Key Takeaways
- Depending on the circumstances of your local government, this may be an easier year for your finance department.
- Under GASB-100, changes in major funds will now be prominently disclosed in the basic financial statements.
- The federal capitalization threshold for equipment will increase from $5,000 to $10,000 on October 1, 2024.
Over the past decade, the Governmental Accounting Standards Board (GASB) has introduced numerous landmark statements, shaping the landscape of governmental accounting. Key among these include:
- GASB Statement No. 68: Accounting and Financial Reporting for Pensions
- GASB Statement No. 75: Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB)
- GASB Statement No. 84: Fiduciary Activities
- GASB Statement No. 87: Leases
- GASB Statement No. 96: Subscription-Based Information Technology Arrangements (SBITA)
As we look ahead to the upcoming fiscal year ending June 30, 2024, it's important to stay informed about any new standards that may apply.
Fortunately, the GASB has slowed the pace of new pronouncements, potentially easing the workload and bringing a bit of relief this summer.
Depending on the circumstances of your local government, this may be an easier year for your finance department.
Statements Effective for the Fiscal Year Ending June 30, 2024
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GASB 99 Omnibus 2022 (GASB-99)
The remaining requirements in paragraphs 4-10 of GASB-99 address financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53.
- Paragraphs 4-7: These paragraphs concentrate on updating accounting guidance for financial guarantees in exchange and exchange-like transactions. Now, these transactions align with the accounting for non-exchange transactions under GASB Statement 70, shifting the booking of liabilities from ‘probable’ to ‘more likely than not.’
- Paragraphs 8-10: These paragraphs revise the accounting guidance for derivative instruments that no longer qualify as hedges.
While these updates may not affect many local governments, it's essential to understand their implications.
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GASB 100 Accounting Changes and Error Corrections (GASB-100)
GASB-100 clarifies and modernizes the guidance on accounting changes and error corrections, building on pre-GASB GAAP. The statement distinguishes between:
- Changes in Accounting Principle
- Changes in Accounting Estimates
- Changes within a Financial Reporting Entity
It also provides clear note disclosure requirements for each category.
One significant change under GASB-100 is the requirement for separate note disclosures explaining changes in major funds (from major to nonmajor and vice versa). This adjustment means that changes in major funds will now be prominently disclosed in the basic financial statements.
The display changes of major to nonmajor funds may appear unusual, as only the beginning fund balance will be shown for former major funds, with ongoing activity included in the nonmajor aggregated funds.
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Capital Asset Purchases and Your Capitalization Threshold
GASB has updated guidance on the capitalization of group assets with GASB Implementation Guide Update 2021-1, Question 5.1. Previously, the capitalization of group assets was left to the discretion of each government. Now, GASB recommends that group asset purchases be capitalized.
Many governments align their capitalization thresholds to the federal government. The federal capitalization threshold for equipment will increase from $5,000 to $10,000 on October 1, 2024, following an amendment to the Uniform Guidance. Governments should carefully consider this change and the updated guidance in 2021-1. If you adjust your capitalization threshold, it will constitute a change in accounting principle per GASB-100, requiring disclosure and potentially adjustments to your statements of net position.
Next Steps for Governments
The scope of statements to implement this year may be narrower than in previous years, but it's always wise to seek guidance if needed. A trusted advisor can empower you to maximize your resources and remain in compliance, at year-end and beyond. For any questions or assistance, we’re here to help.
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