1. YEAR-END GAAP TRAINING Chris Ray, Audit Partner, KPMG
APRIL 2017
Technical update
Chris Ray, Audit Partner, KPMG

2. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
APRIL 2017
Learning Objectives
Be familiar with the new accounting pronouncements and understand its effect to the California State University System financial statements.

3. New GASB Pronouncements
YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
APRIL 2017
New GASB Pronouncements
GASB Statement No. 79, Certain External Investment Pools and Pool Participants, December 2015
GASB Statement No. 80, Blending Requirements for Certain Component Units, January 2016
GASB Statement No. 82, Pension Issues, March 2016
GASB Statement No. 83, Certain Asset Retirement Obligations, November 2016
GASB Statement No. 85, Omnibus, March 2017

4. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement No. 79
GASB Statement No. 79, Certain External Investment Pools and Pool Participants, December 2015
Effective date: for fiscal years beginning after December 15, 2015 (effective June 30, 2017)
The Statement establishes accounting and financial reporting standards to qualifying external investments pools that elect to measure for financial reporting purposes all of their investments at amortized cost. Also applies to governments that participate in qualifying external investments pool that measures investments at amortized cost.

5. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement No. 79 (cont.)
Amortized cost criteria for external investment pool:
Transacts with its participants at a stable net asset value per share
Meets the following requirements per the Standards:
Maturity
Quality
Diversification
Liquidity
Pricing

6. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement No. 79 (cont.)
Portfolio Maturity Requirements – maintain its portfolio maturity consistent with a stable net asset value per share.
Remaining maturity of 397 days or less
Weighted average maturity of 60 days or less
Weighted average life of 120 days or less
Maturity of a security or other investments should be the period remaining until the date on which the total remaining principal amount is required to be unconditionally repaid in accordance with the terms (with some exceptions)

7. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement No. 79 (cont.)
Portfolio Quality Requirements –
- Security is denominated in U.S. dollars and has a credit rating within the highest category of short-term credit ratings
A qualifying external investment pool may continue to hold a security that meets the qualifications at acquisition but subsequently experiences a decline in credit quality, if the pool holds no more than 3% of its total assets in:
Securities with credit ratings within the second-highest category
Securities that are not rated but with comparable credit quality to securities that have been rated within second-highest category

8. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement No. 79 (cont.)
Portfolio Quality Requirements –
- Security subject to guarantee should be considered
Security subject to a conditional demand feature should be considered
Security should not be exposed to custodial credit risk
Credit quality of repurchase agreement should be evaluated

9. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement No. 79 (cont.)
Portfolio Diversification Requirements – no more than 5 percent of its total assets in investments of any issuer of securities subject to the additional requirements, as follows:
- Guarantee or demand feature
Credit ratings within the second-highest category or short term credit ratings
U.S. government securities, including its agencies and instrumentalities, and any certificates of deposit insured by the U.S. government or its agencies and instrumentalities are exempt from the calculations.

10. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Statement No. 79 (cont.)
Portfolio Liquidity Requirements – should hold liquid assets sufficient to meet reasonably foreseeable redemptions
Hold no more than 5 percent of its total assets in illiquid investments
Shadow Pricing Requirements – The shadow price is the net asset value per share of a qualifying external investment pool
The shadow price should not deviate by more than one half of 1 percent from the net asset value per share

11. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement No. 79 (cont.)
Accounting and Financial Reporting for Participants
If an external investment pool meets the criteria and measure all of its investments at amortized cost, the pool’s participants should measure their investments in that external pool at amortized cost.
Otherwise, it should be measured at fair value
Disclosure requirements:
Required disclosures per Statement 72 (par )
Presence of any limitations or restrictions on participant withdrawals

12. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Statement No. 80
GASB Statement No. 80, Blending Requirements for Certain Component Units, January 2016
Effective date: for fiscal years beginning after June 15, 2016 (effective June 30, 2017)
The statement established additional blending requirement.
A component unit should be included in the reporting entity financial statements using the blending method if the component unit is organized as a not-for-profit corporation in which the primary government is the sole corporate member

13. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 82
GASB Statement No. 82, Pension Issues, March 2016
Effective date: for fiscal years beginning after June 15, 2016 (effective June 30, 2017)
Presentation of payroll-related measures in required supplementary information
Covered-employee payroll vs covered payroll
Covered payroll is defined as the payroll on which contributions to a pension plan are based.

14. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 82 (cont.)
Selection of assumptions
A deviation (used in Actuarial Standards of Practice) should not be considered to be in conformity with the requirements of Statements 67, 68 or 73.
Employer’s expense and expenditures – payments made by employers to satisfy employee contribution requirements
recognized in the period for which the contribution is assessed
Classified in the same manner as the employer classifies similar compensation other than pensions (i.e. salaries and wages or benefits)

15. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 83
GASB Statement No. 83, Certain Asset Retirement Obligations, November 2016
Effective date: for fiscal years beginning after June 15, 2018 (effective June 30, 2019)
Establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for AROs.
An asset retirement obligation is a legally enforceable liability associated with the retirement of a tangible capital asset (that is the tangible capital asset is permanently removed from service).

16. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 83 (cont.)
ARO results from the normal operations and include legally enforceable liabilities associated with all of the following activities:
a. retirement of a tangible capital asset
b. disposal of a replace part that is a component of a tangible capital asset
c. Environmental remediation associated with the retirement of a tangible capital asset that results from the normal operation of the capital asset

17. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 83 (cont.)
Recognition – when liability is incurred (external and internal obligating even) and reasonably estimable
External obligating event
Approval of federal, state or local laws/regulations
Creation of a legally binding contract
Issuance of a court judgment
Internal obligating event
Occurrence of contamination
Pattern of incurrence is based on the use of the tangible capital asset or placing the capital asset into operation
Permanent abandonment
Acquired tangible capital assets with an existing ARO

18. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 83 (cont.)
Deferred Outflow of Resources – when an ARO is recognized
Initial Measurement of ARO - Based on the best estimate of the current value (using all available evidence) of outlays expected to be incurred
If a tangible capital asset is permanently abandoned before it is placed into operation, it should be reported immediately as an outflow of resources (i.e. an expense)

19. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 83 (cont.)
Subsequent Measurement of ARO
a. Annual adjustment to current value for the effects of general inflation or deflation
Significant change in estimated outlays – price increases/decreases; changes in technology; changes in legal or regulatory requirements; changes in type of equipment or services that will be used.
if the liability increases/decreases before the time of retirement of the tangible capital asset: Adjust the corresponding deferred outflow of resources
if the liability increases/decreases at or after the time of retirement of the tangible capital asset: recognize an outflow or inflow of resources

20. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 83 (cont.)
Subsequent Measurement/Recognition of Deferred Outflow of Resources – systematic and rational manner
a. over the entire estimated useful life of the tangible capital asset
b. Remaining estimated useful life of the tangible capital asset
Disclosure Requirements:
General description of AROs and associated capital assets
Methods and assumptions used to measure liabilities
Estimated remaining useful life of the associated capital assets
How any legally required funding and assurance provisions are met
Amount of assets restricted for payment of the liabilities
If an ARO has been incurred but is not recognized (not reasonably estimable), disclose the fact and reasons thereof.

21. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 85
GASB Statement No. 85, Omnibus, March 2017
Effective date: for fiscal years beginning after June 15, 2017 (effective June 30, 2018)
Enhance consistency in the application of accounting and financial reporting requirements including the following:
Blending component units
Goodwill
Fair value measurement and application
Postemployment benefits

22. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 85 (cont.)
Blending component units
- Criteria for blending (Statement 14, par.53) for a primary government that is a business-type activity and uses a single column for financial statement presentation
goodwill
- Acquisitions that occurred prior to the effective date of Statement 69, application of par.39 of Statement 69 and negative goodwill should not be reported.
Fair value measurement and application
- Each unit of account of real estate held by insurance entities should be classified either as an investment (dependent of the definition in Statement 72) or as a capital asset
- Money market investments and participating interest-earning investment contracts (described in Statement 72) may be measured at amortized cost to the extent permitted by Statement 31 par.9.

23. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Statement 85 (cont.)
Post employment benefits
- Timing of measurement
- Recognition and Measurement (on-behalf payments)
- Presentation of payroll-related measures in RSI
- Classification of Employer-paid member contributions for OPEB
- Alternative measurement method for OPEB
- OPEB provided through certain Multiple-Employer Defined Benefit OPEB Plans

24. YEAR-END GAAP TRAINING
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YEAR-END GAAP TRAINING
Questions and Answers