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April 8, 2014
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Statement No. 65, Items Previously Recorded as Assets and
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Statement No. 67, Financial Reporting for Pension Plans-an
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Liabilities
amendment of GASB Statement No. 25
Statement No. 68, Accounting and Financial Reporting for
Pensions-an amendment of GASB Statement No. 27
Statement No. 71, Pension Transition for Contributions
Made Subsequent to the Measurement Date
Statement No. 69, Government Combinations and Disposals
of Government Operations
Statement No. 70, Accounting and Financial Reporting for
Nonexchange Financial Guarantees
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GASB STATEMENT NO. 65
Items Previously Recorded as Assets and
Liabilities
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Issued March 2012
Effective Date: Periods beginning after December 15,
2012. Must be applied retroactively to transactions of
previous periods.
GASB Statement No. 63 revised governmental financial
statements to:
• Present deferred outflows of resources and deferred
inflows of resources
• Replace the term net assets with net position
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GASB Statement No. 65 reclassifies certain items
currently reported as assets and liabilities to deferred
outflows/inflows of resources or to expenses of the
current period
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Prepaid Items
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Deferred amounts on refunding of debt
(assuming that a loss was incurred on the
refunding transaction)
• Currently reported as an adjustment to long-term debt on
the statement of net position
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Losses on sale-leaseback transactions
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Debt issuance costs
• The provisions of this statement must be implemented
retroactively, so any existing debt issuance costs deferred
on the statement of net position will have to be removed
and beginning of year net assets adjusted
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• Advance of derived tax revenues (i.e. revenue
received before the underlying transaction has
occurred)
• Grant proceeds received prior to meeting
eligibility requirements (other than time
requirements)
• Receipt of prepayment
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Advance of revenue from imposed nonexchange
transactions (including property taxes
received/recorded as a receivable before the
period for which they are levied)
Advance from grantor when time requirement
not met
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Deferred amounts on refunding of debt
(assuming that a gain was incurred on the
refunding transaction)
• Currently reported as an adjustment to long-term
debt on the statement of net position
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Proceeds from sales of future revenues
Unavailable revenue related to application of
modified accrual accounting (including property
tax payments received after 60 day cutoff)
Gain from sale-leaseback transactions
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• The term deferred should only be used in
conjunction with deferred outflows and
deferred inflows
• Major fund thresholds under GASB Statement
No. 34 have been revised to combine deferred
outflows with assets and deferred inflows with
liabilities
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Questions
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GASB Statement No. 67 addresses how the
financial statements for pension plans should
look
• Applies to stand alone pension plan reports and plans
presented in pension trust funds
• Does NOT require underfunded status of the plan to be
reported as a liability, but plan funded status is disclosed
in the footnotes and required supplementary information
• Effective for June 30, 2014 fiscal year ends
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GASB Statement No. 68 addresses how
employers account for their participation in a
defined benefit pension plan
• Does require underfunded status of the plan to be
reported as a liability on the financial statements
• Effective for June 30, 2015 fiscal year ends
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GASB Statement No. 71 provides a correction to
a small error that was identified in GASB
Statement No. 68 regarding its implementation
• Implement simultaneously with GASB Statement No. 68
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• Single Employer Plans: Plans where pensions
are provided to the employees of only one
employer
• Agent Multiple-Employer Pension Plans (Agent
Plans): Plans where assets are pooled for
investment purposes but separate accounts are
maintained for each individual employer so that
each employer’s share of the pooled assets is
legally available to pay the benefits of only its
employees
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• Single Employer Plans: Plans where pensions
are provided to the employees of only one
employer
• Agent Multiple-Employer Pension Plans (Agent
Plans): Plans where assets are pooled for
investment purposes but separate accounts are
maintained for each individual employer so that
each employer’s share of the pooled assets is
legally available to pay the benefits of only its
employees
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GASB STATEMENT NO. 67
Financial Reporting for Pension Plans-an
amendment of GASB Statement No. 25
• Issued June 2012
• Effective for periods beginning after June 15,
2013
• High level summary: Significantly revises
financial reporting requirements for separately
issued plan financial statements or for plans
included within the financial statements as
pension trust funds
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• Statement of Fiduciary Net Position
• Statement of Changes in Fiduciary Net Position
• These statements are required for ALL types of
plans, including both defined benefit and
defined contribution plans
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Assets
+ Deferred outflows of resources
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Liabilities
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Deferred inflows of resources
= Fiduciary net position
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Additions (such as contributions and investment
income)
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Deductions (such as benefit payments and
administrative expense)
= Net increase (decrease) in fiduciary net
position
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• Plan description
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Name and number of participating employers
Types of benefits provided
Classes of plan members covered
Composition of plan’s board
• Plan investments
• Pension investment policies and how fair value is
determined
• Concentrations of investments exceeding 5% of net
position
• Annual money-weighted return of plan investments
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• Other disclosures
• Contributions
• Reserves
• Allocated insurance contracts
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• Single-employer and cost-sharing plans must
disclose the following regarding plan funding and
actuarial status:
• Total pension liability (TPL)
• Fiduciary net position (FNP)
• Net pension liability (NPL)
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• FNP as a percentage of TPL
• Significant actuarial assumptions:
• Inflation rate
• Salary changes
• Ad-hoc post-employment benefit changes, including cost of
living adjustments (COLA’s)
• Inputs into discount rates
• Information about mortality assumptions
• Dates of experience studies
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• The following 10-year schedules are required for
single-employer and cost sharing plans:
• Sources of changes in the net pension liability
• Information about the components of the net pension
liability and related ratios, including:
• Plan’s fiduciary net position as a percentage of the total
pension liability
• Net pension liability as a percentage of covered-employee
payroll
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• If contributions to the plan are actuarially determined, a
schedule showing:
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Actuarially determined contribution
Actual contributions
Related ratios
Methods and assumptions used (in a note to the schedule)
• Annual money-weighted rate of return on the plan
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• Required at least once every 2 years, although
more frequent valuations are encouraged
• If valuation is not as of fiscal year-end, must
rollforward most recent valuation to year end
• Required valuation methodology will be discussed
in the slides on GASB 68
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Questions
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GASB STATEMENT NO. 68
Accounting and Financial Reporting for
Pensions-an amendment of GASB Statement
No. 27
• Issued June 2012
• Effective for periods beginning after June 15,
2014
• High level summary: Significantly changes
accounting and financial reporting for
governments participating in defined benefit
pension plans
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• For single employer plans and agent plans,
employers will have to record the underfunded
status of the plan as a liability on the
government-wide financial statements
• Currently, governments only record a liability when they
make less than the actuarially required annual contribution
• For cost-sharing plans, employers will have to
recognize a liability representing their
proportionate share of the plan’s underfunded
status
• Currently, governments participating in cost-sharing plans
disclose their participation in the footnotes to the financial
statements but are not required to record any liabilities
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• Key changes to the calculation of liabilities and
expenses associated with defined benefit plans
relate to each of the following:
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Employer liability
Employer expense
Discount rate
Actuarial method
Amortization
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• Under current pension standards:
Annual required contribution (ARC)
Less: Actual Contributions
Net pension obligation (NPO)
• Under GASB Statement No. 68:
Total pension liability (TPL)
Less: Fiduciary net position (FNP)
Net pension liability (NPL)
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• Under current standards, only report a pension
liability to the extent the entity is behind on its
annual pension contributions
• In other words, the actuary’s valuation focuses primarily on
calculating pension expense
• Under GASB Statement No. 68, must report a
pension liability for the entire underfunded status
of the plan
• In other words, the actuary’s valuation focuses primarily on
calculating pension liability
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Annual service cost
Interest on the net pension liability
Projected earnings on plan investments
The full effect of any changes in benefit terms
Amortization of deferred outflows/inflows of
resources
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• Under current guidance, discount rate is the
estimated long-term investment yield for the
plan, with consideration given to the nature and
mix of current and expected plan investments
• Under GASB Statement No. 68, the discount rate
must be modified if it is expected that FNP will
not be sufficient to pay benefits to active
employees and retirees
• Single blended rate
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• Single rate equivalent to the combined effect of
using the following rates:
• For projected cash flows up to the point the FNP will be
sufficient, use the long-term expected rate of return on
plan investments
• For projected cash flows beyond that point, a yield or index
rate on tax-exempt 20-year Aa-or higher rated municipal
bonds
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• Under current guidance, use the same actuarial
method used for funding
• Six acceptable methods
• Must be applied within parameters defined by the GASB
• Under GASB Statement No. 68, there is no tie to
the actuarial method used for funding the plan
• All employers will use the entry age method for accounting
and financial reporting purposes (with service cost
determined as a percentage of pay)
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• The following circumstances that could affect the
net pension liability (NPL) are amortized to
expense:
• Changes in benefit terms
• Changes in economics and demographic assumptions
• Differences between economic and demographic
assumptions and actual experience (other than investment
returns)
• Differences between expected and actual investment
returns
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• Under current guidance, the effect is amortized
over a period not to exceed 30 years
• Under GASB Statement No. 68, the effect is to be
amortized over a much shorter period.
• Different periods, depending on the circumstances
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• Changes in benefit terms
• Immediate recognition
• Changes in economic and demographic
assumptions
• Closed period equal to average remaining service period of
plan members (for retirees, average remaining service
period = 0 years)
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• Differences between economic and demographic
assumptions and actual experience (other than
investment returns)
• Closed period equal to average remaining service period of
plan members
• Differences between expected and actual
investment returns
• Closed 5-year period
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• Valuations are as of a measurement date, which
can be no more than one year before fiscal yearend
• Required at least once every 2 years, although
more frequent valuations are encouraged
• In off years, must rollforward valuation to
measurement date
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• An employer’s proportionate share in the plan’s
liability should be determined in a manner
consistent with the way contributions for various
employers are determined
• The plan’s management and actuaries will likely
have to calculate each participating employer’s
proportionate share of liabilities, expenses, and
deferred inflows/outflows and communicate this
to the employers
• Most cost sharing plans are still determining
precisely how this will be done
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• Plan description
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Name of the plan
Entity that administers the plan
Type of plan (single employer, agent, cost-sharing)
Benefit terms
Number of employees covered
Contribution requirements
Availability of separate report
• Information about the net pension liability (NPL)
• Actuarial assumptions and other inputs (inflation, salary
changes, COLA’s, etc.)
• Impact on NPL of a +/- 1% change in discount rate
• Fiduciary net position
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• Beginning balances for:
• Total pension liability (TPL)
• Fiduciary net position (FNP)
• Net pension liability (NPL)
• Changes during period
• Ending balances for:
• Total pension liability (TPL)
• Fiduciary net position (FNP)
• Net pension liability (NPL)
• Other disclosures
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• For cost sharing plans, the employer’s percentage
share of NPL
• Changes in net pension liability (NPL)
• Funding progress:
• Total pension liability (TPL)
• Less: Fiduciary net position (FNP)
• Equals: Net pension liability (NPL)
• FNP / TPL = % (single and agent plans only)
• Covered payroll
• NPL / Covered payroll = %
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• Actuarially or statutorily determined contributions
• Actuarially/statutorily determined annual pension
contribution
• Amount of employer contribution actually made
• Difference between the two
• Payroll of covered employees
• Ratio of actual employer contributions to covered payroll
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• Determine what type of plan you have (single
employer, agent or cost-sharing)
• For single employer and agent plans:
• Contact your actuary to discuss changes and determine a
measurement date
• Determine what information actuary will require and
provide to actuary
• Determine timetable for delivery of actuary’s report
• Accumulate other information necessary for pension
footnotes and required supplementary information (RSI)
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• For cost sharing plans:
• Contact management of the plan to determine how they
will provide necessary actuarial information to participating
employers
• Determine whether the plan’s auditors will have audited
this information. If not, coordinate with your auditors how
they will approach pension plan information.
• Determine timetable for receipt of actuarial information
• Accumulate other information necessary for pension
footnotes and required supplementary information (RSI)
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Questions
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GASB STATEMENT NO. 71
Pension Transition for Contributions Made
Subsequent to the Measurement Date
• Issued November 2013
• Comments Due August 26, 2013
• High level summary: Requires that, upon the
adoption of GASB Statement No. 68, a beginning
deferred outflow of resources should be recorded
for any contributions made subsequent to the
measurement date of the beginning net pension
liability
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• GASB Statement No. 68 requires the net pension
liability (NPL) to be calculated as of a
measurement date no earlier than the end of the
entity’s prior fiscal year
• For example:
• Client’s fiscal year end: December 31, 2015
• Measurement date (the date the actuarial valuation is as
of): December 31, 2014
• Thus, the NPL presented on the financial
statements may essentially be calculated based
on information that is a year old
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• Issue: what to do with contributions made to the
plan after the measurement date but before the
financial statement date
• In the example on the previous slide, contributions made
during calendar year 2015
• Solution: GASB Statement No. 68 requires
subsequent contributions to be reported as
deferred outflows of resources
• Problem at Transition: GASB Statement No. 68 also
says that, if it is not practical to measure all deferred
inflows and outflows of resources upon the adoption
of the Statement, no beginning balances of deferred
outflows and inflows of resources should be reported
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• The Exposure Draft modifies this guidance to
require that a beginning balance of deferred
outflows of resources be reported for any
contributions made to the plan after the
measurement date of the beginning net pension
liability
• Aside from this, if it is not practical to measure all
deferred inflows and outflows of resources upon
the adoption of the Statement, no beginning
balances of deferred outflows and inflows of
resources should be reported
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Questions
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GASB STATEMENT NO. 69
Government Combinations and Disposals of
Government Operations
• Issued January 2013
• Effective for combinations and disposals of
government operations occurring in financial
reporting periods beginning after December 31,
2013
• High level summary: The statement defines
government mergers, government acquisitions,
transfers of operations and disposals of
operations, and specifies the accounting
treatment to be used for each of these types of
transactions
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• A government combination of legally separate
entities in which no significant consideration is
exchanged
• Either:
• Two governments combine to form a new government, OR
• One or more legally separate governments or
nongovernmental entities cease to exist and their
operations are absorbed into, or provided by, one or more
continuing governments
• Assets, liabilities, deferred outflows/inflows are
recognized at carrying value on the merger date
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• A government combination in which a government acquires
another entity or the operations of another entity, in
exchange for significant consideration
• Assets, liabilities, and deferred outflows/inflows are
recognized at acquisition value (market based entry price),
EXCEPT:
• Compensated absences, pensions, OPEB recognized pursuant to
relevant GASB standards
• Investments and derivatives reported at fair value
• If consideration exceeds net position acquired, difference is
recorded as deferred inflow and amortized
• If consideration is less than net position acquired, values of
noncurrent assets are reduced, and any excess is reported as
a special item
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• Transfer to another government of an integrated
set of activities conducted and managed for
providing identifiable services with associated
assets and liabilities
• Assets, liabilities, deferred outflows/inflows are
recognized at carrying value on the effective
transfer date
• The net position received or assumed by the
transferee government is reported as a special
item
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• Disposal of an integrated set of activities
conducted and managed for providing
identifiable services with associated assets and
liabilities
• Gain or loss on disposal should be recognized as
a special item
• Gain or loss does NOT include normal operating
activities up to the disposal date
• Gain or loss does include:
• Difference between assets and liabilities transferred and
consideration received (if any)
• Costs directly associated with the proposal
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Questions
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GASB STATEMENT NO. 70
Accounting and Financial Reporting for
Nonexchange Financial Guarantees
• Issued April 2013
• Effective for periods beginning after June 15,
2013
• High level summary: Clarifies accounting
treatment for governments that extend or receive
nonexchange financial guarantees
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• Record a liability when qualitative factors and
historical data indicate that it is more likely than
not that the government will have to make a
payment on the guarantee
• Liability is equal to discounted present value of
best estimate of future outflows to be incurred
• If no best estimate exists but there is a range, the
liability should be the discounted present value of
the minimum amount in the range
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• Report liability for the obligation until legally
released as an obligor
• If required to repay the guarantor for any
payments made under the guarantee, report a
liability until legally released as an obligor
• If released as an obligor, recognize revenue as a
result of being released from the obligation
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• For governments extending guarantees:
• Description of all guarantees outstanding, regardless of
likelihood of payment
• Amount of all guarantees outstanding
• If payments have actually been made during the period,
information on the total liability, payments during the
period, cumulative payments made, and amounts expected
to be recovered
• For governments receiving guarantees:
• Description of the guarantee and the entity providing it
• Amount of guarantee outstanding and paid during period
and cumulatively
• Amounts required to be repaid to guarantor
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Questions
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