GASB 63 and 65

Report
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GASB 63
Financial Reporting of
Deferred Outflows of Resources,
Deferred Inflows of Resources,
and Net Position
Jamie Matthews, CPA
May 2013
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Introduction
• Objective: provide guidance for reporting
deferred outflows, deferred inflows and the
net position in the Statement of Financial
Position
• Effective Date: for periods beginning after
12/15/11 (FYE 12/31/12 & FYE 6/30/13)
• Deferred Outflows: reported in a separate
section following assets
• Deferred Inflows: reported in a separate
section following liabilities
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Statement of Net Position
• Statement of Net Position should report Net
Position, rather than net assets, proprietary
or fiduciary fund balance, or equity
• Governments are encouraged to present the
government-wide Statement of Net Position
in a format that displays:
Assets
Deferred
Outflows of
Resources
Liabilities
Deferred
Inflows of
Resources
Net
Position
• Although a Balance Sheet format may be
used:
Assets
Deferred
Outflows of
Resources
Liabilities
Deferred
Inflows of
Resources
Net
Position
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Net Investment in Capital Assets
Component of Net Position
• Changed title
• From: “Investment in capital assets,
net of related debt”
• To:
“Net investment in Capital Assets”
• Calculated the same as the old except
related deferrals are
now included
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Financial Reporting for
Governmental Funds
• Deferred outflows/inflows that are required
to be reported in a governmental fund
balance sheet should be presented in a
format that displays:
Assets
Deferred
Outflows of
Resources
Liabilities
Deferred
Inflows of
Resources
Fund
Balance
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Disclosures
• Details of the different types of
deferred amounts in the notes
to the financial statements if
significant components of the total deferred
amounts are obscured by aggregation
• Disclosure in the notes to the financial
statements is required only if the information
is not displayed on the face of financial
statements
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Transition
• Applied retroactively by reclassifying the
statement of net position and balance sheet
information, if practical, for all prior periods
presented
• In the period this Statement is first applied,
the financial statements should disclose the
nature of any reclassification and its effect
• Also, the reason for not
reclassifying statement of
net position and balance
sheet information for prior
periods presented should
be explained
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GASB 65
Items Previously Reported
as Assets and Liabilities
Jamie Matthews, CPA
March 2013
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Introduction
• Objectives:
• Properly classify certain items that were
previously reported as assets and liabilities
as deferred outflows of resources or
deferred inflows of resources, or
• Recognize certain items that were
previously reported as assets and liabilities
as outflows of resources (expenses or
expenditures) or inflows of resources
(revenues)
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Introduction
• Prior to this statement, GASB only
identified 3 items as deferred
outflows/inflows:
• Deferred outflow/inflows for the changes in
fair value of hedging derivative instruments
(GASB 53)
• Deferred inflow of resources to be reported
by a transferor government in a qualifying
service concession arrangement (GASB 60)
• Deferred inflows for proceeds from the sale
of future revenue (GASB 48)
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Introduction
• Effective Date
•
For periods beginning after 12/15/12
(FYE 12/31/13 & 6/30/14)
Gilbert Associates
Recommendation:
We encourage most clients to
implement GASB 63/65 at the same time
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Definitions
• Assets
•
Resources with present service capacity that the
government presently controls
• Present service capacity - is an asset in its
existing capability to enable the government to
provide services, which in turn
enables the government to fulfill
its mission
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Definitions
• Liabilities
•
Present obligations to sacrifice resources
that the government has little or no
discretion to avoid
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Definitions
• Deferred Outflow of Resources
•
Consumption of net assets by the
government that is applicable to a future
reporting period
• Deferred Inflow of Resources
•
Acquisition of net assets by the
government that is applicable to a future
reporting period
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Definitions
• A deferred outflow of resources has a
positive effect on net position, similar to
assets, and a deferred inflow of resources
has a negative effect on net position,
similar to liabilities.
•
Assets
Notwithstanding those similarities, deferred
inflows/outflows of resources should not be
included in those sections of a statement of
financial position.
Deferred
Outflows of
Resources
Liabilities
Deferred
Inflows of
Resources
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How GASB Determined the
Proper Bucket
Does it meet the definition
of an asset or liability?
Yes
No
Does it meet the definition of a
deferred outflow/inflow?
No
Yes
Report as an
asset or
liability
Report as a
deferred
outflow/
inflow
Report as a
current
outflow
(expense)/
inflow
(revenue)
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Still an Asset!
• Prepayments
• Some respondents to Exposure Draft expressed
concerns with classifying prepayments as assets.
• Concern: prepayments relate to future periods and
should be classified as deferred outflows of resources.
• Board doesn’t disagree prepayments may relate to
future periods; however, Board established a hierarchy
approach for applying definitions.
• Regarding prepayments, Board believes they meet
definition of an asset as entity controls use of
prepayments to provide services to citizens regardless
of period in which services will be provided.
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Still an Asset!
• Purchase future revenues from a Gov outside
the financial reporting entity
• Cable TV initial subscriber install costs
• Capitalized incurred costs related to regulated
activities
• Net pension plan position in excess of
employer’s liability
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Still a Liability!
• Advance of derived tax revenue nonexchange
• Advance from grantor (if eligibility requirements,
other than time requirements, have not been met)
• Ex: Revenue on expenditure-driven grant received
before the incurrence of eligible costs. Time
requirement is met, but no eligible costs.
• Debit Deferred Revenue, Credit Cash
• Receipt of prepayment
• Cable TV hookup revenue in excess of selling
costs
• Premium revenues for insurance entities and
public entity risk
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Still a Liability!
• Commitment (with the obligation to make or
acquire a loan)
• Fees to guarantee the funding of mortgage
loans
• Fees received for arranging a commitment
directly between a permanent investor and a
borrower
• Refunds imposed by a regulator
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Deferred Outflows
• Deferred amount on refunding debt
(debit balance)
• Why not an asset?
• When value of resources required to refund old
bonds exceeds the net carrying amount of old
bonds, Board doesn’t believe resulting debit
amount represents an increase in service
capacity that government presently controls.
• Resources cannot be exchanged for another
asset or used to directly provide present service
capacity and, therefore, do not meet definition of
an asset.
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Deferred Outflows
• Deferred amount on refunding debt
(debit balance) (continued)
• Why not a current inflow/outflow?
• Board concluded that reporting accounting ‘gain’
or ‘loss’ in the period old debt is refunded not
only fails to report purpose of the transaction, but
also distorts operating results in period the debt
is refunded and in subsequent periods
• The difference that results from refunding is not
a separate ‘loss’ transaction, but rather reduction
of interest savings to be obtained in future by
substituting new interest rate for old
• Loss on sale-leaseback
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Deferred Inflows
• Deferred amount on refunding debt
(credit balance)
• Advance of revenue from imposed
nonexchange transaction (ex. property taxes and
fines)
• Why not a liability?
• Resources received prior to the period when
the resources are required to be used or
when use is first permitted do not meet the
definition of a liability
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Deferred Inflows
• Advance from a grantor (if all eligibility
requirements, except for time, are met)
• Ex: Government hasn’t recognized revenue
solely because not yet considered available.
They are eligible, but can’t spend it yet.
• Advance payments by provider and resources
received in advance by recipient in governmentmandated nonexchange transactions and
voluntary nonexchange transactions, including
“reimbursement-type” or “expenditure driven”
grant programs, DO NOT meet definition of asset
and liability, respectively, when only eligibility
requirement not met is time requirement.
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Deferred Inflows
• Advance from a grantor (continued)
• Once all eligibility requirements have been met,
other than time requirements, Board believes
provider no longer maintains control of present
service capacity of advance payments, and
recipient no longer has present obligation to
sacrifice resources.
• If eligibility requirements, other than time, have
been met, it’s not likely provider can reacquire its
resources from recipients and, conversely,
recipient likely no longer has obligation to
provider. Therefore, Board concluded balance
does not meet definition of asset for provider or
liability for recipient.
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Deferred Inflows
• Sales of futures revenues when revenue
recognition is appropriate
• “Unavailable” revenue related to application of
modified accrual accounting
• Gain from sales-leaseback
• Loan origination fees (excluding points) for
mortgage loans held for resale prior to sale
• Loan origination fees for points for lending
activities and mortgage loans held for
investment
• Resources generated by current rates
intended to recover costs that are expected to
be incurred in the future (regulated industries)
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Expense (Current Outflows)
• Debt issuance costs
• Why not an asset?
• Because the costs incurred do not result in
service capacity that the government
presently controls
• Why not a deferred outflow?
• Because the costs are not applicable to a
future period
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Expense (Current Outflows)
• Acquisition costs
• Initial direct cost incurred by lessor for
operating leases
• Fees related to purchased loans
• Gains or other reductions of net allowable
costs intended to reduce rates over future
periods (regulated industries)
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Revenue (Current Inflow)
• Loan origination fees (excluding points)
related to lending activities
• Commitment fees realized upon exercise of
expiration of commitment
• Commitment fees charges (with obligation to
make or acquire a loan or to satisfy an
obligation when exercise is considered
remote)
• Fees received from purchased loans
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Revenue (Current Inflows)
• Loan origination fees (excluding points) for
mortgage loans held as investments
• Loan origination fees (excluding points) for
mortgage loans held for resale after sale
• Fees realized after the funding of mortgage
loans has occurred or after the commitment to
guarantee the funding of mortgage loan
expires
• Fees realized when a commitment is arranged
directly between a permanent investor and a
borrower
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Other Items
• Major Funds - Criteria for determining major
funds will included deferred outflows and
deferred inflows
• Term Deferred – Limited to items reported as
deferred outflows of resources or deferred
inflows of resources
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For More Information:
Jamie Matthews, CPA
Gilbert Associates, Inc.
[email protected]

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