GASB proposes more adjustment time for issuers
The Governmental Accounting Standards Board is proposing a modification to its Dec. 15 effective date to give local governments more time to apply a new rule involving the treatment of leases.
Statement 87 provides one approach to all leases that are 12 months or longer for tangible assets ranging from buildings to fleet vehicles and laptop computers.
The current deadline requires local governments that issue quarterly or interim financial reports to begin applying Statement 87 for the subsequent reporting period ending March 31, 2020.
That also would require local governments to restate their leases for the previous comparable quarter covering the first three months of 2019.
According to a spokeswoman for GASB, the board was persuaded that it would be a significant challenge for local governments to accomplish the relatively quick transition to Statement 87.
Instead, GASB is proposing that the same effective date of Dec. 15 should apply to subsequent fiscal year financial reports, although the restatement of leases would continue to be retroactive. And after the first fiscal year, all interim reports should comply with Statement 87.
The revision gives local governments an extra nine months to make the changes.
GASB guidance is important to states, cities and counties that use GAAP accounting.
Although GASB standards are not binding on state and local governments, they must be adhered to in order for governments to receive clean opinions on audits of their financial statements.
Separately, on August 15 GASB released a 47-page implementation guide for Statement 87 because of the complexity of the new standard for treating leases.
The tweaking of Statement 87 is contained in a larger Exposure Draft Omnibus 20xx, that includes other cleanup language involving recently proposed GASB rules.
The omnibus establishes accounting and financial reporting requirements for specific issues related to leases, intra-entity transfers of assets, post-employment benefits, government acquisitions, risk financing and insurance-related activities of public entity risk pools, fair value measurements, and derivative instruments.
GASB is accepting comments through Oct. 4 on these proposed modifications.
Among the clarifications, Omnibus 20xx modifies Statement 69 to provide for an exception to the use of acquisition value for acquired municipal solid waste landfill closure and post-closure care costs and for obligations involving pollution remediation.
The omnibus also clarifies that the amount of reinsurance recoveries or excess insurers are permitted to be reported as reductions of expenses but it is not a requirement.
“The Board believes this amendment will eliminate the inconsistency in the guidance without changing practice because those governments that have been reporting reinsurance recoveries as reductions of expenses still will have the option to do so,” GASB said.
A rule involving a defined benefit pension plan’s statement of fiduciary net position and statement of changes in fiduciary net position is clarified so that local governments are not required to do it for defined contribution plans.
“Statements 67 and 74 establish such requirements for defined benefit pension plans and defined benefit OPEB plans, respectively, but with regard to defined contribution pension plans and defined contribution OPEB plans, those statements establish only note disclosure requirements,” GASB said.