GASB Seeks Public Comment on Pension Transition Provisions

WASHINGTON – The Governmental Accounting Standards Board has proposed transition provisions for its new pension accounting and reporting standards for state and local governments and is seeking public comments on them.

The proposed provisions would eliminate a potential source of understatement of restated beginning net position and expense in a government’s first year of implementing GASB’s new accounting and financial reporting for pensions in its Statement No. 68. The GASB statement establishes new financial reporting requirements for most governments that provide their employees with pension benefits through these types of plans. It will require state and local governments with defined benefit pension plans to disclose net pension liabilities on their balance sheets.

At issue is if a government is applying the new pension accounting and reporting standards for the first time to its financial statements for the fiscal year ending June 30, 2014, the beginning net pension liability could be determined as of June 30, 2012. The employer could end up with a situation where it has made a contribution subsequent to the measurement date but before the beginning of the initial implementation period, resulting in an understatement of expense in the first year of implementation.

The proposed transition provisions would require a state or local government to recognize a beginning of deferred outflow of resources for its pension contributions made during the time between the measurement date of the beginning net pension liability and the first year it’s implemented. They are available on GASB’s website – www.gasb.org. GASB will accept comments through Aug. 26.  A final draft is expected to be released in November.

GASB’s new accounting and financial report standards will be effective for state and local governments’ fiscal years beginning after June 15, 2014.

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