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Comment Deadline Nears for GASB Proposals on Leases, Fiduciary Responsibilities

Feb 24th 2015
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March 6 is the final day that stakeholders can submit comment letters or register to participate in a series of public hearings regarding two accounting proposals made late last year by the Governmental Accounting Standards Board (GASB).

Last November, the GASB issued two “Preliminary Views” documents: one on potential changes to lease accounting for state and local governments, and the other on the reporting of activities in which a government has a fiduciary responsibility.

The GASB is asking individuals and organizations to review the proposals and provide written comments by the March 6 deadline. Comments should be addressed to the “Director of Research and Technical Activities,” Project No. 3-24P (for leases) and Project No. 3-13P (for fiduciary responsibilities), and emailed to [email protected]. Comments can also be mailed to: Governmental Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.

Stakeholders also have the opportunity to provide the GASB with feedback on both projects during three public hearings that will be held in April.

  • 8:30 a.m. EDT on April 8 at the Sheraton LaGuardia East Hotel, Flushing, New York
  • 8:30 a.m. CDT on April 9 at the Sheraton DFW Airport Hotel, Irving, Texas
  • 8:30 a.m. PDT on April 10 at the Westin Los Angeles Airport Hotel, Los Angeles

The deadline for written notice of intent to participate in the hearings is also March 6. Instruction for registering to participate in the hearings can be found in the front of each Preliminary Views document.

The Leases document addresses accounting and financial reporting issues for lessees and lessors, and is based on the principal that all leases are financings of the right to use an underlying asset.

Under the proposal, lessee governments would report the following in their financial statements for all leases longer than 12 months:

  • An intangible asset that represents the government’s right to use the leased asset.
  • A corresponding liability for lease payments.
  • Amortization expense related to the lease asset (recognizing the asset amount as an expense over the term of the lease).
  • Interest expense related to the lease liability.

For government lessors, the following would have to be reported in their financial statements for all leases longer than 12 months:

  • A receivable for the right to receive payments.
  • A corresponding deferred inflow of resources to reflect resources related to future periods.
  • Lease revenue (and a corresponding reduction in the deferred inflow) systematically over the term of the lease.
  • Interest revenue related to the receivable.

GASB Chairman David Vaudt said in November that the standard-setting board has the opportunity to make changes to the current lease guidance that would result in “greater transparency, reduced complexity in application, and more meaningful information for financial statement users.”

Fiduciary Responsibilities
The document on Financial Reporting for Fiduciary Responsibilities explains how governments can enhance the consistency and comparability of when and how they report their fiduciary activities in financial statements. In this context, fiduciary responsibility generally relates to a government controlling assets belonging to others in a trustee or custodial capacity, according to the GASB.

If approved by the GASB, the final rules would:

  • Define when a government has a fiduciary responsibility and, therefore, is required to present fiduciary fund financial statements.
  • Clarify financial reporting requirements for fiduciary responsibilities, including a requirement for business-type activities that serve in a fiduciary capacity.
  • Introduce the use of a financial statement that reports the inflows and outflows of resources for all fiduciary fund types.

“The changes the board is proposing would give governments and their auditors clearer guidance for determining which activities should be reported in fiduciary funds and in which type of fiduciary fund the activities should be reported,” Vaudt said. “This proposal would provide financial statement users with needed information regarding both general and special-purpose governments, including business-type activities, such as public universities, hospitals, and utilities, which generally have not reported their fiduciary activities in the past.”

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