Article
GASB update for public sector organizations
In this quarterly Governmental Accounting Standards Board (GASB) update, we provide a brief summary of new standards along with an update on the status of current projects on the GASB board’s agenda. The conceptual framework, comprehensive projects, major projects and practice issues will likely result in authoritative guidance issued in the future and could have a significant impact on public sector organizations.
Conceptual framework
No current projects.
Major projects
Going concern uncertainties and severe financial stress disclosures
The objective of this project is to address issues related to disclosures regarding going concern uncertainties and severe financial stress (SFS). The project will consider (1) improvements to existing guidance for going concern considerations to address diversity in practice and clarify the circumstances under which disclosure is appropriate, (2) developing a definition of severe financial stress and criteria for identifying when governments should disclose their exposure to severe financial stress, and (3) what information about a government’s exposure to severe financial stress is necessary to disclose.
Current developments: The Board has been deliberating on cost-benefit considerations and review first draft of a Preliminary view. The work plan on this project extends well into 2027.
Next milestone: Preliminary views expected 4th quarter of 2024.
Infrastructure assets
The proposed project would address issues related to accounting and financial reporting for infrastructure assets. The project would evaluate standards setting options related to reporting infrastructure assets to make information (1) more comparable across governments and more consistent over time, (2) more useful for making decisions and assessing government accountability, (3) more relevant to assessments of a government’s economic condition, and (4) better reflect the capacity of those assets to provide service and how that capacity may change over time. The project is considering the following issues:
- How should infrastructure assets be recognized and measured in financial statements? Should the optional use of the modified approach continue to be allowed to report infrastructure assets?
- Should additional information related to the maintenance and preservation of infrastructure assets be presented in financial statements and, if so, what information and what method of communication should be used to provide that information?
Current developments: At the May 2024 meeting, the Board reviewed a draft standards section without chapters on note disclosures and required supplementary information. At the July 2025 meeting, the Board considered feedback from additional user outreach on note disclosures related to infrastructure assets. At the August 2024 meeting, the Board reviewed a preballot draft of Preliminary views. The work plan on this project extends well into 2027.
Next milestone: Preliminary views with comments due January 17, 2025.
Comprehensive projects
Revenue and expense recognition
The overall objective of this project is to develop a comprehensive, principles-based model that would establish categorization, recognition and measurement guidance applicable to a wide range of revenue and expense transactions. Achieving that objective will include: (1) development of guidance applicable to topics for which existing guidance is limited, (2) improvement of existing guidance that has been identified as challenging to apply, (3) consideration of a performance obligation approach to the GASB’s authoritative literature and (4) assessment of existing and proposed guidance based on the conceptual framework. The expected outcome of the project is enhanced quality of information that users rely upon in making decisions and assessing accountability.
Current developments: At the May 2024 meeting, the Board continued its deliberations regarding the recognition of various Category B transactions, including special assessments, regulatory fees, impact fees, punitive fees, general aid to governments and shared revenue. In addition, the Board clarified its previous tentative decisions related to time requirements. At the July and August 2024 meetings, the Board discussed the organization of the various Category B transactions it had discussed in its recent meetings by summarizing them into categories with similar recognition characteristics. The Board also addressed scope issues related to transactions with characteristics of both loans and qualifying requirements.
Next milestone: Exposure draft expected 1st quarter of 2025.
Practice issues
Classification of nonfinancial assets
The objective of this project would be to reconsider the existing classification of nonfinancial assets and other related sub-classifications (for example, capital assets or intangible assets) to ensure that (1) assets are classified in a way that provides the most relevant financial information and (2) the definitions of the classifications are understandable and appropriate to meeting financial reporting objectives. The project also would consider how any classification changes would affect financial statement presentation and disclosure of nonfinancial assets. The project would not, however, reexamine recognition or measurement of nonfinancial assets.
Current developments: GASB issued GASB Statement No. 104 - Disclosure of Certain Capital Assets in September 2024. See additional information under "Newly Released or Effective Standards and Guidance."
Implementation guidance updated - 2024
The objective of this project is to update implementation guidance for additional issues that come to the attention of the staff. This project will result in the issuance of an Implementation Guide when sufficient need exists for new or improved guidance and the Board does not object to its issuance. All updates are incorporated into the Codification of Governmental Accounting and Financial Reporting Standards and the Comprehensive Implementation Guide, as appropriate.
Current developments: At its August 2024 meeting, the Board reviewed initial staff proposals of questions and answers to be included in a 2025 Implementation Guide Update.
Next milestone: Exposure draft expected 4th quarter of 2024.
Subsequent events - Reexamination of Statement 56
The objective of this project is to improve the accounting and financial reporting for subsequent events. The project will reexamine existing requirements related to subsequent events in Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards, to address issues related to (1) confusion about and challenges associated with applying the existing standards, (2) inconsistency in practice in the information provided about subsequent events, and (3) the usefulness of the information provided about subsequent events.
Current developments: At its July 2024 meeting, the Board discussed transition and effective date provisions. At its August 2024 meeting, the Board reviewed a draft standards section that reflects its tentative decisions to date on the project.
Next milestone: Exposure draft expected 4th quarter of 2024.
Newly released or effective standards and guidance
Below is a recap from past Baker Tilly updates of current accounting standards that might impact your organization, projected effective dates and resources from Baker Tilly technical research and the GASB website to use while implementing new standards.
The objective of this statement is to provide users of government financial statements with essential information about certain types of capital assets.
This statement establishes requirements for certain types of capital assets to be disclosed separately in the capital assets note disclosures required by Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for state and local governments. It also establishes requirements for capital assets held for sale, including additional disclosures for those capital assets. The requirements of this statement apply to the financial statements of all state and local governments.
The requirements of this statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter. Earlier application is encouraged.
The objective of this statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This statement also addresses certain application issues.
The targeted improvements contained in statement 103 establish or modify existing accounting and financial reporting requirements related to:
- Management’s discussion and analysis - While the overall requirements do not substantially change management’s discussion and analysis, the modifications are meant to improve the analysis included in this section and provide details about the items that should be discussed as currently known facts, decisions, or conditions expected to have a significant financial effect in the subsequent period.
- Unusual or infrequent items (previously known as extraordinary and special items) - The new statement simplifies GASB literature by eliminating the separate presentation of extraordinary and special items. Under the requirement of Statement 103, applicable items will either be identified as unusual or infrequent, or both.
- Presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position - The changes are designed to improve consistency around the classification of items in these statements by better defining what should be included in operating revenues and expenses and nonoperating revenues and expenses including, for example, the addition of subsidies received or provided as a new category of nonoperating revenues and expenses.
- Major component unit information, and budgetary comparison information - Statement 103 is designed to improve the consistency of the reporting of major component unit information and budgetary comparison information by specifying required placement of that information.
The requirements of this statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter. Earlier application is encouraged.
The objective of this statement is to disclose within government financial statements risks related to a government’s vulnerabilities due to certain concentrations or constraints. A concentration is defined as a lack of diversity related to an aspect of a significant inflow of resources or outflow of resources. A constraint is a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority. Concentrations and constraints may limit a government’s ability to acquire resources or control spending.
A government is required to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, a government is required to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.
The requirements of this statement are effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter. Earlier application is encouraged.
Guide 2023-1 was issued in June 2023 and contains new questions and answers (Q&A) in addition to amending previously issued Q&A from past implementation guides. Topics covered include: leases, subscription-based information technology arrangements (SBITAs), and other implementation guidance. Questions in this guide are effective for reporting periods beginning after June. 15, 2023. Earlier application is encouraged if related pronouncements have been implemented.
GASB 101 requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. This statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements.
The requirements of this statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. Earlier application is encouraged.
This statement defines accounting changes as changes in accounting principles, changes in accounting estimates and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. This statement also prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections in previously issued financial statements.
The requirements of this statement are effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023, and all reporting periods thereafter. Earlier application is encouraged.
Omnibus statements are issued by GASB to address practice issues identified after other standards have been approved for implementation. Omnibus statements “clear up the loose ends” for recent prior statements GASB has issued. This omnibus addresses recent pronouncements, including GASB 87 – Leases, GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements, and GASB 96 – Subscription-Based Information Technology Arrangements.
Effective Date: The requirements of this statement are effective as follows:
- The requirements related to extension of the use of LIBOR, accounting for SNAP distributions, disclosures of nonmonetary transactions, pledges of future revenues by pledging governments, clarification of certain provisions in Statement 34, as amended, and terminology updates related to Statement 53 and Statement 63 are effective upon issuance
- The requirements related to leases, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter.
- The requirements related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53 are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter.
Earlier application is encouraged and is permitted by topic.
Guide 2021-1 was issued in May 2021 and contains new questions and answers (Q&A) in addition to clarifying previously issued Q&A from past implementation guides. Topics covered include: Accounting and Financial Reporting for Derivative Investments, Fiduciary Activities, Leases, Basic Financial Statements and Management’s Discussion and Analysis, and Other Implementation Guidance. Questions in this guide are effective for reporting periods beginning after June 15, 2021 through June. 15, 2023. Earlier application is encouraged if related pronouncements have been implemented.
