The Auditing Standards Board of the American Institute of CPAs (AICPA) has issued three interpretations intended to assist both plan and employer auditors who are auditing state and local government entities that have implemented recent pension accounting guidelines from the Governmental Accounting Standards Board (GASB).
In June 2012, the GASB issued two new standards that substantially changes the accounting and financial reporting of state and local government public employee pension plans.
Statement No. 67, Financial Reporting for Pension Plans, revises existing guidance for the financial reports of most pension plans. Statement No. 68, Accounting and Financial Reporting for Pensions, revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits.
Statement 67 is effective for financial statements for periods beginning after June 15, 2013, while Statement 68 is effective for fiscal years beginning after June 15, 2014.
The AICPA Auditing Standards Board issued the following auditing interpretations:
- Interpretation No. 2, Auditor of Participating Employer in a Governmental Cost-Sharing Multiple-Employer Pension Plan, of AU-C section 500, Audit Evidence
- Interpretation No. 1, Auditor of Participating Employer in a Government Pension Plan, of AU-C section 600, Special Considerations – Audits of Group Financial Statements (including the Work of Component Auditors)
- Interpretation No. 1, Auditor of Government Cost-Sharing Multiple-Employer Pension Plan, of AU-C section 805, Special Considerations – Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement
The interpretations, along with recent white papers related to cost-sharing plans (issued by the AICPA State and Local Governments Expert Panel), are available in the GASB Matters section of the Governmental Audit Quality Center website.
New Practice Aids for CPAs
The AICPA earlier this week also issued new technical practice aids for CPAs regarding a recent update to variable interest entity guidance from the Financial Accounting Standards Board (FASB).
On March 20, the FASB proposed an accounting alternative that would – if certain conditions are met – exempt private companies from applying variable interest entity guidance to lessors under common-control leasing arrangements.
Under the new guidance – FASB Accounting Standards Update No. 2014-07, Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements – the private company would instead make certain disclosures about the lessor and the leasing arrangement.
The alternative was approved by the Private Company Council (PCC), which works with the FASB to enhance the relevance and reduce the complexity of certain standards for private companies that prepare financial statements under US Generally Accepted Accounting Principles (GAAP).
AICPA Technical Questions and Answers 9150.34 and 9160.30 (AICPA, Technical Practice Aids) were issued to provide nonauthoritative guidance regarding the modification to the accountant’s compilation or review report when a client adopts a PCC accounting alternative that results in a change to a previously issued report, and to the auditor’s report when a client adopts a PCC accounting alternative that results in a change to a previously issued report.