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GASB Update July 26, 2016
Introduction
Shelby Lackey, CPA
Senior Manager| Weaver
16+ years of experience
Practice emphasis on audits for government and
nonprofit entities
Member, AICPA, TSCPA, GFOA, TASBO and ASBO
Extensive experience with federal single audits and
state single audits
2
Introduction
Greg Peterson, CPA
Senior Manager| Weaver
10+ years of experience
Practice emphasis on audits for government and
commercial entities
Member, AICPA, TSCPA, GFOA, TASBO and ASBO
Extensive experience with federal single audits and
state single audits
3
GASB Implementation Timeline
FY15 FY16 FY17 FY18
68, 71 72 73,74,77
78,79, 80,82
75,81
4
Update on GASB 68 Re-Visited: Year Two
GASB Statement 72 – Fair Value Fair Value Measurement & Application
GASB to Implement in 2017 Standards to be Implemented in 2017
GASB to implement in 2018 Standards to be Implemented in 2018 and beyond…
Overview
5
Update on GASB 68
Revisited (Year 2)
6
Update on GASB 68
We implemented GASB 68 last year
What did we learn?
What do we do now?
7
Implementation Issues (leading to GASB Statement No 82):
Covered-employee Payroll vs. Covered Payroll
Assumptions
Employer-Paid Member Contributions
Update on GASB 68
8
TRS Schedules will be released in early August
Changes:
Separate Schedule - pension expense calculation
Deferred inflows / outflows of resources – multi layer
Change in proportionate share
Cost-Sharing Plans (TRS)
Update on GASB 68
9
Deferred Schedules Deferred Outflows - Difference Between Projected and Actual Earnings
MY 2014 MY 2015 MY2016 MY 2017 Total Ouflows Total Inflows
$ 600 $ 400 $ (300) $ 100
Fiscal Year
2015 120 $ 120 $ -
2016 120 80 200 -
2017 120 80 (60) 200 (60)
2018 120 80 (60) 20 220 (60)
2019 120 80 (60) 20 220 (60)
2020 80 (60) 20 100 (60)
2021 (60) 20 20 (60)
2022 20 20 -
MY = Measurement Year
Update on GASB 68
10
Change in Proportionate Share - TRS
May occur this year
Would recognize net effect of change in District’s proportion on
beginning reported balances (paragraph 58 of GASB 68)
Net effect is recognized in pension expense, amortized over the
expected remaining service lives of all employees
Offset is to deferred inflows / outflows of resources
Update on GASB 68
11
Change in Proportionate Share - TRS
Collective Prior Year Current Year
Amount Prop. Share Prop. Share
8/31/2014 0.19% 0.20% Dr. Cr.
Deferred Outflows 1,373,691 2,610 2,747 137
Deferred Inflows (1,538,565) (2,923) (3,077) 154
Net Pension Liability (6,178,023) (11,738) (12,356) 618
137 {a} 772 {b}
Net change = 635 {b-a}
Remaining service life = 9 {c}
Record as Deferred Outflow 71
Recognize as Pension Expense 564
Change in Proportionate Share
Example:
Update on GASB 68
12
What to remember:
Download TRS Schedules early
Create deferral schedules
Prepare /record entries
Make sure you have everything you need for the footnotes
RSI Schedules: Schedule of Proportionate Share of NPL (MY)
Schedule of Contributions (FY)
Update on GASB 68
13
Footnote Disclosures – include:
Contributions / rate
Actuarial assumptions
Discount rate / sensitivity analysis
Target asset allocation
Proportion (%) and change in proportion
Pension expense
State on-behalf payment
Deferred inflows / outflows and amortization schedule
Update on GASB 68
14
Required Supplementary Information
1) Schedule of District’s Proportionate Share of the NPL
2) Schedule of District’s Contributions
Note: Both RSI schedules present covered payroll and
contributions, but they are not the same numbers….why?
Remember: building towards 10-year schedules
Update on GASB 68
15
RSI Schedule of District’s Proportionate Share of the NPL
10-year schedule (eventually) presenting:
Employer’s % of the collective NPL
Employer’s proportionate share of NPL
Employer’s covered payroll
Employer’s NPL as a % of covered payroll
The Plan’s FNP as a % of TPL
The portion of the non-employer’s proportionate share of the collective NPL that is associated with the employer
Schedule of District’s Contributions
10-year schedule of statutory/contractual amounts compared to
actual contributions (info for all 10 years is available)
Update on GASB 68
16
RSI
Example
ISDs
SCHEDULE OF SAMPLE ISD'S PROPORTIONATE SHARE OF NET PENSION LIABILITY
TEACHERS RETIREMENT SYSTEM
Last Ten Fiscal Years
(Dollar amounts in thousands)
2016 2015
District's Proportion of the
Net Pension Liability (asset) 0.020% 0.019%
District's Proportionate Share of
Net Pension Liability (asset) 1,491$ 1,174$
State's proportionate share of Net
Pension Liability associated with
the Sample ISD 13,419 10,564
Total 14,910$ 11,738$
District's Covered Payroll 11,512 10,412
District's proportionate share of net
pension liability (asset) as a percentage
of its covered payroll 12.95% 11.28%
Plan fiduciary net position as a
percentage of total pension liability 81.38% 83.20%
Update on GASB 68
17
Update on GASB 68
RSI
Example
ISDs
SCHEDULE OF SAMPLE ISD'S CONTRIBUTIONS
TEACHERS RETIREMENT SYSTEM
Last Ten Fiscal Years
(Dollar amounts in thousands)
2016 2015
Statutorially required Contributions 210$ 206$
Actual contributions in relation to
statutorially required contributions (210) (206)
Contribution deficiency (excess) -$ -$
District's Covered Payroll 11,780 10,658
Contributions as a percentage
of District's covered payroll 1.78% 1.93%
18
Implementing GASB 68 - TMRS Eye on GASB
http://www.tmrs.org/GASB_Resources.php
GASB Employer Reporting Guide
Describes Employer Reporting Package
Provides guidance / instruction
Pension Disclosure Requirements Table
Sample Pension Note Disclosure
Update on GASB 68
19
Implementing GASB 68 - TMRS Employer Reporting Package:
Actuarial certification letter
Executive Summary
Info / data for disclosures
Financial Schedules
Actuarial assumptions and plan provisions
Deferred inflows / outflows of resources – amortization schedules
City Portal: SOC 1 Type 2 Report
Census data
Controls over contributions and distributions made by cities
On IT-related controls
Census data file (excel)
Qualifications of Actuary
Update on GASB 68
20
TMRS – Financial Statement
Presentation Financial Statements - Cities’ presentation similar to that of ISDs
Required Supplementary Information (RSI) -
1.Schedule of City’s Net Pension Liability and Related Ratios 10-year schedule (eventually) – present two years
Rolls forward the total pension liability, showing components
Rolls forward fiduciary net position, showing components
Fiduciary net position as a % of total pension liability
Covered payroll / NPL as a % of covered payroll
2.Schedule of City’s Contributions
Update on GASB 68
21
TMRS – City RSI SCHEDULE OF SAMPLE CITY's NET PENSION LIABILITY AND RELATED RATIOS
Texas Municipal Retirement Plan
Last Ten Fiscal Years
(Dollar amounts in thousands)
2016 2015
Total Pension Liability:
Service cost 73,034$ 71,505$
Interest 219,345 207,809
Change in benefit terms - -
Difference between expected and
actual experience (37,539) (15,211) Change in assumptions - -
Benefit payments (119,434) (112,603)
Net change in total pension liability 135,406 151,500
Total Pension Liability-beginning 2,853,455 2,701,955
Total Pension Liability-ending 2,988,861 2,853,455
Plan Fiduciary Net PositionContributions - employer 79,713 86,607
Contributions - nonemployer 31,451 30,550
Net investment income 196,154 (44,099)
Benefit payments (119,434) (112,603) Administrative income (3,373) (3,287)
Other 8 (83)
Net change in plan fiduciary net position 184,519 (42,915)
Plan fiduciary net position -beg 2,052,589 2,095,504
Plan fiduciary net position -beg 2,237,108 2,052,589
City's net pension liability -ending 751,753 800,866
Plan fiduciary net position as a %
of total pension liability 74.85% 71.93%
Covered payroll 449,293$ 436,424$
City's net pension liability as a %
of covered payroll 167.32% 183.51%
Update on GASB 68
22
GASB Statement 72 – Fair Value
Fair Value Measurement & Application
23
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
• Defines “fair value” and “investment”
• Requires investments to be measured at fair value, with
certain exceptions
• Addresses acceptable valuation techniques
• Establishes a fair value hierarchy that categorizes the inputs to valuation techniques used to measure fair value into three
levels (level 1, 2, and 3)
• Expands disclosure requirements related to fair value
measurements and the impact of fair value measurements on
a government’s financial position
• Similar to FASB Accounting Standards Codification Topic 820,
Fair Value Measurement
24
“Fair value is 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.”
– “Fair value” is a market based exit-price measurement. – Amount received to sell an asset or paid to transfer a
liability
“An investment is a security or other asset that (a) a government holds primarily for the purpose of income or profit
and (b) has a present service capacity based solely on its
ability to generate cash or to be sold to generate cash.”
– The “investment” designation is made at acquisition and
remains for the life of the asset, even if usage changes
over time.
25
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Market – government’s principal market or most advantageous
– Market with the greatest volume and level of activity
– Market that maximizes the amount that would be received to
sell an asset or minimizes the amount that would be paid to
transfer a liability, after taking into account transaction costs
and transportation costs.
Market participants – Buyers and sellers that are in the principal (or
most advantageous) market for an asset or liability and are
independent, knowledgeable, able and willing to enter into a
transaction for asset or liability
Transaction costs – should not be adjusted
Orderly transaction – Assumes exposure to the market for a period
before the measurement date to allow for marketing activities that
are usual and customary for transactions involving such assets or
liabilities, not a forced transaction
Measurement date – date at which fair value of asset or liability is
determined 26
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
• Valuation techniques:
– Market approach – prices and other relevant information
generated by market transactions
– Cost approach – replace the current service capacity
– Income approach – converts future amounts to a single current amount
27
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Fair Value Hierarchy
– Level 1 – quoted market prices for identical assets or
liabilities in active markets
– Level 2 – inputs other than quoted market prices included
in Level 1 that are observable for an asset or liability, either
directly or indirectly
– Level 3 – unobservable inputs for asset or liability
28
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Exceptions to fair value measurement:
29
Investments in nonparticipating interest-earning investment contracts Measure using a cost-based measure - GASB 31
Unallocated insurance contracts Report as interest-earning investment contracts – GASB 31/59
Money market investments and participating interest-earning investment contracts that have a remaining maturity at the time of purchase of one year or less and are held by governments other than external investment pools
Measure at amortized cost – GASB 31
Investments held by 2a7-like external investment pools May measure at amortized cost – GASB 31
Synthetic guaranteed investment contracts that are fully benefit-responsive
Measure at contract value - GASB 53
Investments in 2a7-like external investment pools Measure at the net asset value (NAV) per share (or its equivalent) determined by the pool – GASB 59
Investments in life insurance contracts Measure at cash surrender value
Investments in common stock meeting the criteria for the equity method
Apply equity method – GASB 62
Donated capital assets, donated works of art, historical treasures, and similar assets, as well as capital assets that a government receives in a service concession arrangement
Measure at acquisition value – GASB 72
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Disclosures should be organized by asset/liability and the
following should be considered for determining level of
detail and disaggregation:
• Nature, characteristic, and risk
• Level of the fair value hierarchy
• This Statement or another Statement specifies a type for
asset/liability
• Objective/mission of government
• Characteristics of government
• Relative significance of assets/liabilities
• Whether separately issued financial statements are available
• Line items presented in statement of net position
30
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Disclosures for fair value measurements:
– For recurring and nonrecurring
• Fair value measurement at end of reporting period
• Except for investments that are measured at the NAV per
share (or its equivalent), the level of the fair value hierarchy
within which the fair value measurements are categorized
in their entirety
• Description of valuation techniques
• Change in valuation technique that has a significant
impact on results
31
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Disclosures for investments in entities that calculate the net
asset value per share:
– The fair value measurement of the investment type at the
measurement date and a description of the significant
investment
– Estimate of the period over which the underlying assets are
expected to be liquidated by the investees
– Unfunded commitments related to that investment type
– Description of the terms and conditions upon which a
government may redeem investments in the type
– Circumstances in which an otherwise redeemable investment in
the type might not be redeemable (lockup or gate)
32
Statement No. 72 – Fair Value Effective FYE June 16, 2016 and later
Disclosures for investments in entities that calculate the net
asset value per share – Cont’d: – Investments that are restricted from redemption as of the government’s
measurement date: the estimate of when the restriction from redemption
might lapse; if an estimate cannot be made, disclose that fact and how
long the restriction has been in effect
– Significant restriction on the ability to sell investments
– If a government determines that it is probable that it will sell an
investment(s) for an amount different from the NAV per share (or its
equivalent): the total fair value of all investments and any remaining
actions required to complete the sale
– Group of investments would otherwise meet the criteria in paragraph 74
but the individual investments to be sold have not been identified
33
GASB to Implement 2017
Standards to be Implemented in 2017
34
No. Title Effective Date - FYE
73 Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68
June 16, 2016/2017
74 Financial Reporting for Postemployment Benefit Plans Other than Pension Plans
June 16, 2017
77 Tax Abatement Disclosures December 16, 2016
78 Pensions Provided Through Certain Multiple-Employer Defined Benefit Pension Plans
December 16, 2016
79 External Investment Pools June/December 16, 2016
80 Blending Requirements for Certain Component Units – an amendment of GASB 14
June 16, 2017
82 Pension Issues – an amendment of GASB 67, 68 and 73 June 16, 2017/June 16, 2018
35
GASB Statements
Statement No. 73
Accounting and Financial Reporting for Pensions
and Related Assets that are not within the Scope of
GASB Statement 68, and Amendments to Certain
Provisions of GASB Statements 67 and 68
36
Statement No. 73 – Pensions Effective FYE June 16, 2016/2017 and later
• Establishes requirements for pensions that are not within the scope of GASB 68, as well as for the assets accumulated for
purposes of providing those pensions.
– Requirements for pensions – effective for fiscal years ending 6/16/17 or later
– Requirements for related assets – effective for fiscal years
ending 6/16/16 or later
• Also amends certain provisions of GASB 67 and 68 for pension
plans and pensions that are within their respective scopes.
– Amendments effective for fiscal years ending 6/16/16 or later
37
Statement No. 73 – Pensions Effective FYE June 16, 2016/2017 and later
For pensions not within the scope of GASB 68:
• Requirements of GASB 73 are similar to those of GASB 68
For pensions within the scope of GASB 68 and pension plans within the
scope of GASB 67:
• GASB 73 amends requirements related to the following:
1. Information that is required to be presented as notes to the 10-year
schedules of required supplementary information about investment-
related factors that significantly affect trends in the amounts reported
2. Accounting and financial reporting for separately financed specific
liabilities of individual employers and nonemployer contributing entities for
defined benefit pensions
3. Timing of employer recognition of revenue for the support of nonemployer
contributing entities not in a special funding situation
38
Statement No. 74
Financial Reporting for Postemployment Benefit
Plans Other than Pension Plans
39
Requirements are similar to GASB 67 (for pension
plans)
• Effective for plans for fiscal years ending June 16, 2017 or
later
Scope includes OPEB plans – Defined Benefit and Defined
Contribution administered through trusts that meet the
following criteria
– Contributions to plan and earnings are irrevocable
– OPEB plan assets are dedicated to providing benefits to
plan members
– OPEB plan assets are protected from creditors of employers
40
Statement No. 74– OPEB Effective FYE June 16, 2017/2018 and later
Required Statements for OPEB Plans
– Statement of Fiduciary Net Position
– Statement of Changes in Fiduciary Net Position
Required Disclosures
– OPEB provided, classes of plan members covered,
composition of plan’s board
– OPEB’s plan investment policies, concentration of
investments, investments exceeding 5% of net position, annual money weighted rate of return
Additional disclosures for single employer and cost
sharing OPEB plan
– Components of OPEB liability and related ratios including
net position as a percent of OPEB liability
41
Statement No. 74– OPEB Effective FYE June 16, 2017/2018 and later
Required Supplementary Information – All plans
– Money weighted rate of return on OPEB investments
Required Supplementary Information – Single
Employer and Cost Sharing Plans
– Sources of changes in net OPEB liability
– OPEB net position as a percentage of OPEB liability
– Net OPEB liability as a percentage of covered payroll
42
Statement No. 74– OPEB Effective FYE June 16, 2017/2018 and later
Measurement of Net OPEB Liability
– Total OPEB liability less OPEB plan fiduciary net position
– OPEB liability determined actuarially or alternative
measurement method if fewer than 100 plan members,
active or inactive
– Plan assets that are not administrated through trusts are
accounted for as assets of the employer in an agency
fund
43
Statement No. 74– OPEB Effective FYE June 16, 2017/2018 and later
Statement No. 77
Tax Abatement Disclosures
44
Statement No. 77 – Tax Abatements Effective FYE December 16, 2016 and later
Requires governments to disclose information about tax abatement programs from both the reporting government and
other governments that reduce the reporting government’s tax
revenues.
• A tax abatement is defined as a reduction in tax revenues
that results from an agreement between one or more
governments and an individual or entity in which
– (a) one or more governments promise to forgo tax
revenues to which they are otherwise entitled and
– (b) the individual or entity promises to take a specific
action after the agreement has been entered into that
contributes to economic development or otherwise benefits the governments or the citizens of those
governments.
45
Statement No. 77 – Tax Abatements Effective FYE December 16, 2016 and later
General Disclosure Principles
• Should distinguish between tax abatements resulting from
agreements that are entered into by the reporting
government and agreements that are entered into by other
governments
• May be provided individually or aggregated
• Organized by each major tax abatement program,
• Organized by the government that entered into the tax
abatement agreement
46
Statement No. 77 – Tax Abatements Effective FYE December 16, 2016 and later
The new disclosures about a government’s own tax
abatement agreements include:
– The purpose of the tax abatement program
– The tax being abated
– The authority under which tax abatements are entered into
– The mechanism by which taxes are abated
– Provisions for recapturing abated taxes
– The types of commitments made by tax abatement recipients
– Dollar amount of taxes abated
– Other commitments made by a government in tax
abatement agreements, such as to build infrastructure
assets
47
Statement No. 77 – Tax Abatements Effective FYE December 16, 2016 and later
The new disclosures about tax abatements that are
entered into by other governments and reduce the
reporting government’s tax revenues include:
– The name of the government entering into the abatement
agreement
– The tax being abated (received and receivable by
government entity)
– Dollar amount of the reporting government’s taxes
abated.
Governments that are legally prohibited from disclosing specific
information should disclose the general nature of the tax
abatement information omitted and the specific source of the legal prohibition.
48
Statement No. 78
Pensions Provided Through Certain Multiple-
Employer Defined Benefit Pension Plans
49
Statement No. 78 – Pensions Effective FYE December 16, 2016 and later
• Amends the scope and applicability of GASB 68 to exclude certain private or
federally sponsored cost-sharing multiple-employer defined benefit pension
plans, and establishes requirements for recognition and measurement of
pension expense, expenditures, and liabilities; note disclosures; and required
supplementary information for such pensions
• Results from the inability to obtain measurements and other relevant data
points needed to comply with GASB 68
• Focuses employer accounting and financial reporting requirements for those
pension plans on obtainable information
50
Statement No. 78 – Pensions Effective FYE December 16, 2016 and later
Recognition and Measurement in Financial Statements
• Economic Resources Measurement Focus
– Pension expense for required contributions
– Payable for unpaid required contributions
• Current Financial Resources Measurement Focus
– Pension expenditures should equal required contributions
associated with pay periods during reporting period
• Notes to Financial Statements
– Name of plan and who administers
– Whether plan issues publicly available report and how to obtain
– Description of benefit terms
– Description of contribution requirements
• Required Supplementary Information
– Required contributions for last 10 years
51
Statement No. 79
External Investment Pools
52
Statement No. 79 – Investment Pools Effective FYE June/December 16, 2016 and later
Existing standards provide that external investment pools may measure their investments at amortized cost for financial
reporting purposes if they follow substantially all of the provisions
of the SEC’s Rule 2a7. Likewise, participants in those pools are
able to report their investments in the pool at amortized cost per share.
• The SEC’s Rule 2a7 regulations were changed in 2014
(effective April 2016)
• Would cause many governments and investments to no longer qualify to measure their investments at amortized cost
GASB 79 replaces the reference in existing GASB literature to Rule
2a7 with criteria that are similar in many respects to those in Rule 2a7 to allow many pools to continue to qualify for amortized cost
accounting.
53
Statement No. 79 – Investment Pools Effective FYE June/December 16, 2016 and later
Criteria to elect to measure investments at amortized cost
– Transacts with participants at stable net asset value per share @
$1/share
– Meets portfolio maturity requirements (generally weighted
average maturity of 60 days or less, weighted average life of 120
days or less)
– Meets portfolio quality requirements (rated by NRSRO,
denominated in U.S. dollars with highest rating of short-term
category or long-term equivalent)
– Meets portfolio diversification requirements (no more than 5%
from one issuer)
– Meets portfolio liquidity requirements (to meet reasonable
foreseeable redemptions)
– Meets shadow pricing requirements (net assets per share
calculated at least monthly must be within one-half of1% of net
asset value per share)
54
Statement No. 79 – Investment Pools Effective FYE June/December 16, 2016 and later
GASB 79 also establishes additional note disclosure
requirements for governments that participate in
those pools.
• Information about limitations or restrictions on
participant withdrawals
– Redemption notice periods
– Maximum transaction amounts
– Liquidity fees/redemption gates
55
Statement No. 80
Blending Requirements for Certain Component
Units
56
Statement No. 80 – Blending Effective FYE 2017
This Statement requires a component unit to be included in the reporting entity financial statements using the blending method if
the component unit is organized as a not-for-profit corporation in
which the primary government is the sole corporate member, as
identified in the component unit’s articles of incorporation or bylaws, and the component unit is included in the financial
reporting entity pursuant to the provisions in paragraphs 21-37 of
Statement 14, as amended. Financial Accountability
• Appointment of a voting majority
• Imposition of Will
• Financial Benefit to or Burden on a Primary Government
Does not apply to component units addressed in Statement No.
39 – Determining Whether Certain Organizations are Component
Units 57
Statement No. 82
Pension Issues – An Amendment of
GASB Statement Nos. 67, 68, and 73
58
Statement No. 82 – Pension Issues Effective FYE 2017 or later
• Presentation of Payroll Related Measures in
Required Supplementary Information
• Selection of Assumptions
• Classification of Employer Paid Member
Contributions
59
Statement No. 82 – Pension Issues Effective FYE 2017 or later
• Presentation of Payroll Related Measures in
Required Supplementary Information
– Change in definition
– Covered payroll is payroll on which contributions to a
pension plan are based
– Required Supplementary Information should be restated for
all years presented, as practicable
60
Statement No. 82 – Pension Issues Effective FYE 2017 or later
• Selection of Assumptions
– Selection of assumptions used to calculate the net pension
liability and related measures
– A deviation, as the term is used in Actuarial Standards of
Practice issued by the Actuarial Standards Board, from the guidance in an Actuarial Standard of Practice should not
be considered to be in conformity with the requirements of
Statement 67, Statement 68, or Statement 73.
– Effective for employer in the first reporting period in which the measurement date of the pension liability is on or after
June 15, 2017 (employer’s pension liability is measured at a
date other than the employer’s most recent fiscal year
end)
– Applied prospectively
61
Statement No. 82 – Pension Issues –
Cont’d Effective FYE 2017 or later
• Classification of Employer Paid Member
Contributions
– Payments made by the employer to satisfy
contribution requirements identified by plan terms
• No. 67 – classified as plan member contributions
• No. 68 – classified as employee contributions, including
for determining cost-sharing employer’s portion
• Recognized in period which contribution is assessed
• Restated for all prior periods as applicable
• Required Supplementary Information should be restated
for all years presented, as practicable
62
Questions?
63
GASB to Implement 2018
Standards to be Implemented in 2018
64
No. Title Effective Date
75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
Fiscal years beginning after June 15, 2017
81 Irrevocable Split-interest Agreements Fiscal years beginning after December 15, 2016
65
GASB Statements – effective 2018
Statement No. 75 – OPEB
• Addresses accounting and financial reporting by
governmental entities that provide other post employment benefits (OPEB) to their employees or
employees of other governmental units, such as retiree
health insurance, not just those administered by a Trust.
• Establishes standards for recognizing and measuring
liabilities, deferred outflows of resources, deferred inflows
of resources, and expense/expenditures. – Defined benefit OPEB - identifies the methods and assumptions that are
required to be used to project benefit payments, discount projected benefit
payments to their actuarial present value, and attribute that present value
to periods of employee service.
– Defined contribution OPEB - requires recognition of OPEB expense for the
amount of contributions or credits to employees’ accounts that are defined
by the benefit terms as attributable to employees’ services in the period, net
of forfeited amounts that are removed from employees’ accounts
66
Statement No. 75 – OPEB
• Replaces GASB Statements No. 45, Accounting and
Financial Reporting by Employers for Postemployment
Benefits Other Than Pensions, as amended, and GASB
No. 57, OPEB Measurements by Agent Employers and
Agent Multiple-Employer Plans.
• Similar to GASB 68 for pension accounting and
reporting
• GASB Statement No. 75 (GASB 75) along with
Statement No. 74 significantly change how
governments calculate and report annual costs and
long term obligations associated with OPEB.
67
Statement No. 75 – OPEB
GASB 75 requirements are defined separately for
OPEB plans administered through a Trust.
• Governments that do not provide OPEB through
a trust meeting the following criteria will report
the total OPEB liability related to their employees.
– Contributions to the OPEB plan from the
government and other entities, as well as earnings
on those contributions, are irrevocable. „
– OPEB plan assets are dedicated to providing OPEB
to the plan members. „
– OPEB plan assets are protected from creditors
68
Statement No. 75 – OPEB
GASB 75 further defines requirements based on:
• Number of Employees
• Whether OPEB obligations and OPEB plan assets are shared
by the employers:
– Single Employers – OPEB plans in which OPEB is provided to the employees of only one employer
– Agent Employers - OPEB plans in which plan 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.
– Cost Sharing Employers - OPEB plans in which the OPEB
obligations to the employees of more than one employer are
pooled and plan assets can be used to pay the benefits of the
employees of any employer that provides OPEB through the
OPEB plan.
69
Statement No. 75 – OPEB
• Net OPEB liability = Total OPEB liability – OPEB
plan’s fiduciary net position
(Total OPEBL liability = portion of the present value of
projected benefit payments to be provided to current active and inactive employees that is attributed to
those employees’ past periods of service (total OPEB
liability), less the amount of the OPEB plan’s fiduciary net
position.)
• Total OPEB liability generally required to
determined through an actuarial valuation every
two years with more frequent valuations or
calculations encouraged.
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Statement No. 75 – OPEB
Valuation of total OPEB liability:
• Alternative method may be used in place of an
actuarial valuation to determine value of the liability
if less than 100 (active and inactive) employees
• If no actuarial valuation or calculation - total OPEB
liability is required to be based on update
procedures to roll forward amounts from an earlier
actuarial valuation or alternative measurement
method calculation (performed as of a date no
more than 30 months and 1 day prior to the
employer’s most recent fiscal year-end)
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Statement No. 75 – OPEB
Projection of benefit payments:
• Must be based on claims costs, or age-adjusted premiums
approximating claims costs, and the benefit terms and legal
agreements existing at the measurement date.
• Required to be discounted to their actuarial present value
using the single rate that reflects
– (1) a long-term expected rate of return on OPEB plan
investments to the extent that the OPEB plan’s fiduciary net
position is projected to be sufficient to make projected benefit
payments and OPEB plan assets are expected to be invested
using a strategy to achieve that return and
– (2) a tax-exempt, high-quality municipal bond rate to the
extent that the conditions for use of the long-term expected
rate of return are not met.
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Statement No. 75 – OPEB
Projection of benefit payments (cont.):
• Required that the actuarial present value of projected
benefit payments be attributed to periods of employee
service using the entry age actuarial cost method with each period’s service cost determined as a level
percentage of pay.
• If fewer than 100 employees (active and inactive) -
alternative measurement method is an approach that
includes the same broad measurement steps as an
actuarial valuation however, it permits simplification of
certain assumptions.
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Statement No. 75 – OPEB
Single and Agent Employers
• The net OPEB liability measured as of a date no earlier than
the end of the employer’s prior fiscal year and no later than
the end of the employer’s current fiscal year (the measurement date)
• Changes in the net OPEB liability are reported as OPEB
expense, deferred outflows or deferred inflows or resources
– Most changes in the net OPEB liability should be included in
OPEB expense in the period of the change
– Employer contributions subsequent to the measurement date of
the net OPEB liability which are required to be reported as
deferred outflows of resources.
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Statement No. 75 – OPEB
Single and Agent Employers
Notes to the Financial Statements
– types of benefits provided
– number and classes of employees covered by the benefit terms
– for the current year, sources of changes in the net OPEB liability
– Significant assumptions and other inputs used to calculate the
total OPEB liability
– the date of the actuarial valuation or calculation using the
alternative measurement method used to determine the total
OPEB liability
– information about changes of assumptions or other inputs and
benefit terms
– the basis for determining employer contributions to the OPEB
plan, and information about the purchase of allocated
insurance contracts, if any.
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Statement No. 75 – OPEB
Single and Agent Employers
Required Supplementary Information
Determined as of the measurement date, for each of the 10 most recent
fiscal years:
– Sources of changes in the net OPEB liability
– The components of the net OPEB liability and related ratios, including
the OPEB plan’s fiduciary net position as a percentage of the total
OPEB liability, and the net OPEB liability as a percentage of covered-
employee payroll.
– Actuarially determined contribution, contributions to the OPEB plan,
and related ratio, if applicable
– Contribution requirement that is established by statute or contract, if
applicable
– Significant methods and assumptions used in calculating the
actuarially determined contributions, if applicable
– Employer is required to explain certain factors that significantly affect
trends in the amounts reported in the schedules
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Statement No. 75 – OPEB
Cost-Sharing Employers
• Recognize a liability for its proportionate share of the net OPEB
liability
• Recognize OPEB expense and report deferred outflows of
resources and deferred inflows of resources related to OPEB for its proportionate share
– Effects of the following are to be recognized as expense in a
systematic and rational manner
• a change in the employer’s proportion of the collective net OPEB liability
• differences during the measurement period between certain of the
employer’s contributions and its proportionate share of the total of
certain contributions from employers included in the collective net OPEB
liability are required to be determined.
– Employer contributions to the OPEB plan subsequent to the
measurement date of the collective net OPEB liability also are
required to be reported as deferred outflows of resources related to
OPEB.
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Statement No. 75 – OPEB
Cost-Sharing Employers
Notes to the Financial Statements
– Descriptive information about the OPEB plans through which
the OPEB is provided.
– The discount rate and assumptions made in the measurement of their proportionate shares of net OPEB
liabilities
– How contributions to the OPEB plan are determined
Required Supplementary Information
10-year schedules containing:
– The net OPEB liability and certain related ratios
– Information about statutorily or contractually required
contributions, contributions to the OPEB plan, and related
ratios, if applicable.
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Statement No. 75 – OPEB
Defined Benefit OPEB - administered through Trusts
that did not meet the specified criteria
• Employers that provide insured benefits
– premiums are paid by employers while employees are in active
service
– insurance company unconditionally undertakes an obligation to
pay the OPEB of those employees
• Record expense/expenditures equal to the amount of premiums /payments in accordance with the agreement
with the insurance company.
• Disclose arrangement
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Statement No. 75 – OPEB
Special Funding Situations
• Defined as circumstances in which a nonemployer entity is
legally responsible for providing certain forms of financial
support for OPEB of the employees of another entity.
• Measurement of expenses, deferred outflows and deferred
inflows of resources are similar to Cost-Sharing Employers
• Notes to financial statements - information about the
amount of support provided
• Required Supplementary Information - similar to Cost-Sharing
Employers
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Statement No. 81 – Irrevocable Split-
Interest Agreements
Purpose:
Improves accounting and financial reporting by providing recognition and
measurement guidance for situations in which a government is a beneficiary
of a split-interest agreement.
Define:
A split-interest agreement is an agreement used by donors to provide
resources to two or more beneficiaries. A donor transfers resources to an
intermediary to hold and administer for the benefit of a government and at
least one other beneficiary.
Recognition:
A government recipient recognizes assets, liabilities, and deferred inflows of
resources at the inception of the agreement. Furthermore, GASB 81 requires
recognition of assets representing its beneficial interests in irrevocable split-
interest agreements that are administered by a third party, if the government
controls the present service capacity of the beneficial interests. Revenue is
recognized when the resources become applicable to the reporting period.
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Questions?
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