level 1—GASB Statements • Level 2—GASB Technical Bulletins and Implementation Guides and AICPA pronouncements cleared by the GASB • Nonauthoritative—further clarifies role of concepts statements • Requires broader public exposure of comprehensive implementation guide

24. Leases—Top Teaching Topics • Single approach—right of use • No classification of leases into operating/capital or other categories • Underlying assumption that leases are financings • Could develop some exceptions • Lessor—symmetrical approach • Working with FASAB

25. Postemployment Benefits—Top Teaching Topics • Three Exposure Drafts • Other Postemployment Benefits (OPEB)—Plans • OPEB—Employers • Pensions—Not covered by Statements 67 and 68 • OPEB proposals based on same basic principles of the new pension standards • Certain modifications made, including provision for healthcare trend rates

26. Web site—www.gasb.org Questions?