GASB’s New Pension Standards Now Available
by Terri Eyden on
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.
- GASB to Propose Changes to Accounting for State Pensions
- FASB, GASB: Accountants Can Be Heard on Upcoming Controversial Issues
You may like these other stories...
Individuals interested in reviewing the proposed 2015 US Generally Accepted Accounting Principles (GAAP) taxonomy from the Financial Accounting Standards Board (FASB) have until October 31 to submit their written comments....
Ernst & Young 2013 audit deficiency rate 49%, regulators sayMichael Rapoport of the Wall Street Journal reported on Thursday that the Public Company Accounting Oversight Board (PCAOB) found deficiencies in 28 of the...
PwC must face $1 billion lawsuit over MF Global adviceA federal judge on Wednesday ordered PricewaterhouseCoopers (PwC) to face a $1 billion lawsuit claiming that its bad accounting advice was a substantial cause of the...
Upcoming CPE Webinars
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.