The implementation of a pension accounting standard for state and local governments is still on schedule, after the Governmental Accounting Standards Board (GASB) last week decided not to delay the timetable of when the new pension guidelines take effect.
Board members decided that the requirements of Statement No. 68, Accounting and Financial Reporting for Pensions, will continue to commence for periods beginning after June 15, 2014.
According to the GASB, stakeholder groups has requested an indefinite delay in the standard’s implementation date because they felt the postponement would be necessary until auditing procedures were implemented for a sufficient period. They expressed concern that governments in multiple-employer pension plans would receive a modified audit opinion on their financial statements in the interim.
However, other individuals, organizations, and stakeholder groups wrote to the GASB requesting that the implementation date not be changed. Some of these groups emphasized that the GASB and other organizations find a solution that did not halt the implementation of the standard.
“The board agreed that the issues raised by its stakeholders warranted thoughtful consideration,” GASB Chairman David Vaudt said in a written statement on March 24. “In response, we undertook a significant effort to gather meaningful input as quickly as possible in order to address these concerns on a timely basis.
“The GASB is committed to doing everything it can to assist governments, pension plans, and their auditors with the implementation of Statement 68, including working with stakeholder groups,” he continued. “However, the board does not believe that delaying implementation will benefit its stakeholders in general.”
Key factors the GASB considered included the following:
- Delaying the new standards would not necessarily address the concern about a modified audit opinion. It appears, based on feedback received, that many governments would face a similar prospect of a modified audit opinion even if governments were to follow the previous pension standards.
- Pension plans are already well into the process of implementing the associated pronouncement, Statement No. 67, Financial Reporting for Pension Plans. If the implementation of Statement 68 were postponed, some governments would now incur the added cost of engaging an actuary to provide information under the old standards in addition to the information already obtained under the new standards.
- The financial statement users who provided feedback to the GASB expressed a strong preference not to delay Statement 68. These users understand the circumstances under which some governments may receive modified audit opinions. They stated that a clearly worded modification would not negatively impact their analyses of government finances.
- Concerns about the effort required to implement Statement 68, particularly with regard to governments in some cost-sharing multiple-employer pension plans, are real and significant. However, the GASB was fully aware of these issues when it originally considered the costs and benefits associated with establishing the original implementation date. No new evidence has been brought forth to date that would result in the reconsideration of this conclusion.
On March 11, the GASB released a free toolkit that supplies preparers, auditors, and users of state and local governmental financial reports with numerous resources on pension accounting and financial reporting standards.
Statement 68, which was approved by the GASB on June 25, 2012, revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits.