GFOAz – 2018 Summer Conference August 8, 2018

GFOAz – 2018 Summer Conference August 8, 2018
GASB Update GFOAz – 2018 Summer Conference August 8, 2018

Effective dates – June 30th
2018 75 – OPEB – Employer Reporting 81 – Irrevocable Split Interest Agreements 85 – Omnibus 2017 86 – Certain Debt Extinguishment Issues Imp Guide and 2019 83 – Certain Asset Retirement Obligations 88 – Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements 2020 84 – Fiduciary activities 2021 87 – Leases 89 – Accounting for Interest Costs Incurred before the End of a Construction Period

Something to ponder…

GASB 74 and 75 GASB 74 - Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans GASB 75 - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions

Brief Overview 67 68 71 73 78 82 Pensions 74 75 85 OPEB

Brief Overview 74 – Plan Reporting 75 – Employer Reporting
“TRUSTed” defined benefit and defined contribution plans Addresses assets accumulated for providing OPEB in non-trust plans Financial statement recognition is similar to GASB 43 Notes/RSI updated primarily to reflect changes in DBL of employers AMM is still applicable Similar recognition approach to pensions OPEB definition is the same as GASB 45 Addresses employer reporting for “TRUSTed” and non-trust plans

GASB 75 Impact Net or Total OPEB Liability will be recorded on the financial statements Actuarial valuations are required biennially Discount rate and actuarial assumptions are more prescriptive Expanded note disclosures and RSI Expense volatility? Different level of administration by employers?

Less: Plan Fiduciary Net Position
GASB 75 Impact Non Trust Single Employer Agent Multiple Cost Sharing Total OPEB Liability Actuarial Valuation Less: Plan Fiduciary Net Position Plan/Employer FS Audited Information Net OPEB Liability

GASB 75 Impact 24 months 12/31/15 12/31/16 12/31/17 6/30/18 6/30/17
Plan Year- End 12/31/15 12/31/16 12/31/17 6/30/18 30 months + 1 day 6/30/17 6/30/16 Potential Measurement Dates Potential Actuarial Valuation Dates Employer Current Year- End 12/31/15

What’s included in Fiduciary Net Position?
Trust as defined by criteria in GASB 75, Par 4 Section 115 Trusts – it depends: OPEB Implementation Guide (Employer) – Generally effective for reporting periods beginning after 6/15/17 (i.e. 17/18) – with some specific caveats OPEB Implementation Guide (Plans) – generally effective for reporting periods beginning after 12/15/16 (i.e. 17/18)

Projecting of payments is different than Pensions
Total OPEB Liability Projecting of payments is different than Pensions Based on claims costs or age adjusted premiums Not typically tied to salary or time based Implicit rate subsidy considerations Healthcare postemployment benefits Other forms of OPEB not provided through a pension plan Diverse arrangements for benefits Include assumptions that weren’t part of pension valuations Healthcare cost rate trend Benefit can end or be reduced at age 65 Projecting Discounting Attribution

“Trust” plans Single blended discount rate: Total OPEB Liability
Based on the long term rate of return on plan investments (net of investment expenses) that are expected to be used to finance the payment of OPEB benefits for the periods that the plan’s fiduciary net position is projected to be sufficient to make projected benefit payments and is expected to be invested, using a strategy to achieve that return; and A yield or index rate for 20-year, tax-exempt general obligation municipal bonds with average rating of AA/Aa or higher for all periods that fiduciary net position is not available (also known as the crossover point). Projecting Discounting Attribution

Total OPEB Liability Non-Trust Plans A yield or index rate for 20-year, tax-exempt general obligation municipal bonds with average rating of AA/Aa or higher Projecting Discounting Attribution

Attribution Total OPEB Liability Single attribution method – Entry Age
Projecting Discounting Attribution

Changes in Liability Recognize most changes in liability for the current reporting period as OPEB expense immediately, except: Changes in total OPEB liability: Differences between expected and actual experience with regard to economic and demographic factors in the measurement of the total OPEB liability Changes of assumptions in the measurement of the total OPEB liability For OPEB administered through trust in which specified criteria are met: Difference between projected and actual earnings on OPEB plan investments Employer contributions Governmental funds

Journal Entries – Implementation Year
Prior Period Adjustment: Reverse original OPEB Obligation Record beginning measurement date Net or Total OPEB Liability (impact to Net Position) Deferred Outflows of Resources – Contributions subsequent to measurement date Current year Activity: Contributions Subsequent to measurement date – defer contributions 7/1/17-6/30/18; Recognize prior year contributions as part of Plan Fiduciary Net Position Changes in Total or Net OPEB Liability Deferred Inflows or Outflows OPEB Expense

Cost-sharing Employers
Relevant only for OPEB administered through trust in which specified criteria are met Recognize proportionate shares of collective net OPEB liability, OPEB expense, and deferred outflows of resources/deferred inflows of resources related to OPEB Proportion (%) Basis required to be consistent with contributions Use of relative long-term projected contribution effort encouraged Consider separate rates related to separate portions of collective net OPEB liability Collective measure × proportion = proportionate share of collective measure

Notes and RSI Plan Description Trust Single/Agent Trust Cost Sharing
Non-Trust Name of OPEB plan, entity that administrators the plan, and plan type (single employer or agent plan)  Benefit terms, including (1) classes of employees covered, (2) types of benefits, (3) key elements of OPEB formula, (4) terms or policies with respect to automatic benefit changes [COLA’s] (5) authority under which benefit terms are established or amended If plan is closed to entrants, fact should be disclosed Number of employees covered Fact that no assets accumulated in a trust Contribution requirements, including (1) basis for determining, (2) authority for changes (3) legal or maximum contributions rates, (4) contribution rates, and (5) contributions made Authority under which to pay OPEB benefits as they come due and amount Availability of audited OPEB plan financial statements

Information about the Net OPEB Liability
Notes and RSI Information about the Net OPEB Liability Trust Single/Agent Trust Cost Sharing Non-Trust Significant assumptions, including inflation, healthcare cost trend rates, salary changes, postemployment benefit changes, sharing of benefits costs with inactive employees  Fact that projections of sharing of benefit costs based on established pattern of practice Source of mortality assumptions Dates of experience studies on which significant assumptions are based Net OPEB liability calculated using a healthcare cost trend rate that is (+/- 1%) than assumed rate Total OPEB liability sensitivity to healthcare cost trend rate (+/- 1%)

Information about the Net OPEB Liability
Notes and RSI Information about the Net OPEB Liability Trust Single/Agent Trust Cost Sharing Non-Trust Discount rate applied in the measurement of the total OPEB liability and change in the discount rate since prior measurement period  Assumptions about projected cash flows in and out of the OPEB plan Long-term expected rate of return on plan investments and how determined Municipal bond rate used, if discount rate includes a municipal bond rate Periods of projected benefit payments applied to long-term rate of return and municipal bond rate, if applicable Assumed asset allocation and long-term expected real rate of return for each major asset class Net OPEB liability calculated using a discount rate that is (+/- 1%) than assumed rate Total OPEB liability sensitivity to municipal bond rate (+/- 1%)

Additional Disclosures
Notes and RSI Additional Disclosures Trust Single/Agent Trust Cost Sharing Non-Trust Information about plan’s fiduciary net position if report not publicly available  Schedule of changes in net OPEB liability Schedule of changes in total OPEB liability Measurement date Actuarial valuation date Employers proportionate share of net (total) OPEB liability and basis for allocation; percentage of collective net OPEB liability, change in proportion Changes in assumptions, benefit terms and or other inputs that affected the total OPEB since prior measurement date Description of changes between current measurement date and employer year-end that are expected to have a significant effect on net OPEB liability OPEB expense in current period Balance of deferred outflows/inflows by source and aggregate impact on OPEB expense in each of next 5 years and thereafter

Required Supplementary Information
Notes and RSI Required Supplementary Information Trust Single/Agent Trust Cost Sharing Non-Trust Changes in net OPEB liability by source  Components of net OPEB liability and related ratios Proportionate share of net OPEB liability Employer contributions Changes in total OPEB liability by source Total OPEB liability as a percentage of covered employee payroll OPEB Plan’s fiduciary net position as a percentage of total OPEB liability

GASB 85 – Part 1 Omnibus 2017 (impact to pension/OPEB standards)

GASB 85 This Statement establishes accounting and financial reporting requirements for blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]).

GASB 85 Pension and OPEB Provisions in GASB-85
Six issues related to pension and OPEB are amended by provisions of GASB-85. Amendments are made regarding: The timing of the measurement of pension or OPEB liabilities and expenditures recognized in the governmental funds, Recognition and measurement of on-behalf payments for pensions or OPEB in the employer’s financial statements, Presentation of payroll-related measures in required supplementary information (RSI) by OPEB plans and employers that provide OPEB, Classification of employer-paid member contributions for OPEB (Similar to GASB 82), Alternative measurement method for OPEB clarifications, and OPEB provided through certain multiple-employer defined benefit OPEB plans.(Similar to GASB 78)

GASB 85 GASB-85 amends reporting of pension or OPEB liabilities and expenditures in governmental funds. Liabilities to employees for defined benefit pensions or defined benefit OPEB should be measured as of the end of the reporting period. Examples – (a) there are benefit payments that are due and payable and (b) the plan’s fiduciary net position is not sufficient for the payment of those benefits is consistent with the Board’s prior conclusions in Statements 68 and 75 regarding employer liability recognition. All expenditures for defined benefit pensions or defined benefit OPEB including: (a) amounts for payables to a pension or OPEB plan; and (b) amounts for costs incurred by the employer related to the administration of pensions or OPEB provided through a pension or OPEB plan that is not administered through a trust should be measured for the reporting period.

GASB 85 Payroll Related Measures in RSI by OPEB Plans and Employers That Provide OPEB For single-employer defined benefit OPEB plans (which are most prevalent) and cost-sharing multiple-employer defined benefit OPEB plans, the measure of payroll that should be used in RSI should be covered payroll. Covered payroll is the payroll on which contributions to the OPEB plan are based. For employers that provide OPEB through irrevocable trusts, the measure of payroll used in RSI should be one of the following as applicable: Covered payroll as defined above, or Covered-employee payroll, if contributions to the plan are not based on a measure of pay.

GASB 85 For a single-employer or cost-sharing multiple employer OPEB plan, if contributions are not based on a measure of pay, no payroll measure is presented in the RSI. This would occur if there is a statutory dollar amount, a dollar amount based on a percentage of revenues or similar. Such amounts are common. For example, a state may apportion capital gains taxes received or tobacco settlement revenues to OPEB. These are not measures of pay.

Takeaways for OPEB Implementation
Similar to pensions – recording of OPEB liabilities and OPEB expense Contributions – includes contributions to trust and retiree claims or benefits payments made Restate financial statements upon implementation – reporting initial deferred outflows of resources for contributions and OPEB payments made after the measurement date All other deferred outflows/inflows at transition –all or nothing RSI schedules – build up to 10 year schedules, however, contributions for all periods may be available upon implementation. RSI schedules – if OPEB is not based on measure of pay (common) – Covered-Employee Payroll If OPEB contributions are based on measure of pay – then Covered Payroll

GASB 84 Fiduciary Activities

Overall What: The Board issued Statement 84 to clarify when a government has a fiduciary responsibility and is required to present fiduciary fund financial statements Why: Existing standards require reporting of fiduciary responsibilities but do not define what they are; use of private-purpose trust funds and agency funds is inconsistent; business-type activities are uncertain about how to report fiduciary activities When: Effective for fiscal years beginning after December 15, Earlier application is encouraged.

Fiduciary Activities Focus is on:
Whether a government is controlling the assets of the fiduciary activity; and The beneficiaries with whom a fiduciary relationship exists Establishes the criteria on which a fund should be reported as a fiduciary fund

Identifying Fiduciary Activities
Various types of fiduciary activities Component Units – “Fiduciary component units” Component Unit criteria and certain other criteria – with different criteria for: Post-employment benefits component units Non post-employment benefits component units Other types of fiduciary activities Reported in one of four types: Pension (and OPEB) trust funds Investment trust funds Private-purpose trust funds Custodial funds Liability recognized in the fiduciary fund when an event has occurred that requires the government to disburse fiduciary resources.

When Should a Government Report Assets in a Fiduciary Fund?
Four paths to making this determination: Component units that are postemployment benefit arrangements Component units that are not postemployment benefit arrangements Postemployment benefit arrangements that are not component units All other activities

Is it a component unit refresher…
The primary government is financially accountable if it appoints a voting majority of the organization‘s governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. a primary government is considered to have a financial burden if it is legally obligated or has otherwise assumed the obligation to make contributions to the pension plan or OPEB plan.

Is it a component unit refresher…

When Should a Government Report Assets in a Fiduciary Fund?
Four paths:

Component Units That Are Postemployment Benefit Arrangements are Fiduciary if…
1 GASB 84 – para 6 They are one of the following arrangements: A pension plan that is administered through a trust that meets the criteria in paragraph 3 of Statement 67 An OPEB plan that is administered through a trust that meets the criteria in paragraph 3 of Statement 74 A circumstance in which assets from entities that are not part of the reporting entity are accumulated for pensions as described in paragraph 116 of Statement 73 A circumstance in which assets from entities that are not part of the reporting entity are accumulated for OPEB as described in paragraph 59 of Statement 74.

Pension Contributions Considered a Financial Burden on the Primary Government? GASB 84 says Yes.
GASB 84 Para 7 - Generally, pension plans that are administered through trusts that meet the criteria in paragraph 3 of Statement 67 and OPEB plans that are administered through trusts that meet the criteria in paragraph 3 of Statement 74 are legally separate entities. In determining whether those legally separate entities are component units, a primary government is considered to have a financial burden if it is legally obligated or has otherwise assumed the obligation to make contributions to the pension plan or OPEB plan.

Other Component Units Are Fiduciary if…
2 GASB 84 – Para 8 They have one or more of the following characteristics: The assets are (1) administered through a trust agreement or equivalent arrangement in which the government itself is not a beneficiary, (2) dedicated to providing benefits to recipients in accordance with the benefit terms, and (3) legally protected from the creditors of the government. The assets are for the benefit of individuals and the government does not have administrative involvement with the assets or direct financial involvement with the assets. In addition, the assets are not derived from the government's provision of goods or services to those individuals. The assets are for the benefit of organizations or other governments that are not part of the financial reporting entity. In addition, the assets are not derived from the government's provision of goods or services to those organizations or other governments. Control is NOT a factor to be considered

Examples of administrative involvement
When Does a Government Have Administrative or Direct Financial Involvement? Examples of administrative involvement If it monitors compliance with the requirements of the activity that are established by the government or by a resource provider that does not receive the direct benefits of the activity If it determines eligible expenditures that are established by the government or by a resource provider that does not receive the direct benefits of the activity If it has the ability to exercise discretion in how assets are allocated Example of direct financial involvement If it provides matching resources for the activities

What is an Equivalent Arrangement?
According to the GASB 84 Basis of Conclusion An equivalent arrangement is one that, although not a trust by name, has the same characteristics required of a trust: (a) assets are dedicated to providing benefits to recipients in accordance with the benefit terms and (b) assets are legally protected from the creditors of the government that is acting as a fiduciary, as stated in paragraph 11c.

Postemployment Benefit Arrangements That Are Not Component Units Are Fiduciary if...
3 The government controls the assets of the arrangement and the arrangement is one of the following arrangements: A pension plan that is administered through a trust that meets the criteria in paragraph 3 of Statement 67 An OPEB plan that is administered through a trust that meets the criteria in paragraph 3 of Statement 74 A circumstance in which assets from entities that are not part of the reporting entity are accumulated for pensions as described in paragraph 116 of Statement 73 A circumstance in which assets from entities that are not part of the reporting entity are accumulated for OPEB as described in paragraph 59 of Statement 74.

When is a Government Controlling Assets?
A government controls the assets of an activity if: The government holds the assets. The government has the ability to direct the use, exchange, or employment of the assets in a manner that provides benefits to the specified or intended recipients.

All Other Activities Are Fiduciary if…
4 All three of the following are met: The government controls the assets Those assets are not derived either: Solely from the government's own-source revenues, or From government-mandated nonexchange transactions or voluntary nonexchange transactions with the exception of pass-through grants and for which the government does not have administrative or direct financial involvement One of the criteria on the next slide is met

Fiduciary – All other activities
One of the three following criteria The assets are (1) administered through a trust agreement or equivalent arrangement in which the government itself is not a beneficiary, (2) dedicated to providing benefits to recipients in accordance with the benefit terms, and (3) legally protected from the creditors of the government. The assets are for the benefit of individuals and the government does not have administrative involvement with the assets or direct financial involvement with the assets. In addition, the assets are not derived from the government’s provision of goods or services to those individuals. The assets are for the benefit of organizations or other governments that are not part of the financial reporting entity. In addition, the assets are not derived from the government’s provision of goods or services to those organizations or other governments.

Fiduciary Fund Types New definitions for pension trust funds, investment trust funds, and private-purpose trust funds that focus on the resources that should be reported within each. Trust agreement or equivalent arrangement should be present for an activity to be reported in a trust fund. Custodial funds would report fiduciary activities for which there is no trust agreement or equivalent arrangement. External portions of investment pools that are not held in trust should be reported in a separate column under the custodial fund umbrella (i.e. “external investment pool fund” vs other custodial funds)

Stand-Alone Business-Type Activities
A stand alone BTA’s fiduciary activities should be reported in separate fiduciary fund financial statements. Resources expected to be held 3 months or less can be reported instead in the statement of net position, with inflows and outflows reported as operating cash flows in the statement of cash flows

Custodial Funds Single aggregated total for additions and a single aggregated total for deductions may be reported: If resources, upon receipt, are normally expected to be held for three months or less. The descriptions of the aggregated totals of additions and deductions should indicate the nature of the resource flows. Example Addition: property taxes collected for other governments. Example deduction property taxes distributed to other governments.

Example Statements

Implementation Takeaways
Agency fund transactions will have to be converted to a statement of fiduciary net position and a statement of changes in fiduciary net position within custodial funds. As a result, reporting systems may have to change to accommodate the changes in reporting. Need to revisit arrangements to determine if a component unit, including evaluation of pension trust funds and other trust fund arrangements (successor agency, investment trust funds, etc.).

Leases GASB Statement 87

Effective Date Effective for periods beginning after December 15, 2019
Governments with 6/30 year ends: June 30, 2021 Earlier application encouraged Transition Should be applied retroactively by restating, if practicable Leases recognized and measured using the facts and circumstances that exist at the beginning of the implementation period Lessors should not restate the assets underlying their existing sales-type or direct financing leases Any residual assets for those leases would become the carrying values of the underlying assets

Definition A contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction Control is conveyed when the government has both: The right to obtain the present service capacity from use of the underlying asset as specified in the contract The right to determine the nature and manner of use of the underlying asset as specified in the contract

Applicability Foundation principle
All leases are financings No classification of leases into operating/capital or other categories Exceptions (applies to lessors and lessees): Short-term leases Leases transfer ownership (and do not include termination option) Does not apply to lessors with: Leases of assets that are investments Certain regulated leases (such as airport-airline agreements)

Exclusions Intangible assets (including licensing of contracts for computer software) Biological assets Inventory Contracts that are service concession arrangements Certain transactions related to conduit debt Supply contracts (such as power purchase agreements)

Lease Term Lease term Period in which the lessee has the noncancelable right to use an underlying asset plus the following periods, if applicable: Lessee’s/Lessor’s option to extend the lease (reasonably certain will exercise) Lessee’s/Lessor’s option to terminate the lease (reasonably certain will not exercise) “Reasonably certain” Excludes periods for which both lessee and lessor each have the option to terminate (cancellable periods) Fiscal funding/cancellation clauses considered only when reasonably certain that the clause will be exercised

Question 1 Party A (lessee) enters into a lease contract with Party X (lessor) for equipment. The lease contract is for a 5 year period but provides Party A the option to cancel at the end of year 4. What is Party A’s lease term?

Question 2 Party A (lessee) enters in a 15 year ground lease contract with Party X (lessor). There is an option to extend the lease an additional 15 years at which point the rental amounts reset to current market value. Party A is intends to construct a building with a 40 year useful life with unique specifications. What is Party A’s lease term?

Lease Term - Reassessment
Lessees and lessors should reassess only if one or more of the following occur: Elect to exercise an option when it was previously determined that the lessees/lessor would not exercise the option Elect not to exercise an option when it was previously determined that the lessees/lessor would exercise the option Event specified in the lease contract that requires an extension or termination of the lease occurs

Short Term Leases Is a lease that, at the commencement of the lease term, has a maximum possible term under the contract of 12 months or less, including any options to extend the lease, regardless of the probability of being exercised For a lease that is cancelable by either the lessee or lessor, the maximum possible term is the noncancelable period, including any notice periods. Accounting Lessee payments are expense and lessor receipts are revenue No required disclosures

Initial Reporting Assets Liability Deferred Inflow Lessee
Intangible asset (right to use leased asset)—value of lease liability plus prepayments and initial direct costs that are ancillary to place asset in use Present value of future lease payments to be made over the lease term NA Lessor Lease receivable (generally including same items as lessee liability) Would not derecognize the underlying asset NA Equal to lease receivable plus any cash received up front

Subsequent Reporting Assets Liability Deferred Inflow Lessee Lessor
Amortize over shorter of useful life or lease term Reduce by lease payments (less amount of interest expense) NA Lessor Depreciate leased asset (unless indefinite life or required to be returned in its original or enhanced condition) Reduce receivable by lease payments (less payment needed to cover accrued interest) NA Recognize revenue over the lease term on a systematic and rational basis

Liability Remeasure Lessee should remeasure the liability at subsequent reporting dates if one or more of the following have occurred at or before the reporting date and changes are expected to significantly effect the liability: Change in lease term Likelihood of residual value guarantees being paid has changed from reasonably certain to no, or vice versa Likelihood of purchase option being exercised has changed Change in estimated amounts of payments (except related to an index) Change in the interest rate the lessor charges A contingency, upon which some or all of the variable payments that will be made…(convert from variable to fixed)

Amendments Considered modifications unless the lessee’s right to use the underlying asset decreases (which would then be a partial or full lease termination) Account for as a separate lease if: Lessee results in an additional lease asset (adding or more underlying assets not originally included) and Increase in lease payments does not appear to be unreasonable Unless required to be reported as a separate lease (above) Lessee - remeasure the liability and adjust the lease asset accordingly Lessor - remeasure the lease receivable and deferred inflows of resources

Subleases and Leaseback Transactions
Subleases include three parties Original lessee (now lessor in sublease) should account for the two separate transactions respectively as lessor and lessee Sale-leaseback accounting would apply only if it is a qualifying sale, otherwise considered a borrowing Lease-leaseback

Intra-Entity Leases and/or Leases with Related Parties
Blended component units – reporting requirements don’t apply Discretely presented component units – treated like any other lease under this statement Related Parties – Reported like other leases, except in cases in which it is clear that the terms of the transaction are significantly affected by the relationship. Recognize based on substance rather than legal form

Note Disclosures - Lessee
A general description of leasing arrangements including the basis, terms and conditions on which variable lease payments, not included, in the liability the existence, and terms and conditions, of residual value guarantees not included in the liability Total amount of lease assets, and the related accumulated amortization, disclosed separately from other capital assets Amount of lease assets by major class of underlying assets, disclosed separate from other capital assets Amount of outflows of resources recognized for the period for variable lease payments not previously included in the lease liability Amount of outflows of resources recognized for the period for other payments, such as residual value guarantees or termination penalties, not previously included in the lease liability

Note Disclosures - Lessee
Proposed disclosures (cont’d) Principal and interest requirements to maturity, presented separately, for the lease liability for each of the five subsequent fiscal years and in five-year increments thereafter Commitments under leases before commencement of the lease term The components of any net impairment loss (impairment loss less and changes in lease liability) during the period Relevant disclosures for sublease, sale-leaseback and lease-leaseback transactions NOT required to disclose collateral pledged as a security for the lease (if solely the asset underlying the lease)

Note Disclosures - Lessor
A general description of its leasing arrangements, including the basis, terms, and conditions on which any variable lease payments not included in the lease receivable are determined The total amount of inflows of resources (for example, lease revenue, interest revenue, and any other lease-related inflows) recognized in the reporting period from leases, if the total is not displayed on the face of the financial statements The amount of inflows of resources recognized in the reporting period for variable and other payments not previously included in the lease receivable, including inflows of resources related to residual value guarantees and termination penalties

Note Disclosures-Lessor
The existence, terms, and conditions of options by the lessee to terminate the lease or abate lease payments if the lessor government has issued debt for which the principal and interest payments are secured by the lease payments. (If principal operations) - schedule of future lease payments that are included in the lease receivable, showing principal and interest, for each of the five subsequent years and in five-year increments thereafter Relevant disclosures for sublease, sale-leaseback and lease-leaseback transactions Regulated leases have separate additional disclosures

GASB 85 – Part 2 Omnibus 2017 (the non pension/OPEB provisions)

GASB 85 This Statement establishes accounting and financial reporting requirements for blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]).

GASB 85 Non-Pension and OPEB Provisions in GASB-85
Blending Component Units For a primary government that is a business-type activity and uses a single column for financial statement presentation of its business-type activities, a component unit may be blended only if the component unit meets a criterion for blending in paragraph 53 of Statement No. 14, The Financial Reporting Entity, as amended. Goodwill For acquisitions that occurred prior to the effective date of Statement No. 69, Government Combinations and Disposals of Government Operations, (a) paragraph 39 of Statement 69 should be applied for circumstances in which consideration provided exceeded the net position acquired and (b) “negative” goodwill should not be reported.

GASB 85 Non-Pension and OPEB Provisions in GASB-85
Fair Value Measurement and Application Each unit of account of real estate held by insurance entities should be classified either as an investment or as a capital asset, based on whether the unit of account meets the definition of an investment in Statement 72. The money market investments and participating interest-earning investment contracts described in paragraph 69c of Statement 72 may be measured at amortized cost to the extent permitted by paragraph 9 of Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools.

GASB 81 Irrevocable Split – Interest Agreements

Scope and Timing Scope Timing
Addresses accounting and financial reporting for irrevocable split-interest agreements created through trusts where the donor irrevocably transfers resources to an intermediary to provide resources to two or more beneficiaries, including governments Does not apply to pledges, perpetual trusts and permanent endowments Timing Effective for reporting periods beginning after December 15, 2016 Application should be applied retroactively to all periods presented

Irrevocable Split-Interest Agreements
Typically consists of two components Lead interest – resources provided throughout the term of the agreement in the form of periodic disbursements Remainder interest – resources provided as a final disbursement at termination of the agreement Common examples Charitable lead trust Charitable remainder trust Life-interests in real estate

GASB 86 Certain Debt Extinguishment Issues

Addresses accounting and financial reporting for in-substance defeasance of debt and prepaid insurance on debt that is extinguished Timing Effective for reporting periods beginning after June 15, 2017 Application should be applied retroactively to all periods presented

GASB 86 In-substance defeasance
GASB 86 establishes essentially the same requirements in GASB 7, Advance Refundings Resulting in Defeasance of Debt, for when a government places cash and other monetary assets acquired with only existing resources in an irrevocable trust to extinguish the debt. Prepaid insurance related to extinguished debt For governments that extinguish debt, any remaining prepaid insurance related to the extinguished debt must be included in the net carrying amount of that debt for the purpose of calculating the difference between the reacquisition price and the net carrying amount of the debt.

GASB 86 Additional disclosure for all in-substance defeasance transactions One of the criteria for determining an in-substance defeasance is that the trust hold only monetary assets that are essentially risk-free. If the substitution of essentially risk-free monetary assets with monetary assets that are not essentially risk-free is not prohibited, governments should disclose that fact in the period in which the debt is defeased in substance. In subsequent periods, governments should disclose the amount of debt defeased in substance that remains outstanding for which that risk of substitution exists.

GASB 83 Certain Asset Retirement Obligations

Addresses accounting and financial reporting for certain asset retirement obligations (AROs) Timing Effective for reporting periods beginning after June 15, 2018 Application should be applied retroactively to all periods presented

Certain Asset Retirement Obligations
Legally enforceable liability associated with the retirement of a tangible capital asset resulting from normal operations Excludes landfill closure/postclosure

Recognition of an ARO Liability is recognized when incurred and reasonably estimatable: External – federal, state, local laws; legally binding contract; issuance of a court judgment Internal – Occurrence of contamination Non-contamination Use of capital asset Placing the capital asset into service Abandoned before being placed into service Acquisition of a tangible capital asset with an existing ARO

GASB 88 Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements

Definition of debt and requirement of disclosures related to unused lines of credit, assets pledged as collateral for debt, and terms specified in debt agreements related to default events Timing Effective for reporting periods beginning after June 15, 2018

GASB 89 Accounting for Interest Cost Incurred before the End of a Construction Period

Simplifies accounting for interest cost incurred before the end of a construction period Interest cost incurred before the end of a construction period recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. Timing Effective for reporting periods beginning after December 15, 2019 Applied prospectively

Questions? Contact Info: Jessica Andersen – Kinnaly Soukhaseum -

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GFOAz – 2018 Summer Conference August 8, 2018

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