GASB Update Chris Deweese, CPA, Member Suttle & Stalnaker, PLLC.

GASB Update

Chris Deweese, CPA, MemberSuttle & Stalnaker, PLLC

Today’s Discussion

GASB UpdateGASB Statement No. 51GASB Statement No. 53GASB Statement No. 54Other GASB Statements

GASB Exposure Drafts/Future Projects

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GASB Statement No. 51


Intangibles

Effective for FYE 6/30/10

Establishes accounting requirements and presentation of intangibles for financial reporting purposes.

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Intangibles

Intangible assets possess all of the following characteristics Lack of physical substance Nonfinancial nature Initial useful life extending beyond a single

reporting period

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Intangibles assets include:

Easements, Water rights, Timber rights, Patents, Trademarks, and Computer software.

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Intangible assets should be classified as capital assets:

Assets that are explicitly excluded from the scope of the standard, such as capital leases, should follow existing relevant authoritative guidance.

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GASB Statement No. 51Intangible assets only reported in Statement of Net Assets if identifiable

Specific approach for intangible assets that are internally generated (e.g., patents or copyrights)

Accounting and reporting for internally generated software

Guidance for amortization of intangibles

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Intangibles acquired or created primarily for obtaining profit should be reported as investments.

Intangibles must be “identifiable” or “separable” – it can be sold, rented, transferred, etc.

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GASB Statement No. 51Examples include: patents, copyrights, and, most commonly, software

Three criteria for such assets to be capitalizedObjective and service capacity of asset has been determinedFeasibility of project has been demonstratedIntention to continue and complete project has been demonstrated

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Management must also authorize and commit funding for software project before outlays may be considered capitalizable

Thus, capitalization period begins with authorization and commitment to projectCapitalization period ends with substantial completion (i.e., software is ready for use)

Activities in pre- and post-capitalization phases should be expensed

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Useful life for amortization should equal service capacity expectation not to exceed length of contractual provisions Intangibles with indefinite useful lives should not be amortized

This may change, assuming an impairment has not occurred, if conditions convert a useful life to a definite period

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Implementation guide clarifications for intangibles

Websites (if it meets the criteria for internally-generated software...there is a VERY HIGH BAR here)Interest capitalization requirements, if applicable, do apply to intangible projects just like they do for tangible projects

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Purchased/licensed software that is not internally generated is an intangible

Example...5 year licensing agreementIntangible asset offset by commitment of obligation to pay

No amortization of an intangible with an indefinite useful life


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GASB Statement No. 53Derivatives Effective for FYE 6/30/10

Include interest rate & commodity swaps, interest rate locks, options (caps, floors, and collars), swaptions, forward contracts, and futures contracts

GASB establishes the accounting and financial reporting requirements

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GASB Statement No. 54Fund Balance

Effective for FYE 6/30/11

Traditional three component model (reserved, unreserved-designated, unreserved) replaced with the five new components.

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Under GASB 54 fund balances should be reported in classifications that:

“comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent”

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Two initial distinctions in GASB Statement No. 54

Non-spendable

Spendable

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GASB Statement No. 54Non-spendable

Cannot be spent with cash InventoriesPrepaymentsLong-term receivables

Legally or contractually required to remain intactPermanent fund principle

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GASB Statement No. 54Spendable

Can be spent, but may have restrictions – such as:

RestrictedCommittedAssigned

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GASB Statement No. 54Restricted

Same definition as in Statement No. 46

Externally imposed by creditors debt covenants Grantors Contributors

Imposed by law through constitutional provisions or enabling legislation and has legal enforceability

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GASB Statement No. 54Committed

Can only be used for specific purposes imposed by formal action of the governments highest level of decision making authority (governing board or board of directors)

Can only be changed by the same type of action (law, ordinance, resolution)

Should occur prior to year end, but can occur after

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GASB Statement No. 54Assigned

Can be constrained by intent

Should be expressed by governing body, a committee or an official that can assign assets (can be delegated by the Board to another level of management)

Includes all remaining amounts NOT in the general fund

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GASB Statement No. 54Unassigned

Includes only unrestricted, uncommitted, unassigned amounts in the general fund ONLYGeneral fund should be the only fund that reports a

positive unassigned amount

If a NON-general fund balance is negative after restricted, committed, assigned, then:Reduce assigned and if that goes to zeroThen you have negative unassigned

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Disclosure

The following must be disclosed in the summary of significant accounting policies

Committed Who is the highest level of decision making authority What action is required to establish commitment

Assigned Who can assign What is the policy for assignment

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Encumbrances

Disappear from the face of the financial statements, other than what is already restricted, committed, or assigned

Disclose encumbrances in the notes to the financial statements

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What about stabilization amounts/rainy day funds.

Formal establishment of “rainy day” or “contingency” funds to only be used in certain specified circumstances

Only appropriately categorized as restricted or committed

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Presentation (aggregated approach)

Fund balances:

• Non-spendable• Restricted• Committed• Assigned• Unassigned

– Total fund balances

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GASB Statement No. 54Presentation (disaggregated approach)

Fund balances:• Non-spendable

– Inventory– Endowment fund

• Restricted– Debt service reserve– School construction– Capital projects– Other purposes

• Committed– Education– Economic stabilization

• Assigned– Library acquisitions– Text books– Capital projects

• Unassigned

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GASB Statement No. 54Governmental Fund Type Definitions Special revenue fund – used to account for and report

the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects.

Capital projects fund – used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays including the acquisition or construction of capital facilities and other capital assets.

Debt service, permanent and general fund – definition unchanged

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Other GASB Statements


GAAP Hierarchy

Implementation – Effective upon issuance

Established the GAAP hierarchy within GASB literature

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GASB Statement No. 56Codification of reporting standards previously in audit standards

Implementation – Effective upon issuance

Purpose Related Parties Going Concern Subsequent Events

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GASB Statement No. 57OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans

Effective for FYE June 30, 2012

Clarifies the use of the alternative measurement method for OPEB plans as defined in GASB 45

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GASB Statement No. 58Accounting and Financial Reporting for Chapter 9 Bankruptcies

Effective for FYE June 30, 2010

Provides guidance to governments who have petitioned the court for bankruptcy

Liabilities are to be re-measured in accordance with the approved bankruptcy plan when approved

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GASB Exposure Drafts/ Future Projects

GASB 14 and GASB 34 amendment

Exposure draft issued March 2010

This will impact how governments are consolidated

Expected to be finalized in late fall / early winter

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Accounting Developments – Looking Forward

GASB and FASB Codification

Exposure draft issued January 2010

This is a follow-up project to the recent FASB project in which the codification was created

Expected to be finalized in late fall

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Accounting Developments – Looking Forward

Questions?

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Contact Information:

Chris Deweese, CPA, MemberSuttle & Stalnaker, PLLC1411 Virginia Street, East, Suite 100Charleston, WV 25301(304) 343-4126(304) 415-4827 (cell)[email protected]

GASB Update Chris Deweese, CPA, Member Suttle & Stalnaker, PLLC.

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Transcript of GASB Update Chris Deweese, CPA, Member Suttle & Stalnaker, PLLC.