GASB Update—The Past, Present, and Future The views expressed in this presentation are those of the GASB Chairman, Vice Chairman, and Director. Official positions of the GASB on accounting matters are determined only after extensive due process and deliberation.

The Past The Creation of the GASB 2

The Antonio Years Statements

The First Board 4

 A strong and independent GASB -Rule 203 -Five-year review  Conceptual framework -Objectives of financial reporting -Service efforts and accomplishments  Financial reporting entity  Pension standards  Developing the basic underpinnings of the new model The Top Five Accomplishments 5

 Five-year review -Survival of the GASB -Birmingham, Raleigh, or Norwalk  Moving past Statement 11 Second Board Biggest Challenges 6

The Allen Years Statements

 Financial reporting model -Statement 34  Other Postemployment Benefits (OPEB) standards  Staking out the governmental model -Nonexchange transactions -Capital asset impairment -Interpretation 6—Modified accrual  Fair value reporting for investments  Moving the Board from five to seven members -Member with NASC background -Member with financial statement user background Top Five Accomplishments 8

 Financial reporting model  Service efforts and accomplishments Biggest Challenges 9

The Attmore Years Statements

 New pension standards  Conceptual framework -Communication methods -Elements -Measurement  Derivatives reporting  Deferred inflows and deferred outflows  Suggested guidelines Top Five Accomplishments 11

 Call for the GASB’s demise  Financial projections—scope of authority Biggest Challenges 12

The Vaudt Years Statements 72-??? 13

Current Board Members 14

 Seventy-seven Statements -Fifty-six Statements still are effective or will be effective  Thirty-four Statements considered broad (for example, Statements 14, 34, 68, 75)  Twenty-two Statement considered narrow (for example, Statements 13, 41, 58, 69) GASB-31 Years of Excellence in Standards Setting 15

Final Pronouncements The Vaudt Years

Statement 72 Fair Value Measurement And Application 17

 What: new standards for mergers, acquisitions, and transfers and disposals of operations  Why: becoming more common, but no government- specific guidance  When: fiscal years ending December 31, 2014 and later  What: Statement establishes how fair value should be measured and applied to elements of financial statements – and what should be disclosed  Why: The GASB receives a large volume of questions about fair value; the standards have not been broadly addressed previously  When: Statement 72 issued February 2015; effective for reporting periods beginning after June 15, 2015  What: Statement establishes how fair value should be measured and applied to elements of financial statements – and what should be disclosed  Why: The GASB receives a large volume of questions about fair value; the standards have not been broadly addressed previously  When: Statement 72 issued February 2015; effective for reporting periods beginning after June 15, 2015 Fair Value

 Definition of fair value  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.  An exit price  Other characteristics of fair value measurement  Market-based  Based on a government’s principal or most advantageous market Fair Value – MEASUREMENT

 Definition of an investment  A security or other asset that a government holds primarily for the purpose of income or profit and with a present service capacity that is based solely on its ability to generate cash or to be sold to generate cash  Assets and liabilities that meet the definition of an investment generally should be measured at fair value Fair Value – APPLICATION

Statement 74 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans Statement 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions 21

 Other postemployment benefits – all postemployment benefits promised to employees other than pensions  Principally, retiree health insurance – but also life insurance, disability, legal services, and other benefits  Includes:  Payments made to insurance companies on behalf of retirees,  Payments directly to retirees, and  Subsidizing retiree premiums by allowing them to be insured in the same group as active employees What is OPEB? 22

OPEB Reporting—Key Provisions  Mirrors pension standards  Measurement may increase size of long-term obligation and annual cost for OPEB  Recognize the net liability on the face of the financial statements  Present more extensive note disclosures and supporting schedules

OPEB Reporting—Key Provisions  Objective: to establish a consistent set of standards for all postemployment benefits—more transparent reporting of the liability and more useful information about the liability and costs of benefits  Implementation dates: periods beginning after June 15, 2016 (plans) and June 15, 2017 (employers)

Other Highlights  Identical in most respects to pension standards in Statements 67 and 68  Recognize net OPEB liability in accrual-basis financial statements  Recognize many portions of change in net OPEB liability as OPEB expense immediately; others deferred and recognized as OPEB expense over shorter periods than previously  Cost-sharing governments and nonemployer contributing entities report proportionate shares of collective net OPEB liability, OPEB expense, and OPEB-related deferrals  Enhanced notes and RSI

OPEB Standards Mirror Pension Standards  Once you know how to implement the pension standards, you will know how to implement the OPEB standards  OPEB has 2 key assumptions subject to sensitivity analyses:  Discount rate +1% and discount rate –1%  Healthcare cost trend rate +1% and healthcare cost trend rate –1%

Statement 76 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments 27

The GAAP Hierarchy  What: Statement 76 establishes a revised hierarchy of generally accepted accounting principles and exposed the entire Comprehensive Implementation Guide for public comment  Why: The GAAP hierarchy was incorporated (by Statement 55) from the auditing literature essentially “as is”—this project simplifies the hierarchy and explains how to identify the relevant literature within the hierarchy  When: Effective for periods beginning after June 15, 2015

GAAP Hierarchy—Key Provisions Reduce GAAP Hierarchy from four levels to two levels Level 1—GASB Statements Level 2—GASB Technical Bulletins and Implementation Guides and AICPA pronouncements cleared by the GASB Nonauthoritative—further clarifies role of concepts statements

Tax Abatement Disclosures: Statement 77 30

Tax Abatement Disclosures  What: The Board issued Statement 77, which requires disclosures about a government’s tax abatement agreements  Why: Information about revenues that governments forgo is essential to understanding financial position and economic condition, interperiod equity, sources and uses of financial resources, and compliance with finance related legal or contractual requirements  When: Effective for periods beginning after December 15, 2015

 Does not include all transactions that reduce tax revenues  Emphasis is on the substance of the arrangement meeting the definition, not on its name or form  Would apply only to arrangements meeting this definition: -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. Definition and Scope 32

 A government would disclose separately (a) its own tax abatements and (b) tax abatements that are entered into by other governments and reduce the reporting government’s taxes  Disclose own tax abatements by major program  Disclose those of other governments by the government and specific tax abated  May disclose individual tax abatements above quantitative threshold established by the government  Disclosure would commence in the period in which a tax abatement agreement is entered into and continue until the tax abatement agreement expires, unless otherwise specified General Disclosure Principles 33

Current Technical Agenda Projects Redeliberation  PV – Leases  PV – Fiduciary Responsibili ties Due Process Stage  ED – External Investment Pools  ED – Irrevocable Spilt-Interest Agreements  ED – Blending Requirements Earlier Stages  Asset Retirement Obligations  Pension Issues 34

GASB Chairman What is the GASB doing beyond the technical agenda and here is what I see looking into the crystal ball …

Enhancing Communications  GASB Outlook  A new form of communication directed at the “C” suite  Detailed communications are still available for the techies  Webcasts focused on due process documents  Fair value  Other postemployment benefits  Leases  Many more to come

Enhancing Communications  Updated website  Timely information on projects  Technical inquiry portal  Implementation tools  Postretirement Implementation Tools  Fact sheets  Plain-language articles  Podcasts and video discussions of specific provisions  Statements  Pension Implementation Guide  More to come

Beyond the Agenda: Continuing Priorities  Engaging with GASB stakeholders  Encouraging broad participation in our process  Conducting regular listening tours

Beyond the Agenda: Improving Relationships  External  Meetings with organization execs & congressional leaders in and o Strengthening already strong relations (NASBA, AICPA, NASACT) o Reintroducing GASB to some (National Governors Association, National Conference of State Legislatures, Council of State Governments) o Establishing relations with others (National School Boards Association)  Great standards are built with good, open communication and trust  Internal  Breaking down silos to increase efficiency o Boards can leverage off each other  Still need to always recognize why the GASB exists o Board and staff expertise in the public sector – a unique environment

Beyond the Agenda: Stakeholder Collaboration  Pension Communications Resource Group  Statements 67 & 68 o Significant impact on the information available about pension promises o Learning curve to understand  Stakeholder collaborative effort o Facilitated by GASB o Identify materials already produced and build upon those resources o Equip state & local governments with a roadmap and resources to address questions

Pre-Agenda Research Activities  Financial Reporting Model Reexamination  Debt Extinguishments  Debt Disclosures, including Direct Borrowing  Going Concern 41

Financial Reporting Model Reexamination  What: In August 2013, the Board decided to begin pre- agenda research examining the effectiveness of the financial reporting model  Why: The GASB is committed to ensuring standards remain effective; most of the requirements of Statement 34 became effective between 2002 and 2004  When: The research was completed0 in July – Board to consider adding project to current agenda in September 2015

Financial Reporting Model Reexamination  Added to the agenda in August 2013  Top priority of GASAC  Staff research and roundtables with preparers, auditors and users conducted in 2013  Separate preparer, auditor, and user surveys conducted in 2014  Interviews with preparers, auditors, and users conducted in 2015  Research complete – preparing papers for Board review

Final Thought The only ideas that are off of the table are the ones you don’t share with us. So, make sure your ideas are on the table. We’d love to hear from you!

Questions? Web site—