1. Slide 1 APPA Business and Financial Spring Meeting April 20, 2007 GASB Update The views expressed in this presentation are those of Mr. Galloway. Official positions of the GASB are determined only after extensive due process and deliberation.

2. Slide 2 Current Events

3. Slide 3 Effective Dates Periods beginning after Dec. 15, 2005 –Statement 43, OPEB Plan reporting— Phase I Periods beginning after June 15, 2006 –Statement 34 (Retroactive Infrastructure— Phase II Governments)

4. Slide 4 Effective Dates Periods beginning after Dec. 15, 2006 –Statement 43, OPEB Plan reporting—Phase II –Statement 45, OPEB Employer reporting—Phase I (& any termination benefits) –Statement 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenue

5. Slide 5 Effective Dates Periods beginning after Dec. 15, 2007 –Statement 43, OPEB Plan reporting—Phase III –Statement 45, OPEB Employer reporting—Phase II –Statement 49, Accounting and Financial Reporting for Pollution Remediation Obligations. (Measurement required at beginning of period!)

6. Slide 6 Other Postemployment Benefits

7. Slide 7 Statement 43 (for Plans) Subject: reporting on steward- ship of plan assets by (a) a trustee or plan administrator that is a governmental entity (stand-alone plan reporting) or (b) an employer or plan sponsor with a fiduciary responsibility for the plan assets that includes the plan as a trust or agency fund in its own financial report Includes provisions for reporting of (a) plans administered as trusts and (b) multiple-employer plans that are not administered as trusts

8. Slide 8 Statement 45 (for Employers) Primary Focus Today Accounting and reporting by employers for their OPEB expenses and obligations Applies to all employers that provide OPEB (that is, the employer pays all or part of the cost of the benefits, including implicit rate subsidies) Requires accrual-basis accounting for expense Requires measurement and disclosure of actuarial accrued liabilities and funded status (UAAL)

9. Slide 9 OPEB Myths GASB has “created” the liability GASB is causing OPEB cutbacks Statement 45 requires plan funding Enormous liabilities will be recognized Fund balances will take a big hit

10. Slide 10 Some Implementation Planning Considerations Measure (Find Out the Financial Implications of Your Government’s OPEB Commitments) –Schedule and make arrangements for an actuarial valuation. –Prepare for the valuation. –Absorb the information developed by the valuation. Overcome initial shock by taking a few deep breaths. Calmly engage analytical faculties.

11. Accrual-Basis Illustration (Year 2 of Applying Statement 45) Normal cost (current service cost) $ 350,000 Amortization of the UAAL (for past periods)600,000 Annual required contribution (ARC)950,000 Interest on beginning net OPEB obligation 50,000 ARC adjustment (58,500) Annual OPEB cost = expense 941,500 Actual employer contribution (PAYG method of financing) (250,000) Increase in net OPEB obligation 691,500 Net OPEB obligation—beginning 650,000 Net OPEB obligation—ending 1,341,500

12. Slide 12 Additional Guidance: OPEB Implementation Guide A GASB staff document, issued in July 2005, created primarily to provide guidance (classified as level D GAAP) to preparers and auditors on the implementation of the Statements Includes: –258 questions and answers (212 on Statement 45 and 46 on Statement 43) –Standards sections, glossaries, and illustrations from the Statements –Additional illustrations related to the alternative measurement method For ordering information, see the GASB website, www.gasb.org

13. Slide 13 Due Process Documents Derivatives Intangibles Pension disclosures Fund balance and fund definitions Land and other real estate

14. Slide 14 Intangible Assets Exposure Draft

15. Slide 15 Definition An intangible asset as an asset that possesses all of the following characteristics: –Lack of physical substance –Nonfinancial nature –Initial useful life extending beyond a single reporting period.

16. Slide 16 Types of Intangibles Computer software –Purchased –Internally developed Right-of-ways Easements

17. Slide 17 Basic Guidance All intangible assets should be classified as capital assets, and all existing authoritative guidance related to capital assets should be applied to these intangible assets.

18. Slide 18 Internally Generated Outlays incurred related to an internally generated intangible asset that is considered identifiable should be capitalized only upon the occurrence of all of the following: –Determination that an objective for the project is to create a specific internally generated intangible asset; –Determination of the nature of the service capacity that is expected to be provided by the asset upon its completion; –Demonstration of the technical or technological feasibility for completing the project so that the asset will provide its expected service capacity; –Demonstration of the current intention, ability, and presence of effort to complete or, in the case of a multiyear project, continue development of the intangible asset.

19. Slide 19 Project Timetable December 2006—Exposure draft Comment Deadline—March 23, 2007 Public hearings—April Final statement—June?

20. Slide 20 Pension Disclosures Exposure Draft

21. Slide 21 Pension Disclosures Goal is to conform the pension disclosures with the OPEB disclosures Notes to financial statements would disclose the funded status of the plan as of the most recent actuarial valuation date. –Defined benefit pension plans also would disclose actuarial methods and significant assumptions used in the most recent actuarial valuation in notes to financial statements instead of in notes to RSI.

22. Slide 22 Project Timetable Exposure Draft release in December 2006 Comment Deadline was February 28 Final statement expected by June

23. Slide 23 Land and Other Real Estate Statement 31, paragraph 2 –Historical costs is the default for reporting investments Land and real estate next step –Fair value—limited to endowments and permanent funds (not quasi-endowments) Investment Omnibus—a more comprehensive look at the “left behind” investments—after derivatives is completed

24. Slide 24 Other Current Projects Concepts Statements – Elements of Financial Statements Final—June 2007 –Recognition and Measurement Attributes Deliberations to begin later this year Intergovernmental Financial Dependency Risk Service Efforts and Accomplishments Reporting –Concepts 2 update –Guidelines—due process document

25. Slide 25 SEA What the project is: –Focus on reporting –Focus on guidelines –Focus on clarifying GASB’s role What the project is not: –Establishing performance measures –Establishing performance benchmarks –Establishing reporting standards

26. Slide 26 Other Projects

27. Slide 27 Research Agenda Economic Condition Reporting Electronic Financial Reporting Pension Accounting and Reporting Public and Private Partnerships Reporting Units/Statement 14 Revisited

28. Slide 28 Calling All Issues Agenda is full; however, emerging issues still need to be addressed If you have identified that warrants the GASB’s attention, please submit that issue via email to director@gasb.org Agenda reviewed three times a year the GASB

29. Slide 29 Questions? Telephone—(203) 847-0700 Web site—www.gasb.org