october 13, 2004 © campus strategies 1 west virginia higher education policy commission fasb-gasb...

October 13, 2004 © Campus Strategies 1

West Virginia Higher Education Policy Commission

FASB-GASB Differences October 13. 2004

Larry Goldstein, PresidentCampus Strategies


Agenda

Background

Philosophy

Nature of Differences

Specific Differences

Commentary

Questions


BackgroundAICPA College & University Audit Guide (1973)

FASB’s not-for-profit agenda

– FASB 93 Depreciation (1987 / 1991)

– FASB 116 Contributions (1993 / 1997)

– FASB 117 Reporting model (1993 / 1997)

– FASB 124 Investments (1995 / 1997)

– Combinations (?)…


Background (contd.)

AICPA Not-for-Profit Audit Guide (1997)GASB college and university agenda– 1984 Jurisdiction agreement– GASB 3 Deposits (1986 / 1987)– GASB 8 Depreciation (1988 / 1988)– GASB 14 Reporting entity (1991 / 1994)– GASB 15 Reporting model (1991 / 1993)– GASB 19 Pell (1993 / 1994)…


Background (contd.)

GASB college and university agenda– GASB 33 Nonexchange transactions

(1998 / 2001)– GASB 35 Separate reporting model (1999 /

2002)– GASB 39 Affiliated organizations (2002 /

2004)AICPA State & Local Audit Guide (2002 / varied, based on GASB 34 implementation)


Philosophy

FASB– Overall focus is decision utility– Conceptual framework

Objectives for business (1—1978) and NFP (4—1980)Qualitative characteristics (2—1980)Recognition and measurement (5—1984)Definition of elements (6—1985)Cash flow and present value (7—2000)


Philosophy (contd.)

GASB– Overall focus is accountability– Conceptual framework

Objectives (1—1987)

Service efforts and accomplishments (2—1994)

Current agenda includes concept projects


Areas of Potential Differences

Recognition

Measurement

Display

Disclosure


Contributed Services

FASB– Specific recognition criteria

GASB– No recognition criteria

Effect – Gift revenues– Expenses– No impact on net revenues


Restricted Cash Contributions

FASB– Recognize either as temporarily or

permanently restrictedGASB– Recognize as deferred revenue if use

restricted to future periodEffect – Liabilities– Gift revenues– Net assets


Endowment Pledges

FASB– Recognize as permanently restricted

GASB– Prohibits recognition of endowment pledges

Effect – Assets– Gift revenues– Net assets


Restricted Non-endowment Pledges

FASB– Recognize as temporarily restricted revenue

GASB– Prohibits recognition if for future period use

Effect – Assets– Gift revenues– Net assets


Discounting of Pledges

FASB– Requires discounting if collectible beyond one

yearGASB– Allows, but does not require, discounting

Effect – Gift revenues– Assets – Net assets


Investment Income

GASB– Investment income and realized investment

gains / losses must be reported as single net amount

Net unrealized gains and losses can be displayed separately using a prescribed label– Net increase (decrease) in the fair value

of investments


Investment Income (contd.)

GASB– Investment income cannot be operating

revenueException for interest on program loansException for pooled-investment entities

FASB– No similar requirements related to

investment income display


Pell Grants

FASB– Balance sheet transaction

GASB– Activities statement transaction

Effect – Grants and contracts revenue– Net tuition and auxiliaries revenue– Liabilities and net assets


Perkins Loan

FASB– Balance sheet transaction

GASB– Balance sheet or activities statement

Effect– If activities statement

Grants and contracts revenue Liabilities Net assets


Funds Held in Trust by Others

FASB– Include as assets

GASB– Only include via GASB 39

Effect– Assets– Revenues– Net assets


Restrictions Definition

FASB– Only donors can restrict

GASB– Any external party

Donors, creditors, legislation, constitutionEffect– Categorization of net assets


Use of Restricted Funds

FASB– First dollar release mandated

GASB– First dollar release optional

Effect– Categorization of net assets


OPEB & Pensions

FASB– Expense and liability calculated consistently

using FASB methodologyGASB– Expense and liability calculated consistently

using GASB methodologyEffect– Measurement / recognition differences

impact expense, liability, and net assets


Software

FASB– Requirement to capitalize

GASB– No requirement to capitalize; intangible

assets project pendingEffect – Assets– Expenses– Net assets


Impairment

FASB– Requires cash flow approach

GASB– Requires service utility approach

Effect – Assets– Expenses and losses– Net assets


MD&A

FASB– No requirement related to MD&A

GASB– Prescriptive requirement for MD&A

Effect – No substantive effect, although potential

concerns regarding financial transparency for private institutions


Disaggregation

FASB– Allows line of business (e.g., academic,

auxiliaries, etc.) or net asset class (e.g., unrestricted, temporarily restricted, permanently restricted) disaggregation

GASB– Line of business only; not net asset class


Balance Sheet Display

GASB requires classified balance sheet (i.e., current and noncurrent)

FASB does not have a classification requirement

FASB has three net asset classes– Unrestricted– Temporarily restricted– Permanently restricted…


Balance Sheet Display (contd.)

GASB has three net asset classes– Capital assets, net of related debt– Restricted

ExpendableNonexpendable

– Unrestricted…


Balance Sheet Display (contd.)

GASB prohibits display of net asset designations– Disclosure in notes is okay

GASB requires disclosure of nondepreciable capital assets separate from depreciable capital assetsFASB has no specific requirements related to display of capital assets


Cash Flow Statement

FASB – Indirect method allowed– Three categories

Operating

Investing

Financing…


Cash Flow Statement (contd.)

GASB – Direct method mandated– Mandates reconciliation of operating cash to SRECNA

operating loss– Four categories

OperatingInvestingCapital and related financingNoncapital financing


Activities Statement

Reclassifications– FASB treats all expenses as unrestricted

Forces reclassification of resources from temporarily restricted to unrestricted

– GASB has no similar concept

Expenses can be unrestricted, restricted, operating, nonoperating…


Activities Statement (contd.)

Operating measure– GASB requires (somewhat) prescriptive

operating measure

State appropriations, gifts, investment income

– FASB allows self-defined operating measure

Disclosure required if not obvious…



Expense categories– FASB allows natural but requires

functional, either through display or in notes– GASB allows natural or functional

NACUBO encourages a matrix reconciling functional and natural expenses in notes…



Specific expenses– FASB requires allocation of certain expenses

O&M of plantDepreciationInterestGASB allows allocation of depreciation

– GASB precludes recognition of bad debt expense

Exception for loans…



Exception items– FASB

Extraordinary (i.e., unusual and infrequent)– GASB

Extraordinary (same as above)

Special (i.e., unusual and infrequent but within management’s control)


FASB-GASB Differences

Questions~

Thank You!

[email protected](540) 942-9146

october 13, 2004 © campus strategies 1 west virginia higher education policy commission fasb-gasb...

Documents

gasb college

separate reporting model

reporting entity

investment gains losses

aicpa state local audit

university agendagasb

gasboverall focus

present value