Getting Your Government Ready for December 31 Year-End

November 30, 2020 | Article

Governments that have calendar year-ends are getting ready to close a year like none other. Aside from budgetary pressures, major factors for this year include:

  • Whether your government took advantage of the Governmental Accounting Standards Board (GASB’s) delay in the implementation of new standards in GASB-95
  • The impact of the COVID-19 pandemic on your basic financial statements

Governments That Took Advantage of the Delay Offered in GASB-95
If your government took advantage of the delay offered in GASB Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance, two GASB statements would be of concern this year:

  • GASB Statement No. 84, Fiduciary Activities
  • GASB Statement No. 90, Majority Equity Interests

GASB-84 can be a very difficult standard to implement for many general-purpose governments. Therefore, the extension provided by GASB-95 is a welcome relief for many governments.

GASB-90 may only impact governments that hold majority equity interests in legally separate entities. If your government has economic development capabilities or is a public healthcare entity, public college or university, or tribal nation, GASB-90 may impact your government. Otherwise, it may have minimal or no impact.

Governments That Implemented GASB-84 and GASB-90 Last Year
If you implemented GASB-84 and 90 on a timely basis and your government took advantage of GASB-95’s allowed delays after those implementations, it is time for your government to get going on implementing GASB-87, Leases.

Unless a December year end government only has a handful of leases, it is likely that most governments will take advantage of the delay. There are lots of considerations necessary to properly implement the GASB-87 standard.

GASB-87 is a big deal. We have the resources to help your government implement it effectively.

Also, this year is GASB-89, Accounting for Interest Cost Incurred before the End of a Construction Period.

GASB-89 provides relief to some governments that have large construction projects. Upon implementation of GASB-89, construction period interest will no longer be required to be capitalized. Instead, it will be expensed. Interest that has been incurred prior to this year and already capitalized is not adjusted. Be careful though; for those governments that have a rate-setting process, including capitalized interest, rates may need to be adjusted. This would be especially true for public utilities.

COVID-19 – Need We Say More?
The big story of 2020 will, of course, be the COVID-19 pandemic. There are considerations needed related to COVID-19’s impact on your government and disclosure in the basic financial statements. The GASB has issued a Technical Bulletin (2020-1) for those governments that have received funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. 2020-1 contains six questions and answers relating to:

  • The accounting and financial reporting for coronavirus relief funds (CRF)
  • The provider relief fund (PRF)
  • Amendments to the CARES Act that may be coming from Congress
  • The Paycheck Protection Program (PPP)
  • The Higher Education Emergency Relief Fund (HEERF) and other grants to airports and transit
  • Special or extraordinary item determination and COVID-19

If your government has been the recipient of CARES Act funds, Technical Bulletin 2020-1 should be considered as part of this year’s preparation of the basic financial statements.

The GASB has also issued an emergency toolbox for further consideration of accounting, financial reporting and disclosure related to COVID-19. There are 27 potential areas of operations that may need consideration, as outlined in the toolbox, ranging from capital asset impairment to troubled debt restructuring. References to existing GAAP are also incorporated in the toolbox.

Wrapping up 2020 will be complicated. Compliance with GASB standards and COVID-19 relief provisions will face many governments.

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