2019 GASB Year in Review and a Look Forward to 2020

December 2019 | Article

In 2019, the GASB continued work on the so-called “Big 3” projects. However, at the end of the year, all the “Big 3” are slightly different than when 2019 started. The board also released three Implementation Guides: the annual Update as well as guides helping practitioners implement GASB Statement Nos. 84 Fiduciary Activities and 87, Leases, and certain elements of these guides caused some practitioners and the GASB to consider additional issues toward the end of the year. Notably, the GASB delayed the issuance of what may have been GASB Statement No. 92, Deferred Compensation Plans – Reexamination of Statement 32. GASB is currently conducting additional outreach to governments as it relates to the fiduciary reporting of Section 457 plans and other government-sponsored employee benefit plans. As soon as this outreach is completed, additional changes may occur from the GASB prior to a final standard release.

All Quiet on the New Standards Issuance Front
The GASB just issued Statement No. 91, Conduit Debt Obligations (to replace GASB Cod. Sec. C65). GASB-91 updates more than two decades of existing guidance related to conduit debt obligations (CDOs). The changes made by GASB-91 will become effective for reporting periods beginning after December 15, 2020 (January 1, 2021, or July 1, 2021).

GASB-91 defines CDOs for financial reporting purposes as having all the following characteristics:

  • There are at least three parties involved:
    • The issuer
    • At least one third-party obligor
    • At least one debt holder or a debt trustee
  • The issuer and the third-party obligor are not within the same financial reporting entity.
  • The debt obligation is not a parity bond of the issuer, nor is it cross-collateralized with other debt of the issuer.
  • The third-party obligor or its agent (typically a corporate trust department at a bank,) not the issuer, ultimately receives the proceeds from the debt issuance and finally,
  • The third-party obligor, not the issuer, is primarily obligated for the payment of all amounts associated with the debt obligation (the debt service payments).

If any of the requirements are not met, the issuance is not a CDO. The bond issue is then an obligation of the issuer. Otherwise, the obligation is at the third-party obligor. Look for additional information on GASB-91 in an upcoming Eide Bailly webinar.

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Three Implementation Guides Issued
GASB staff was busy developing new questions and answers, especially related to Fiduciary Activities and Leases. Focus areas in the guides are dependent upon the issues at hand for a government, but pay attention to the following:

Implementation Guide Questions / Focus Areas
2019-1 – Annual Update
  • 4.9 (to be codified as GASB Cod. Sec. S20.708-3) – A government transfers a building to a pension plan component unit. The GASB reminds practitioners that such a transfer is at net book value, which may be zero.
  • 4.10 (to be codified as GASB Cod. Sec. S20.708-4) – Such a transfer in 4.9 does not result in a recharacterization of the capital asset transferred to an investment (in this case involving a parcel of land). GASB Cod. Sec. I50.107 (GASB-72, par. 68) requires such transfers to remain as originally recorded.
2019-2 – Fiduciary Activities
  • 4.5 – A pension or OPEB plan that is administered through a trust that meets the criteria for a trust in GAAP does not have a governing board. Instead, another government (for example, a sponsoring government) performs the duties that a governing board typically would perform (for example, the government determines or amends the structure of the plan [vesting requirements and required contributions]). If that other government (for example, a sponsoring government) is legally obligated to make contributions to the pension or OPEB plan, then in the financial statements of the sponsoring government, the plan is reported.
  • 4.6 – Similar pattern to 4.5 and answer, but for defined contribution plans.
  • 4.15 – Government clearing account activity is reported as liabilities of the government and not in custodial funds.
  • Student activity fund questions and answers.
2019-3 – Leases
  • 4.1 - 4.11 – Scope and applicability of GASB-87.
  • 4.12 - 4.16 – Lease term calculations.
  • 4.17 - 4.20 – Short-term leases.
  • 4.56 - 4.57 – Lease incentives (lessors and lessees).
  • 4.58 - 4.70 – Components, combinations, modifications and terminations.
  • 4.75 – Intra-entity leases.
  • 4.76 – 4.77 – Effective date and transition.

Where are We Headed in 2020?
Assuming no change in the dates within the GASB’s Technical Plan, the “Big 3” will have significant activity in the new year. The following is the current slate of activity for the GASB over the next six months:

Month Release
Imminent Exposure Draft – Implementation Guide Update – 2020
January Final Statement – Omnibus – 20XX
February Exposure Draft – Conceptual Framework – Note Disclosure
March Final Statement – Public-Private and Public – Public Partnerships and Availability Payment Arrangements

Final Statement – Replacement of Interbank Offered Rates
April Final Statement – Subscription-Based Information Technology Arrangements
May Preliminary Views – Revenue and Expense Recognition
June Exposure Draft – Financial Reporting Model – Reexamination

An unknown remains in the Deferred Compensation Plans, which hopefully will come to resolution soon.

2020 an Important Year
The GASB will likely have a busy year in 2020, one that may set the course for many years to come. Many of you know the implementation of GASB-84 currently ongoing has not been and will not be easy. As the chairman of the GASB has remarked—it is a monster. For many governments, GASB-87 may not be any easier as evidenced by the number of requests for proposals for consulting related to GASB-87 implementation that have been released recently.

Eide Bailly will be presenting webinars on each of these and other topics throughout the next six months. Please check our events page regularly for updates!

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