GASB’s New Pension Standards Now Available

Following is an update to our June 25, 2012, article:

On August 2, 2012, the Governmental Accounting Standards Board (GASB) published standards intended to improve the accounting and financial reporting of public employee pensions by state and local governments.
 
The two pronouncements, which were approved on June 25, are available to download at no charge on the GASB website.
 
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.
 
The provisions in Statement 67 are effective for financial statements for periods beginning after June 15, 2013. The provisions in Statement 68 are effective for fiscal years beginning after June 15, 2014. Earlier application is encouraged for both Statements.
 
Bound, hard copies of the statements will be available for purchase in mid-August via the GASB Store.
 
Source: August 2, 2012, GASB News Release
 
Article published June 28:
 
By Christina Camara
 
The true cost of public employee pensions will become clearer under changes approved June 25 by the accounting standards-setter for state and local governments ‒ the Governmental Accounting Standards Board (GASB).
 
The GASB has approved two new standards that mark a major departure in the way pension costs are accounted for and described in financial statements today.
 
The major difference is that liabilities will be reported on the balance sheet for the first time. The net pension liability is the difference between the total pension liability (the present value of projected benefit payments to employees based on their past service) and the assets (mostly investments reported at fair value) set aside to pay current employees, retirees, and beneficiaries. Currently, governments must only report as a liability the difference between the contributions they are required to make to a pension plan in a given year versus what is actually funded.
 
Many states and municipal governments have not fully funded their pensions. In fact, the gap between the promises states have made for public employees' retirement benefits and the money they have set aside to pay these bills was at least $1.38 trillion in fiscal year 2010, according to the Pew Center on the States.
 
Some observers believe the changes will help users of financial statements more clearly see the consequences of future proposed benefit increases.

Note Disclosures and Supplementary Information

Statement 68 requires employers to present more extensive note disclosures and RSI, including:

  • Descriptive information about the types of benefits provided.
  • How contributions to the pension plan are determined.
  • Assumptions and methods used to calculate the pension liability.
 
Single and agent employers will disclose additional information, such as:
  • Composition of the employees covered by the benefit terms.
  • Sources of changes in the components of the net pension liability for the current year.
 
A single or agent employer also will present RSI schedules covering the past ten years regarding:
  • Sources of changes in the components of the net pension liability. 
  • Ratios that assist in assessing the magnitude of the net pension liability.
  • Comparisons of actual employer contributions to the pension plan with actuarially determined contribution requirements, if an employer has actuarially determined contributions.
 
Source: June 25, 2012, GASB News Release
 
 
Governments must also "comprehensively and comparably" measure the annual costs of pension benefits under the new standards. 
 
The new statements are: 
  • Statement No. 67, Financial Reporting for Pension Plans, which changes the existing guidance for the financial reports of most pension plans. The standard is effective for periods beginning after June 15, 2013.
     
  • Statement No. 68, Accounting and Financial Reporting for Pensions, establishes new financial reporting requirements for most governments that provide their employees with pension benefits. Provisions are effective for fiscal years beginning after June 15, 2014.
 
Early implementation is encouraged for both statements.
 
The American Institute of CPAs (AICPA) came out in favor of the new rules. AICPA President and CEO Barry C. Melancon said in a statement, "The new GASB standards will benefit users of these financial statements as well as taxpayers, since state and local governments for the first time will have to report unfunded pension liabilities on their balance sheets providing a clearer view of pension obligations." 
 
Statements 67 and 68 can be downloaded from the GASB website early August. Bound copies of the statements and a plain-language description of the new requirements also will be available.
 
Related articles:
 

You may like these other stories...

The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...
House proposes $10.5B, eight-month highway billThe House Ways and Means Committee proposed a transportation funding bill on Tuesday that calls for a temporary extension of current transportation funding levels until May 31,...
Event Date: July 17, 2014, 2 pm ETThis webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.Participants will learn:...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.