1. National Association of State Comptrollers
GASB Update
The views expressed in this presentation are those of Chair Vaudt, Vice-Chair Sylvis, and Mr. Bean. Official positions of the GASB on accounting matters are reached only after extensive due process and deliberation.

2. Major Challenges

3. OPEB
Discuss Later

4. Statement 84—Fiduciary Activities—Challenges
Identifying fiduciary activities
Fiduciary component units (pensions and OPEB plans)
Other activities
Assets are controlled by the government
Not derived from own-sourced or most government-mandated or voluntary nonexchange transactions
Meets an additional characteristic (for example, assets are for the benefit of individual and the government does not have administrative involvement or direct financial involvement)
Reporting fiduciary activities
Pension (and other employee benefit) trust funds
Investment trust funds
Private-purpose trust funds
Custodial funds (non-trust fiduciary activities)

5. Why Are All Leases Financings?
Lessee receives a legal right to use the underlying asset (the asset subject to the lease)
In exchange, the lessee promises to make payments over time for that right
Therefore, the lease has financed the acquisition of that legal right
There are many varieties of leases in the government environment; however, all contain a financing element
Therefore, a single approach to accounting for lease transactions was developed

6. Statement 86—Leases—Challenges
Identification of information
Contracts that meet the definition of a lease
Options that are reasonably certain
Nonlease components
Specifically identified in the contract
Not unreasonable to estimate
Otherwise, practical expedient exemption
Terminations and modifications

7. Why Revenue and Expense Recognition?
Statement 33—Nonexchange Transactions was issued almost 20 years ago
Recent FAF Postimplementation Review concluded that the Statement was achieving its objectives; however, practitioners still were facing application issues
Exchange revenue guidance almost nonexistent in the GASB literature
AICPA industry audit and accounting guides were not consistent (which in part drove the new FASB revenue recognition standards)
Need for consideration of symmetry (especially with nonexchange transactions), resulted in expenses being reexamined in this project

8. Major Projects Versus Practice Issues
Fundamental to the overall financial reporting model
Financial reporting model, revenue and expense recognition, potentially note disclosures in the future
Complex transactions
Pensions, OPEB, leases
Long-term in nature
4-6 years on the current technical agenda
Normally includes a Preliminary Views, if not also a Invitation to Comment
Practice Issues
More narrowly scoped
Shorter-term in nature
1-3 years
Includes Category B literature—Technical Bulletins and Implementation Guides
Normally only requires an Exposure Draft

9. Radar Worthy Recent Practice Issue Statements
Statement 81—Irrevocable Split Interest Arrangements
Statement 82—Pension Issues
Statement 85—Omnibus 2017

10. Statement 81 Primarily a college and university issue
Split-interest agreements are a type of giving agreement used by donors to provide resources to two or more beneficiaries, including agreements with characteristics that are equivalent to split-interest
Examples of these types of agreements include charitable lead trusts, charitable remainder trusts, and life-interests in real estate
A government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement
If the government controls the present service capacity of beneficial interests that are administered by a third party, those assets should be recognized and revenue should be reported in the applicable reporting period

11. Statement 82 Addressed Not addressed Covered-employee payroll
Treatment of employer–paid member contributions
Deviations from Actuarial Standards of Practice (ASOPs)
Not addressed
Application of administrative costs as a reduction of discount rate
Timing of the measurement of liability
Disclosure of annual required contribution (ARC) as a benchmark

12. Statement 85 Focused primarily on OPEB Issues
Timing of the measurement of pension and OPEB liabilities and related expenditures recognized in financial statements prepared using the current financial resources measurement focus
Recognizing on-behalf payments for pensions or OPEB in employer financial statements
Presenting payroll-related measures in required supplementary information for purposes of reporting by OPEB plans and employers that provide OPEB
Classifying employer-paid member contributions for OPEB

13. Current Practice Issues
Capitalization of interest cost
Should the application be expanded or eliminated
Debt disclosures
Should specific disclosures regarding direct borrowing be required
Implementation guides
2017 update—final in April
OPEB plan—final in April
OPEB employer—Exposure Draft in June

14. Implementation Guides—Big Issues
Application of Statement 77 to tax increment financings
Cannot always judge a book by its cover
Partitioning a plan that covers OPEB and pensions
Only if allocated portion dedicated solely to providing a specific benefit (OPEB or pension)
Contribution stabilization trusts
Not considered to be part of the pension or OPEB plan
Cannot be used to make benefit payments (only contributions to the plan)

15. Research Activities—Why Should I Care?
For those under years-old—the future of accounting standards
Category created so that unbiased research could be conducted
Also allows the Board to stop an activity if the research shows that further action is not warranted
Opportunity to share information and views at a very early stage
Roundtables, surveys, interviews

16. Research Activities Conduit debt Going concern disclosures
Note disclosures
Social impact bonds

17. Conduit Debt Conduit debt—what is it?
Board guidance is over 25 years old (Interpretation 2)
Came to the fork in the road and took it—disclosure only or asset and liability
Conceptual framework now provides a foundation to help decide the issue
Definitions of assets and liabilities
Research
How have no-commitment, moral-obligation, etc. bonds changed over the years?
How do users view this type of debt?
Research is scheduled to be completed in July 2017

18. Going Concern Focused on two issues
Current going concern disclosures
The potential need for disclosures related to severe financial stress uncertainities
When should these disclosures be considered?
What information should these disclosures potentially provide?
What information do users need?

19. Note Disclosures Statement 38 is over 15-years old
Certain disclosures were recently reexamined—pensions, OPEB, debt, leases, but over 60 specific disclosure required have not been reassessed in the past 5 years
Focus is on what are the problems and what are the potential solutions
Staff have completed archival research on 500 CAFRs
Currently holding roundtables around the country
Results will form the basis for a broadly distributed survey
Survey results may form the basis for individual interviews
Research scheduled to be completed in July 2018

20. Social Impact Bonds Social Impact Bonds Research focus
Generally, repayment based on achievement of stated performance goals
Research focus
What types of social impact bonds have been issued
Do these bond meet the definition of a liability
What information do users need regarding these bonds

21. Potential Research Topics
Based on GASAC feedback at March 2017 meeting
Potential projects
Information technology, including cloud computing
Public private partnerships, including reexamination of Statement 60

22. Observations From the Chair and the Vice-Chair

23. Questions?
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