2. Agenda + surprise fun and games
GASB Updates
Uniform Guidance Developments
Yellow Book
AICPA
2
3. Statement No. 72: Fair Value
Measurement and Application
Statement No. 82: Pension Issues â An
Amendment of GASB Statement No. 67,
No. 68, and No. 73 (WITH EARLY
IMPLEMENTATION)
3
GASBS in Review
4. GASB Statement No. 72
Fair Value Measurement and Application
(periods beginning after June 15, 2015)
ď§ The statement addresses accounting
and financial reporting issues related
to fair value measurements; it defines
fair value as 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.
It also provides guidance for
determining a fair value measurement
for financial reporting and disclosure
purposes
Fair Value
Level
3
Level
2
Level
1
4
5. GASB Statement No. 72
5
Quoted prices
(unadjusted) in
active markets for
identical assets or
liabilities
Level 1
Quoted prices for
similar assets or
liabilities, quoted
prices for identical
assets or liabilities
in markets that
are not active, or
other than quoted
prices that are
observable
Level 2
Unobservable
inputs
Level 3
6. GASB Statement No. 72
ď§ Investments not measured at fair value include the following:
⢠Money market investments
⢠External investment pools (2a7-like)
⢠Investments in life insurance contracts
⢠Common stock meeting the criteria for the equity method
⢠Unallocated insurance contracts
⢠Synthetic guaranteed investment contracts
ď§ Additional note: a government is permitted in certain
circumstances to establish the fair value of an investment that
does not have a readily determinable fair value by using the net
asset value per share (or its equivalent) of the investment
6
7. GASB Statement No. 82
Pension Issues â An Amendment of GASB Statement No. 67, No.
68, and No. 73
(periods beginning after June 15, 2016; periods beginning after June 15, 2017 for
measurement dates after the employerâs most recent fiscal year)
ď§ The statement addresses the presentation of payroll-related
amounts in the required supplementary information, the selection
of assumptions and the treatment of deviations from the guidance
in an Actuarial Standard of Practice for financial reporting
purposes, and the classification of payments made by employers
to satisfy employee (plan member) contribution requirements
ď§ Covered Payroll: the payroll on which contributions to a pension
plan are based
7
9. GASBS Updates â are we done yet?
9
Statement No. 84
(Fiduciary Activities)
FY20
Statement No. 85
(Omnibus)
FY19
Statement No. 86 â
Certain Debt
Extinguishment Issues
FY18
Statement No. 87 âLeases
FY21
Other GASB Projects : Implementation Guide 2017-1 Issued, Reporting Model Re-examination
10. Statement No. 74/75: Financial Reporting
for Postemployment Benefit Plans Other
Than Pension Plans / Accounting and
Financial Reporting for Postemployment
Benefits Other Than Pensions
Statement No. 77: Tax Abatement
Disclosures
10
GASBS Updates
11. GASB Statement No. 74
Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
(periods beginning after June 15, 2016)
ď§ The statement replaces Statements No. 43 and 57; additionally, the statement
also replaces requirements from Statements No. 25, 43, and 50
ď§ The scope of the statement includes OPEB plans (defined benefit and defined
contribution) administered through trusts that meet the following criteria:
⢠Contributions from employers and nonemployer contributing entities to the plan (and
earnings on those contributions) are irrevocable
⢠Plan assets are dedicated to providing benefits to plan members in accordance with
the benefit terms
⢠Plan assets are legally protected from the creditors of employers, nonemployer
contributing entities, and the plan administrator. If the plan is a defined benefit plan,
plan assets also are legally protected from creditors of the plan members
ď§ The statement also includes OPEB plans (defined benefit and defined
contribution) not administered through trusts and defined contribution OPEB
plans administered through trusts
11
12. GASB Statement No. 75
Accounting and Financial Reporting for Postemployment Benefits Other Than
Pensions
(periods beginning after June 15, 2017)
ď§ The statement replaces Statements No. 43 and 57
ď§ The scope of the statement includes OPEB plans (defined benefit and defined
contribution) administered through trusts that meet the following criteria:
⢠Contributions from employers and nonemployer contributing entities to the plan (and
earnings on those contributions) are irrevocable
⢠Plan assets are dedicated to providing benefits to plan members in accordance with
the benefit terms
⢠Plan assets are legally protected from the creditors of employers, nonemployer
contributing entities, the plan administrator, and the plan member
ď§ The statement also includes OPEB plans (defined benefit and defined
contribution) not administered through trusts and defined contribution OPEB
plans administered through trusts
12
13. GASB Statement Nos. 74/75
ď§ When are these statements effective?
⢠Statement No. 74 is effective for OPEB plans (ex. ASRS â health insurance
benefit) for fiscal yearâs beginning after June 15, 2016
⢠Statement No. 75 is effective for OPEB employers (ex. employers â school
districts) for fiscal yearâs beginning after June 15, 2017
ď§ Are these statements similar to the pension statements (Statements
Nos. 67/68), but for OPEB?
⢠Yes
⢠Employer governments participating in OPEB plans will be reporting their
respective net OPEB liability, as well as related deferred outflows of
resources and deferred inflows of resources
⢠Required notes to the financial statements and required supplementary
information are significant
⢠Governmental fund financial statements are not directly affected
13
15. GASB Statement Nos. 74/75
ď§ What is the difference between a plan administered by a trust and a plan not
administered by a trust?
⢠Contributions from employers and nonemployer contributing entities (and earnings on
those contributions) are irrevocable in a Trust
⢠Plan assets are dedicated to providing benefits to plan members in accordance with
the benefit terms in a Trust
⢠Plan assets are legally protected from the creditors of employers, nonemployer
contributing entities, the plan administrator, and the plan member in a Trust
ď§ Is GASB Statement Nos. 74/75 applicable to OPEB plans not administered
through a Trust?
⢠Yes
ď§ What do I need to do for GASB Statement Nos. 74/75?
⢠Ensure your actuary is aware of the additional/new valuation requirements for GASB
Statement Nos. 74/75
⢠Ensure you receive a valuation that can be used for your FY18 financial statements
15
16. GASB Statement Nos. 74/75
ď§ Actuarial valuation of total OPEB liability
⢠Project benefit payments
ďą Based on claims costs (or age-adjusted premiums approximating claims costs)
ďą Evaluation of benefit terms (through plan documents and discussions)
ďą Consideration of legal or contractual caps on benefit payment
ďą Incorporate the effect of projected salary changes and service credits (if
applicable)
ďą Incorporate the effect of automatic postemployment benefit changes (including
COLA)
ďą Include taxes or other assessments expected to be imposed on benefit payments
⢠Discounted projected benefit payments (to actuarial present value)
ďą Using a single discount rate that reflects the long-term expect rate of return (or a
tax-exempt, high quality municipal bond rate, if certain conditions are not met)
⢠Actuarial present value attributed to periods of plan members service
ďą Using entry age (cost method) and level percentage of pay (periods service cost)
16
17. GASB Statement Nos. 74/75
ď§ Measurement of the net OPEB liability
⢠Total OPEB liability less the OPEB planâs fiduciary net position
⢠Total OPEB liability valuation requires the use of an actuary; except, if a plan
has fewer than 100 members (active and inactive) â an alternative
measurement calculation is available
⢠Actuarial valuation or calculation is required every two years (every year is
encouraged)
⢠The valuation or calculation date of the total OPEB liability cannot be more
than 30 months and 1 day earlier than the employerâs current fiscal year-end;
if the valuation is not performed on the measurement date, the valuation will
need to be rolled-forward to the measurement date
⢠The measurement date of the net OPEB liability cannot be more than 12
months earlier than the employerâs current fiscal year -end
⢠All assumptions for the determination of the total OPEB liability are generally
required to be in conformity with the guidance in the Actuarial Standards of
Practice
17
18. GASB Statement Nos. 74/75
Valuation Date
⢠No more than 30
months and 1 day
before the
employerâs current
fiscal year-end
Measurement
Date
⢠No more than 12
months before the
employerâs current
fiscal year-end
Reporting Date
⢠Current fiscal year-
end
18
19. GASB Statement No. 75
Notes to Financial Statements
Single/Agent
Employer
Cost-Sharing
Employer
OPEB Plan Description ďź ďź
Information About the Net OPEB Liability: ďź ďź
-Assumptions and Other Inputs ďź ďź
-OPEB Planâs Fiduciary Net Position ďź ďź
-Changes in the Net OPEB Liability ďź
-Proportionate Share of Collective Net OPEB Liability ďź
19
20. GASB Statement No. 75
Required Supplementary Information
Single/Agent
Employer
Cost-Sharing
Employer
Schedule of Changes in Net OPEB Liability and Related Ratios ďź
Schedule of Contributions ďź ďź
Schedule of Proportionate Share of the Net OPEB Liability ďź
20
21. GASB Statement Nos. 74/75
ď§ What happens if there is not a trust (or the related requirements are not
met)?
⢠For OPEB plans
ďą Accumulated assets for OPEB purposes are required to be reported as assets of the
employer (or nonemployer contributing entity)
ďą If the assets are held in a fiduciary capacity, then they are required to be report in an
agency fund
ďą Assets in excess of liabilities for benefits due to plan members, as well as accrued
investment and administrative expense, is required to be reported as a liability to the
participating employers (or nonemployer contributing entity)
⢠For OPEB employers
ďą For defined benefit OPEB plans (other than insured benefits), an approach similar to
plans with a trust related to measurement of OPEB liabilities, OPEB expense, and
deferred inflows and outflows of resources is required; additionally, similar note
disclosures and required supplementary information is required. However, no OPEB
plan assets are incorporated
ďą For insured benefits (through a defined benefit OPEB plan), expenses/expenditures
are recognized in the amount equal to premiums or other payments; additionally, a
brief description of the benefits provided is required
21
22. GASB Statement No. 75
ď§What about defined contribution OPEB plans?
⢠For defined contribution OPEB plans, OPEB expense is
recognized for the amount of contributions or credits to
employeesâ accounts, net of forfeited amounts; a change in OPEB
liability is recognized as the difference between OPEB expense
and amounts paid.
⢠Additionally, a plan description (similar to that of defined benefit
plans), the amount of OPEB expense, the amount of forfeitures
reflected in OPEB expense, and the amount of the employerâs
liability is required for the notes to financial statements; no
required supplementary information is required.
22
23. GASB Statement No. 75 Overall Impact
ď§ Financial Statements
⢠Possible decrease in net position
⢠Possible negative unrestricted net position
ď§ Notes and RSI Disclosures
⢠Significant increase in additional information and schedules
ď§ Additional Questions
⢠What is all this?
⢠Requirement to accumulate resources to fund the net OPEB liability
⢠Impact on bond and credit ratings
ď§ Resources
⢠GASB â standards, implementation guides
⢠Arizona Auditor General
⢠State OPEB plan website
⢠OPEB plan management and actuary report
23
24. GASB Statement No. 77
24
Agreement in
Place
Tax Abated
Economic
Development
25. GASB Statement No. 77
Tax Abatement Disclosures
(periods beginning after December 15, 2016)
ď§ The statement requires governments that entered into tax abatement
agreements to disclose the following information about the agreements
⢠Brief descriptive information, such as the tax being abated, the authority
under which tax abatements are provided, eligibility criteria, the mechanism
by which taxes are abated, provisions for recapturing abated taxes, and the
types of commitments made by tax abatement receipts
⢠The gross dollar amount of taxes abated during the period
⢠Commitments made by the government, other than to abate taxes, as part of
a tax abatement agreement
ď§ Additionally, the disclosures should be organized by major tax
abatement program and may disclose information for individual tax
abatement agreements within those programs
25
26. GASB Statement No. 77
Brief Descriptive
Information
Govâtâs Own
Abatements
Other
Govâtâs
Abatements
Name of government ďź
Tax being abated ďź ďź
Name of program ďź
Purpose of program ďź
Authority to abate taxes ďź
Eligibility criteria ďź
Abatement mechanism ďź
Recapture provisions ďź
Types of recipient
commitments
ďź
26
Other Disclosures
Govâtâs Own
Abatements
Other
Govâtâs
Abatements
Dollar amount of taxes
abated
ďź ďź
Amounts received or
receivable from other
governments associated
with abated taxes
ďź ďź
Other commitments by
the government
ďź
Quantitative threshold
for individual disclosure
ďź ďź
Information omitted
due to legal prohibitions
ďź ďź
27. Blending Requirements for Component Units
GASB Statement No. 80
ď§ The statement amends the blending requirements for the
financial statement presentation of component units of all state
and local governments. The additional criterion requires
blending of a component unit incorporated as a not-for-profit
corporation in which the primary government is the sole
corporate member. The additional criterion does not apply to
component units included in the financial reporting entity
pursuant to the provisions of Statement No. 39
ď§ Effective fiscal year 2017
27
28. Irrevocable Split-Interest Agreements
GASB Statement No. 81
ď§ The statement requires that a government that receives funds through an
irrevocable split-interest agreement recognize related assets, liabilities,
and deferred inflows of resources at the inception of the agreement.
Additionally, the statement requires that revenues are recognized when the
resources become applicable to the reporting period
ď§ The statement also requires that a government recognize assets
representing its beneficial interest in irrevocable split-interest agreement
when they are administered by a third party (if the government controls the
present service capacity of the beneficial interests
ď§ Effective for fiscal year 2018
28
29. Fiduciary Activities
GASB Statement No. 84
ď§ The term âCustodial Fundsâ will replace âAgency Fundsâ
ď§ All fiduciary funds to be reported in the Statement of Changes in
Fiduciary Net Position
ď§ Any administrative or direct financial involvement of the assets will
result in the reporting of the activity as a governmental fund (or
business-type activity)
⢠Administrative or direct financial involvement includes maintaining
checkbook, reconciliation of account, expenditure compliance
determination, etc.
⢠I.e. most all student activities funds will now be reported as a
governmental fund
29
31. Fiduciary Activities
GASB Statement No. 84
ď§ Pension trust funds
⢠Used to report pension and OPEB plans that are administered through trusts
ď§ Investment trust funds
⢠Used to report fiduciary activities form the external portion of investment pools
and individual investment accounts that are held in trust
ď§ Private-purpose trust funds
⢠Used to report all fiduciary activities that are not required to be reported in
pension trust or investment trust funds
ď§ Custodial funds
⢠Other fiduciary activities that are not reported in another category
ď§ Effective for fiscal year 2020, earlier application is encouraged
31
33. Lease Accounting
GASB Statement No. 87
ď§Will effectively eliminate the distinction between capital
and operating leases
ď§Leases will create a new intangible asset
ď§Leases with terms less than 12 months will recognize
expenses based on contract terms
ď§FASB and international standards have made similar
changes
ď§Final pronouncement issued in June 2017. Effective for
FY21
33
35. Financial Reporting Model Improvements
Invitation to Comment
ď§Three proposed approaches:
⢠Near-term approach â focus on activity within 90 days of
year-end
⢠Short-term approach â focus on activity with 12 months of
year-end
⢠Long-term approach â effectively accrual accounting that
excludes capital assets and capital-related debt
35
36. Financial Reporting Model Improvements
Invitation to Comment â Near-Term Approach
ď§ Most similar to current model- excludes items of a long-term nature
ď§ Normally would include recognition of items 60-90 days from end of the
reporting period
ď§ Potential Benefits:
⢠Would report amounts available for spending, conceptually similar to
modified accrual
⢠Similar to cash flow information, so statement of cash flows wouldnât be
necessary
ď§ Challenges:
⢠Potential for inconsistencies still exist
⢠Amounts available for spending will be overstated and perhaps
misleading to users of the financial statements
36
37. Financial Reporting Model Improvements
Invitation to Comment â Short-Term Approach
ď§Focus is on one-year fiscal period (operating cycle)
ď§Potential Benefits:
⢠Would recognize all of the obligations that are payable and
normally due within the next cycle and the resources available in
that same cycle
⢠Better basis for inter-period equity and align with the budgetary
cycle
ď§Challenges:
⢠Additional efforts in preparing and auditing
⢠More estimations and assumptions for liabilities
⢠Statement of cash flows would be required, additional preparation
and audit costs
37
38. Financial Reporting Model Improvements
Invitation to Comment â Long-Term Approach
ď§ Would recognize the transactions when they take place,
regardless of when cash is received or paid, i.e. accrual basis
ď§ Does not recognize capital assets or capital-related debt
ď§ Potential Benefits:
⢠Conceptually consistent recognition principles
⢠Better basis for assessing inter-period equity
⢠Few differences from the government-wide statements
ď§ Challenges:
⢠Inconsistency in treatment of capital assets and capital-related debt
differently from other assets and liabilities.
⢠Statement of cash flows would be required, additional preparation and
audit costs
38
39. Financial Reporting Model Improvements
Invitation to Comment
ď§All three would exclude capital assets and capital-
related debt
ď§All three approaches would require a same-page
reconciliation to the government-wide statements
ď§Short-term and long-term approaches would likely
require a statement of cash flows
ď§Budgetary comparison to original budget may be
required
39
40. Financial Reporting Model Improvements
Invitation to Comment
ď§Different views on the definition of financial resources â
considerations given to removing prepaid items and
inventory from the balance sheet
ď§Proposed changes to the existing format of the
governmental fund financial statements
ď§Possible changes to the four categories for the
statement of cash flows
ď§Comments on ITC due March 31, 2017
ď§Estimated timeline 2020/2021
40
41. Items in Pre-Agenda Research
ď§Conduit Debt
ď§Going Concern Disclosures
ď§Note Disclosure Reexamination
ď§Social Impact Bonds
ď§Information Technology Agreements- Including Cloud
Computing
Major Project
Revenue Recognition
41
43. Audit Findings
ď§Increases the threshold for reporting known and likely
questioned costs from $10,000 to $25,000
ď§Requires identification of whether audit finding is a
repeat from the immediately prior audit and if so the
prior year audit finding number
ď§Provides that audit finding numbers be in the format
prescribed by the data collection form, i.e. 2017-001
ď§Status of prior year âYellow Bookâ findings now required
43
44. Small Purchases Procurements
ď§Small purchases are procurements using Federal funds
between $3,000 and $150,000
ď§Federal guidelines do require competitive procurement
methods
ď§Intended to be relatively simple and informal
ď§Quotations required from more than one source
ď§Sources may be online search, public websites, phone
quotation, etc.
44
45. Other Procurement Considerations
Must maintain written standards of conduct covering conflicts of interest
with respect to employees engaged in the selection, award, and
administration of contracts, including disciplinary actions for violations
Definition of supplies revised to include computer equipment with an
acquisition cost of less than $5,000
Contracting with small and minority business, womenâs business
enterprises and labor surplus area firms
45
46. Post Federal Award Requirements â
Subrecipient Monitoring
ď§All pass-through entities must:
⢠Ensure every subaward includes the thirteen required data
elements listed in §200.338
⢠Evaluate each subrecipientâs risk of noncompliance
⢠Consider imposing additional award conditions
⢠Monitor the activities of the subrecipient
⢠Provide training, assistance and on-site review if deemed
necessary
⢠Verify that a Single Audit is performed if required
⢠Consider taking enforcement action for noncompliance
46
47. Frequently Asked Questions-FY 2017
ď§ Indirect Costs versus Administrative Costs
ď§ Grace period for updating Procurement Standards
⢠Non-federal entity- 7/1/17
⢠Subrecipient risk assessment, findings
ď§ Organizing the content of the SEFA
⢠Alternative state methods
⢠Subtotals by agency
⢠Program clusters
ď§ Auditee Responsibility
⢠Summary of significant prior audit findings
⢠Corrective action plan
https://cfo.gov/wp-content/uploads/2017/08/July2017-
UniformGuidanceFrequentlyAskedQuestions.pdf
47
48. SEFA
Face of the SEFA must include -
â˘Noncash assistance
â˘Loan programs, including outstanding balances
â˘Loan guarantee programs
â˘Clusters
48
49. New Federal CFDA Schematic
ď§Scheduled effective date of October 1, 2018
ď§Numbering construct will change from ##.### to ###.####
ď§Prefix to align with the 3-digit agency code listed in the
Treasury Account Symbol chart of accounts
ď§Examples
⢠Dept. of Education: 091.0910
⢠Dept. of Transportation: 069.0205
⢠Dept. of Housing: 070.0872
49
51. When Does the Yellow Book Apply?
ď§ When required (i.e. law, regulation, contract)
⢠HUD Audit Guide, US Dept. of Education Audit Guide
⢠Increased application to For-Profit entities
ď§ Usually participation in federal programs (i.e. single
audit)
ď§ Most governmental performance audits
ď§ Voluntary election by the auditee
ď§ Updated revision of Yellow Book expected to be
released as an exposure draft in next month
51
52. Additional Yellow Book Requirements
ď§ Additional audit report
⢠Internal control over financial reporting
⢠Report on compliance
ď§ Additional independence documentation
ď§ Auditor competence and CPE
ď§ Additional considerations for material noncompliance
ď§ Considerations for abuse of funds
52
54. Yellow Book Findings Format
ď§ Elements of the finding
⢠Criteria â what should we have seen?
⢠Condition â what did we see?
⢠Cause â why did we see what we saw?
⢠Effect â what is the result of what we saw?
ď§ Views of responsible officials
ď§ Recommendations
ď§ Status for prior year Yellow Book findings now
required for Single Audits
54
55. Yellow Book Revision
ď§Major changes
⢠New format to differentiate requirements from application
guidance
⢠Independence
⢠Specialists
⢠Continuing Professional Education (CPE)
⢠Peer review
⢠New financial audit requirements for waste
55
57. Revised Code of Professional Conduct
ď§ Two New Conceptual Frameworks
ď§ Structure
⢠Preface
⢠Part 1: Members in public practice (includes independence)
⢠Part 2: Members in business
⢠Part 3: All Other Members
ď§ New Numbering Format
⢠Appendix D to Code is a mapping document to the prior code
citations
57
58. Code of Conduct - Members in Business
ď§ Prohibits a member from knowingly misrepresenting facts or subordinating his or
her judgment
ď§ Requires a member to be candid and not knowingly misrepresent facts when
dealing with an external accountant
ď§ Requires a member to have the knowledge required to perform duties and perform
additional research or seek consultation when needed
ď§ Requires a member to correct an entityâs financial statements that are materially
false or misleading
ď§ Requires a member to comply with regulations regarding the timely filing of
personal tax returns
ď§ Must maintain confidentially of employerâs records and may not use confidential
information as a result of prior employment to his or her personal advantage or
advantage of a third party, such as a prospective employer
58
59. Conflicts of Interest (COI)
ď§ Examples of Conflict of Interest for Members in Business
⢠Serving in a management or governance position for two employing organizations
and acquiring confidential information from one employing organization that could
be used by the member to the advantage or disadvantage of the other employing
organization
⢠Being responsible for selecting a vendor for the memberâs employing organization
when the member or his or her immediate family member could benefit financially
from the transaction
⢠Serving in a governance capacity or influencing an employing organization that is
approving certain investments for the company in which one of those specific
investments will increase the value of the personal investment portfolio of the
member or his or her immediate family member
ď§ Steps outlined for addressing conflicts of interest
ď§ Identify COI, Evaluate COI, Disclose/Obtain Consent
59
60. ď§ Online Platform
⢠Basic and Advanced Search
Capability
⢠Pop-ups
⢠Bookmarks
⢠Record Notes
⢠Hyperlinking
ď§ Available at aicpa.org
Online Code of Professional Conduct
60
61. Statement on Auditing Standards
ď§SAS 130 Audit of Internal Control Over Financial
Reporting Integrated with Audit of Financial Statements
⢠Applies when auditor is required to examine and report on
effectiveness of internal control over financial reporting
⢠Effective for integrated audits for periods ending on or after
December 15, 2016
ď§SAS 132 The Auditorâs Consideration of the Entityâs
Ability to Continue as a Going Concern
⢠Effective for periods ending on or after December 15, 2017
61
62. Statement on Auditing Standards
⢠SAS 133, Auditor Involvement with Exempt Offering Documents
ďą Effective for offering documents that are initially distributed, circulated or
submitted on or after June 15, 2018.
ďą Exempt offerings include: municipal securities, ST commercial paper,
private placement offering
ďą Auditor Involvement-BOTH must be present
ď Audit Report is included in the offering
ď Auditor performs one or more âtriggering eventsâ
⢠Assist in preparing the information in the offering document
⢠Provide written or oral comments in the offering document
⢠Act of reading through the offering document at the clientâs request
⢠Issuing a Comfort Letter
⢠Participating in due diligence conversations with the underwriters/brokers
⢠others
62