florida gfoa

Florida GFOA

Hot TopicImplementation of GASB Standards

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.

Statement 60Service Concession Arrangements

Effective for Periods Beginning After December 15, 2011

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What Is An SCA?

• The transferor conveys to the operator – Right and related obligation to provide public services through the

operation of a capital asset – In exchange for significant consideration

• The operator collects and is compensated from fees from third parties

• The transferor determines or has the ability to modify or approve – What services the operator is required to provide – To whom the operator is required to provide the services, and – Prices or rates that can be charged for the services.

• The transferor is entitled to significant residual interest in the service utility of the facility at the end of the arrangement

How Should Facilities Be Reported?

• A new facility purchased or constructed by the operator or

• An existing facility that has been improved by the operator, then the transferor should report – The new facility or the improvement as a capital

asset at fair value when it is placed in operation, with– Any contractual obligations recorded as liabilities,

along with a corresponding deferred inflow of resources

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How Should Upfront Or Installment Payments Be Reported?

• Up-front payment received or present value of installment payments reported as an asset

• Any contractual obligations recorded as liabilities along with a related deferred inflow of resources

• Revenue should be recognized as the deferred inflow of resources is reduced.– Systematic and rational manner over the term of the

arrangement beginning when the facility is placed into operation.

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When Should Liabilities Be Reported?

• Liabilities should be recorded at their present value if a contractual obligation is significant and meets either of the following criteria:– The contractual obligation directly relates to the facility

• Could relate to ownership of the facility or • Could arise from the responsibility to assure that the facility remains fit

for the particular purpose of the arrangement– For example, obligations for capital improvements, insurance, or maintenance on

the facility – The contractual obligation relates to a commitment made to maintain a

minimum or specific level of service in connection with the operation of the facility• For example, providing a specific level of police and emergency services

for the facility or providing a minimum level of maintenance to areas surrounding the facility 7

Statement 61The Financial Reporting Entity—Omnibus

Effective for Periods Beginning After June 15, 2012

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What Are The Significant Effects?

• Increase the emphasis on financial relationships• Raises the bar for inclusion

• Refocus and clarify the requirements to blend certain component units

• Improve the recognition of ownership interests– Joint ventures– Component units– Investments

What Are The Changes To The Inclusion Criteria?

• Statement 14 requires inclusion if Potential Component Unit is fiscally dependant. That is, Primary Government has authority over:– Budget, or

– Setting taxes and charges, or

– Issuing debt

• Statement 61 adds a requirement for a financial benefit or burden before inclusion is required.

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How Have The Blending Requirements Been Narrowed?

• Statement 14 requires blending if Primary Government and Component Unit have “substantively the same” governing body

• Statement 61 modifies that requirement to also include:– A financial benefit/burden relationship, or– Primary Government has “operational responsibility” for

Component Unit• Primary Government’s personnel manage activities of Component

Unit like a fund, program, or department of the primary government

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How Have The Blending Requirements Been Broadened?

• Component units whose total debt outstanding is expected to be repaid entirely or almost entirely by revenues of the primary government will now be blended– Even if the component unit provides services to

constituents or other governments, rather than exclusively or almost exclusively to the primary government

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How Are The Current Disclosures Clarified?

• Rationale for including each component unit• Whether it is discretely presented, blended, or

included as a fiduciary fund• Disclosures focus on the relationship of the

primary government and the component units

Statement 62Codification of Pre-November 30, 1989 FASB and AICPA Pronouncements


How Are The Standards Impacted?• Statement 20 is superseded– All applicable pre-November 30, 1989 standards are

contained in the GASB’s codification– All potentially applicable post-November 30, 1989 non-

GASB standards will be “other accounting literature”• Guidance on 29 topics is brought into the GASB

literature

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Statement 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position


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What Are The New Elements?• Deferred outflows of resources

– A consumption of net assets by the government that is applicable to a future reporting period

– Has a positive effect on net position, similar to assets• Deferred inflows of resources

– An acquisition of net assets by the government that is applicable to a future reporting period

– Has a negative effect on net position, similar to liabilities• Net position

– The residual of all elements presented in a statement of financial position

– = assets + deferred outflows – liabilities – deferred inflows

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How Are These Changes Displayed?• Deferred outflows should be reported in a separate section

following assets• Similarly, deferred inflows should be reported in a separate

section following liabilities• Net Position components resemble net asset components

under Statement 34, but include the effects of deferred outflows and deferred inflows– Net investment in capital assets– Restricted– Unrestricted

• Governmental funds continue to report fund balance

• Prior Standards– Statement 53—Accounting and Financial

Reporting for Derivative Instruments – Statement 60—Service Concession Arrangements

• Post-issuance Standards– Statement 65—Items Previously Reported as

Assets and Liabilities– Statement 68—Pensions– Statement 69—Government Combinations

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What Qualifies For Reporting As A Deferral?

2014 and 2015

Statement 65Items Previously Reported as Assets and Liabilities


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What Should Be Classified As Deferred Inflows of Resources?

• Governmental funds—resources not available for expenditure

• Grants received in advance of meeting timing requirement

• Deferred amounts from refunding of debt (credits)• Proceeds from sales of future revenues• Deferred gain from sale-leaseback• “Regulatory” credits

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What Should Be Classified As Deferred Outflows of Resources?

• Grant paid in advance of meeting timing requirement

• Deferred amounts from refunding of debt (debits)

• Cost to acquire rights to future revenues (intra-entity)

• Deferred loss from sale-leaseback

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What Should Be Classified AsOutflows of Resources?

• Debt issuance costs (other than insurance) • Initial costs incurred by lessor in an operating

lease • Acquisition costs for risk pools • Loan origination costs

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What Should Be Classified As Inflows of Resources?

• Loan origination fees• Commitment fees (after exercise or expiration)

Statement 66Technical Corrections—2012


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What Are The Clarifications?

• Statement 62 with– Statement 13—Leases– Statement 48• Purchase of a loan or group of loans• Servicing fees related to mortgage loans

• Statement 10 with– Statement 54—Risk financing pools

Statement 68Accounting and Financial Reporting for Pensions

Effective for Fiscal Years Beginning After June 15, 2014

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What Are The Fundamental Principles Of The New Pension Standards?

• View the cost of pensions within the context of an ongoing, career-long employment relationship

• Use an accounting-based versus funding-based approach to measurement and report any Net Pension Liability on the statement of financial position

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What Liabilities Should Be Reported By An Employer?

• Liabilities to the pension plan (payables)• Liabilities to employees for pensions– “Net pension liability” (NPL)

• Total pension liability (TPL), net of pension plan’s fiduciary net position– TPL = actuarial present value of projected benefit payments

attributed to past periods– Fiduciary net position as measured by pension plan

– Single/agent employers recognize 100 percent of NPL– Cost-sharing employers recognize proportionate shares

of collective NPL

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When Should A Pension Expense Be Reported?

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When Should a Pension Expenditure Be Reported?

• Net pension liabilities are normally expected to be liquidated with expendable available financial resources to the extent that pension benefits have matured—that is, pension benefit payments are due and plan net position is not sufficient for payments of benefits.

• Liabilities to defined benefit pension plans, as well as liabilities for defined contribution pensions, are normally expected to be liquidated with expendable available financial resources when amounts are due pursuant to contractual arrangements or legal requirements.

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What Additional Deferrals Should Be Reported For Cost-Sharing Employers?

• Change in proportion– Net effect deferred– Expense recognition period—average expected remaining

service lives of all employees

• Contributions during the measurement period– Difference between the amount of contributions and

the amount of the entity’s proportionate share – Expense recognition period—average expected

remaining service lives of all employees

Statement 69Government Combinations and Disposals of Operations


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What Is Covered?

• Combinations in which no consideration is provided– Government mergers– Transfers of operations

• Combinations in which consideration is provided– Government acquisitions

• Disposal of government operations reporting

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How Should Mergers and Transfers of Operations Be Reported?

• Assets and liabilities at carrying values– Presumption of GAAP– Mergers

• New entity—Date of merger• Continuing entity—Beginning of fiscal year

– Transfers of operations—Date of transfer– Adjustments

• Accounting principles, policies, and estimates• Capital asset impairment• Transaction eliminations

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How Should Acquisitions Be Reported?

• Assets (and liabilities) at acquisition value– GAAP applicable to state and local governments is used

for recognition– Market-based entry price measurements– Exceptions

• Accounting for the difference– Goodwill–deferred outflow of resources– Contribution received or reduction of non-current assets

• Reporting period

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How Should The Disposals of Government Operations Be Reported?

• Governments would report disposals of operations for all disposals of operations (transfers or sales).– Gains and losses reported as special items

• Costs associated with disposals of government operations– Should consider all costs associated with disposals

of operations

Statement 70Nonexchange Financial Guarantees

Effective for periods beginning after June 15, 2013

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What Are Nonexchange Financial Guarantees?

• Based the same definition of nonexchange that is found in Statement 33

• Excludes exchange and exchange-like transactions

• Entities addressed– Providers of financial guarantees– Recipients of financial guarantees

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When Should The Guarantee Be Recognized?

• Provider of financial guarantee– When qualitative factors and historical data, if any, indicate

that it is more likely than not that a government will make a payment on nonexchange financial guarantees it extended, the government should recognize a liability

• Recipient of financial guarantee– When nonexchange financial guarantee is legally released

as an obligor from the obligation and from any liability to the guarantor, the government should recognize revenue

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How Should The Guarantee Be Measured?

• Provider of financial guarantee– Amount equal to the discounted present value of

the best estimate of the future outflows expected to be incurred as a result of the guarantee • If there is no best estimate, the discounted present value

of the minimum amount in that range should be recognized

• Recipient of financial guarantee– Amount equal to the reduction of the guaranteed

liability should be recognized

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Questions?

Web site—www.gasb.org

florida gfoa

Documents

new facility

operator right

related obligation

public services

emergency services

specific level of service

capital asset

significant consideration