may 13, 20081 accounting upd ate focus staunton may 13, 2008 larry goldstein, president campus...

May 13, 2008 1

Accounting Update

FOCUSStaunton

May 13, 2008

Larry Goldstein, President

Campus Strategies

© Campus Strategies

May 13, 2008 2

Agenda

Recently issued GASB documents and upcoming effective dates

GASB Statement No. 50 GASB Statement No. 51 GASB Statement No. 52 FASB UPMIFA FSP


May 13, 2008 3

Recently Issued GASB Documents


May 13, 2008 4

Recently Issued Documents

Statement 50—Pension Disclosures (an amendment of GASB Statements No. 25 and No. 27) (5/07)

Statement 51—Accounting and Financial Reporting for Intangible Assets (6/07)

Concepts Statement No. 4—Elements of Financial Statements (6/07)…


May 13, 2008 5


2007-08 Comprehensive Implementation Guide (10/07)

Statement 52—Land and Other Real Estate Held as Investments by Endowments (11/07)…


May 13, 2008 6


Exposure drafts Derivatives (6/07) Fund balance reporting (2/08) Concepts Statement No. 2—Service

Efforts and Accomplishments Reporting (4/08)


May 13, 2008 7

Upcoming GASB Effective Dates


May 13, 2008 8

Effective Dates

June 30, 2008 Statement 43—Phase II (OPEB plans) Statement 45—Phase I (Employers OPEB) Statement 48—Sales & Pledges of

Receivables and Future Revenues Statement 50—Pension Disclosures…


May 13, 2008 9

Effective Dates

June 30, 2009 Statement 43—Phase III (OPEB plans) Statement 45—Phase II (Employers OPEB)

Statement 49—Pollution Remediation Obligations

Statement 52—Endowment Real Estate June 30, 2010

Statement 45—Phase III (Employers OPEB) Statement 51—Intangible Assets •


May 13, 2008 10

GASB 50Pension Disclosures


May 13, 2008 11

Pension Disclosures

Driven by new OPEB standards Amends GASB 25 (pension plans) and GASB

27 (accounting for pensions by employers) Extends new disclosure requirements related

to OPEB to pensions Removes inconsistencies between original

pension disclosures and OPEB disclosures •


May 13, 2008 12

GASB 51Intangible Assets


Intangible Assets

Assets that possess following characteristics Lack physical substance Nonfinancial nature Initial useful life extending beyond a

single reporting period…

May 13, 2008 13© Campus Strategies

Intangible Assets

Examples Patents, copyrights, trademarks Easements and land use rights Computer software

Purchased or licensedInternally generated…


Intangible Assets

Intangible assets must be classified and reported as capital assets Existing authoritative guidance related to

capital assets extends to intangible assets But there are exceptions…


Intangible Assets

Exceptions Intangible assets acquired or created

primarily to generate income or profitShould be reported at cost or value at

time of donation Capital leases Goodwill resulting from a combination

transaction (e.g., merger, acquisition)…


Intangible Assets

Recognition—only if asset is identifiable Asset is separable (i.e., capable of being

separated and sold, transferred, licensed, etc.) or

Asset arises from contractual or other legal rights, regardless of whether rights are separable…


Intangible Assets

Internally generated intangible assets (IGIA) Created or produced by institution or entity

contracted by institution or Acquired from a third party and requiring

more than minimal incremental effort to achieve expected service capacity…


Intangible Assets

IGIA costs capitalized only when all three criteria met1. Specific objective for project determined,

including establishment of expected service capacity upon completion

2. Demonstration of technical or technological feasibility for completing project…


Intangible Assets

3. Demonstration of current intention, ability, and presence of effort to complete project If multiyear project, requirement for

continuing satisfaction of this criterion Outlays incurred prior to meeting criteria

should be expensed as incurred…


Intangible Assets

Standard includes guidance on applying the specified-conditions approach for recognition of computer software Guidance closely follows requirements of

AICPA SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use…


Intangible Assets

Amortization Existing guidance for depreciating capital

assets generally applies to amortizing intangible assets

Not required for intangible assets with indefinite useful livesIndefinite useful lives exist when there

are no factors that limit useful life…


Intangible Assets

Transition Provisions generally should be applied

retroactively Exceptions permitted for IGIA and

intangible assets with indefinite useful lives at transition…


Intangible Assets

Recognition required for all other intangible assets acquired in fiscal years ending after June 30, 1980 by phase 1 or 2 governments

Phase 3 governments are encouraged but not required to report other intangible assets •


Questions?

May 13, 2008 © Campus Strategies 25

May 13, 2008 26

GASB 52Endowment Real Estate


Endowment Real Estate

Paragraph 19 of GASB 34 defines land as a capital asset Requires recognition at cost (or fair value at

time of donation) Many endowments hold land and other real estate

for investment purposes Standard applies to real estate held as true and

term endowments but not quasi-endowments…


Endowment Real Estate

True and term endowment real estate should be measured at fair value

Changes in value should be reported in SRECNA as investment income

Investment disclosures per paragraph 15 of GASB 31 should be presented as appropriate •


Uniform Prudent Management of Institutional Funds Act (UPMIFA)

Model act approved by National Conference of Commissioners on Uniform State Laws (07/06)

Enacted by 22 states and DC so far; under consideration by seven others Effective July 1, 2008 in Virginia

Updates the 1972 UMIFA in the area of investment management and endowment spending…May 13, 2008 29© Campus Strategies

UPMIFA

Eliminates concept of historic dollar value Enhances guidance on what constitutes

prudent endowment spending Authorizes spending from “underwater”

endowments Includes optional rebuttable presumption of

imprudence for spending below 2% or above 7% of market value…


UPMIFA

FASB Staff Position, FSP No. 117-a, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosure Requirements…


UPMIFA

Objectives Provide guidance on net asset

classification of donor-restricted endowment funds for not-for-profit organizations subject to UPMIFA

Improve endowment disclosures whether subject to UPMIFA, UMIFA, or other state law…


UPMIFA

Key questions Does ability to spend from “underwater”

endowments affect net asset classification? Does optional rebuttable presumption of

imprudence impose a temporary (time) restriction on a portion of otherwise unrestricted funds?...


UPMIFA

UPMIFA specifies that “Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution.” Does above language impose a time

restriction on a portion of otherwise unrestricted funds?...


UPMIFA

Conclusions If governing board concludes that state

law requires a portion of the fund—initial gift or appreciation—to be retained in perpetuity That amount is permanently restricted

Other amounts are temporarily restricted or unrestricted…


UPMIFA

If subsequent losses result in spending below amount required to be retained Loss must be recognized in

temporarily restricted until exhausted, then unrestricted Because overall fund accountability

is unchanged under UPMIFA—still accountable for full amount of fund…


UPMIFA

Rebuttable presumption language does not affect net asset classification Refer to EITF Topic No. D-49,

“Classifying Net Appreciation on Investments of a Donor-Restricted Endowment Fund” Unless law extends donor-imposed

restriction, no impact…


UPMIFA

An important caveat! Be sure to read actual language in

UPMIFA as adopted by in Virginia along with other relevant information Might reach a different conclusion

if law deviates from model legislation…


UPMIFA

New disclosure requirements apply to all NFPs—not just those in states adopting UPMIFA For both donor-restricted and board-

designated, must address net asset classification, net asset composition, changes in net asset composition, spending policy(ies), and related investment policy(ies) concerning endowment funds…


UPMIFA

Minimum information Description of board’s interpretation of

relevant law guiding net asset classification Description of endowment spending

(distribution) policy(ies)…


UPMIFA

Description of endowment investment policy(ies) Return objectives and risk parameters How the objectives relate to spending

policy(ies) Strategies for achieving objectives…


UPMIFA

Composition of endowment by net asset class

Endowment roll-forward by net asset class Planned endowment distribution for next

year (if known)…


UPMIFA



year (if known)…


UPMIFA

Proposed FSP issued in February Comments were due by April 18

Final FSP expected in June Anticipated effective date is for fiscal years

ending after June 15, 2008 (i.e., FY 2008) Monitor progress at www.fasb.org •


Acknowledgements

David Bean, GASB Susan Budak, NACUBO FARM co-author Wes Galloway, GASB Jeff Mechanick, FASB Ken Schermann, GASB


May 13, 2008 47

Accounting Update

Questions, Comments,

and Reactions

[email protected]

(540) 942-9146


may 13, 20081 accounting upd ate focus staunton may 13, 2008 larry goldstein, president campus...

Documents

employers opeb statement

concepts statement

new opeb standardsamends

amendment of gasb statements

original pension disclosures

opeb plansstatement

pension plans

pension disclosuresdriven