The American Institute of CPAs (AICPA) has submitted comments to the Governmental Accounting Standards Board (GASB) on three Exposure Drafts (ED) in recent months: 1) Implementation Guide No. 201X-Y, Implementation Guidance Update-201X (IG Update ED); 2) Implementation Guide No. 201X-X, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (OPEB Plans IG ED), and 3) Omnibus 201X (Omnibus ED). The AICPA committees that were involved in these advocacy efforts were the State and Local Government Expert Panel (SLGEP) and Private Companies Practice Section (PCPS) Technical Issues Committee (TIC).
GASB Implementation Guidance
The SLGEP provided comments on the OPEB Plans IG ED in a December 23, 2016 letter and on the Implementation Guidance Update ED in a February 3, 2017 letter. The two EDs had many parallel questions relating to OPEB and Pensions. Both letters from the SLGEP encouraged the Board to reconsider the proposal relating to partitioning trusts (i.e., using one trust to pay benefits of both actives and retirees). The SLGEP also raised concerns about a question in the Implementation Guidance Update that appeared to expand tax abatement disclosures to certain agreements. The SLGEP also requested clarification of a number of other items proposed in both of the EDs.
TIC limited its feedback to the IG Update ED. In a January 31, 2017 letter, TIC raised concerns with proposed question 4.42 related to the treatment of tax incremental financings (TIFs). TIC does not believe that TIFs were originally included in the concept of a tax abatement in the issuance of the original GASB Statement as the process for TIFs can differ from the procedures of a typical tax abatement. Therefore, TIC urged the GASB to either remove this question altogether, or perhaps issue additional Q&As to address and clarify these TIF issues.
The Omnibus ED proposed changes to various GASB standards. In its November 21, 2016, letter, the SLGEP supported many of the proposed changes. However, it questioned whether the ED could be implemented in stages given the wide variety of topics addressed in the ED. Instead, the SLGEP recommended the effective date guidance only permit early application of certain topics covered in the ED. The SLGEP also recommended that future GASB EDs include a markup of relevant Codification sections to provide improved transparency of proposed changes.
TIC wrote in its November 21, 2016 letter that it agreed with the objective of the ED, which is to address practice issues that have been identified during implementation and application of certain GASB Statements over the years. TIC agreed that an effective date of reporting periods beginning after June 15, 2017, is reasonable and early adoption may be used by some governmental entities that want to adopt these changes as soon as possible.
GASB Encourages Input on its Reporting Model Invitation to Comment
As part of its commitment to maintaining the effectiveness of its standards, GASB is reexamining the existing financial reporting model established by GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, now that it has been in place for a sufficient length of time. As a result, GASB has issued an Invitation to Comment (ITC) titled, Reporting Model Improvements—Governmental Funds Invitation to Comment (ITC). Members who are state or local government preparers or those who audit governments are encouraged to provide input to the GASB in response to the ITC by the March 31, 2017, comment deadline.
Among other things, the ITC asks for feedback on three alternative recognition approaches for governmental fund financial statements: Near-term financial resources; Short-term financial resources; and Long-term financial resources. These three approaches fall on a continuum – from a closer-to-cash approach at one end of the spectrum to a closer-to-economic resources approach on the other. The ITC also asks for feedback on other governmental fund financial statement issues that relate to the Resource Flows Statement and the Statement of Cash Flows.
Both the SLGEP and TIC are reviewing the ITC and will be providing feedback to the GASB. However, given the significant impact this project will have on governmental reporting, individual members or their firms or organizations should also consider commenting. GASB will ultimately develop a future exposure document presenting the Board’s views in this area, so providing feedback to the Board at this early stage is important.