The User's Perspective

May 2007

GASB Project Update

Pension Disclosures

            GASB Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, on retiree health insurance and other postemployment benefits (OPEB) made a number of improvements to the existing disclosure requirements for pensions. Governments are in the process of implementing Statements 43 and 45 right now. The purpose of this project is to replicate those improvements for pensions where appropriate. For example, the OPEB standards require that the funded status information—including the amount of the unfunded actuarial liability—for the most recent actuarial valuation be presented in the notes to the financial statements. This would have the benefit of ensuring that you receive some funding information, even if the required supplementary schedule of funding progress is not appended to the financial statements. Another example relates to one of the six allowable actuarial cost allocation methods, the aggregate method. This method does not produce an unfunded actuarial liability, and therefore governments that use it are not required to present a funding progress schedule for their pensions. The OPEB standards require that such governments use the entry age cost method to prepare and present a funding progress schedule for their OPEB. This requirement would be extended to pensions as well.

            Impact on the financial report: Additional useful information about pensions will be disclosed in the notes and, in some cases, required supplementary information. For the first time, users will be able to obtain information about the funded status of pensions that use the aggregate cost method.

            Status: Statement No. 50, Pension Disclosures, was issued in May 2007. The implementation deadline is fiscal years beginning after June 15, 2007 , though some governments may implement earlier. The preparation of funding progress schedules by governments using the aggregate method is required to begin no later than the first actuarial valuation as of June 15, 2007 , or later.

    Contacts:      Karl Johnson (

    Michelle Czerkawski ( )

    More information:   Pension disclosures project page

Intangible Assets

            This project is intended to answer questions the GASB has received regarding how to identify and report intangible assets. The project is developing standards that would apply to nonfinancial assets that lack physical substance and have useful lives extending beyond a single reporting period (in other words, generally more than one year). The standards will discuss when intangible assets—such as computer software, water rights, patents, and trademarks—should be reported in the financial statements at historical cost, as well as when and how to amortize that cost.

            Impact on the financial report: Assets not previously reported will be added to the accrual-based financial statements, which will increase net assets—specifically, the “invested in capital assets, net of related debt” component of net assets. If an intangible asset has a finite useful life, its cost will be reported in annual installments as amortization expenses in the accrual-based financial statements, rather than being reported in a lump sum in the year it was acquired or developed and put into service. This would result in a government’s annual costs being more accurately depicted.

            Status: The Board is reviewing drafts of the final Statement, which is expected to be issued in June 2007. The intangible assets standards are expected to be effective for periods beginning after June 15, 2009 , though governments may implement earlier.

    Contact:        Greg Driscoll (

    More information:   Intangible Assets project page

Conceptual Framework—Elements of Financial Statements

            Concepts projects do not establish standards; they provide a foundation to guide future standards-setting by the Board. This project sets forth definitions of the building blocks of financial statements, such as assets, liabilities, and inflows and outflows of resources.

            Impact on the financial report: Minimal, at least at first. However, once published, the Concepts Statement will inform the Board’s future decisions about the standards it sets. The definition of a liability, for example, will influence the Board’s decisions about what obligations to require governments to report in the financial statements.

            Status: The Board is reviewing drafts of the final Concepts Statement, which is expected to be issued in June 2007.

    Contact:        Roberta Reese (

    More information:   Elements of Financial Statements project page

Fund Balance Reporting and Governmental Fund Type Definitions

            In October 2006, the GASB issued an Invitation to Comment seeking input on potential changes to the standards governing what information may be reported in governmental funds and how that information is presented in fund balance. The Invitation to Comment was a response to observations by the GASB and others of considerable variation in how the standards were being applied by governments. As a result of these variations, serious comparability problems have developed, undermining the usefulness of fund balance information. The Invitation to Comment considered several approaches to addressing fund balance reporting, including stricter interpretations of how special revenue, debt service, and capital projects funds may be used and new categories of fund balance. The GASB has been reviewing the feedback it received on the Invitation to Comment and is in the process of developing proposed standards. In response to that feedback, the Board has tentatively decided to be less prescriptive regarding the definitions of what resources may be reported in the various governmental fund types and to focus more intently on the fund balance components that identify the degree to which limitations are placed on how resources may be used.

            Impact on the financial report: On the plus side, users should be better able to distinguish between resources in governmental funds that are limited to particular purposes and those that are available for any purpose, a key need of many types of users. However, on the negative side, historical trends before and after the new standards may not be consistent.

            Status: Proposed standards are currently being developed and are projected for release toward the end of 2007.

    Contacts:      Ken Schermann (

    Dean Mead ( )

    More information:   Fund Balance Reporting project page

Service Efforts and Accomplishments Reporting

            A key difference between public and private sector entities is that public sector entities are expected not only to perform well financially but also to accomplish public policy goals and objectives. Demonstrating accountability requires not only financial information but nonfinancial information such as measures of service outputs and outcomes. The GASB has been conducting research on the reporting of service efforts and accomplishments and monitoring actual reporting by governments for over two decades. With its research efforts recently completed, the GASB decided to add a project to its current agenda with two goals. First, the GASB will make limited revisions to its Concepts Statement No. 2, Service Efforts and Accomplishments Reporting, to reflect what it has learned. Second, the GASB will consider how to develop suggested guidelines that can be used by governments that choose to report on their performance publicly.

            Impact on the financial report: None. If suggested guidelines are developed, they would apply to separately issued reports.

            Status: Proposed revisions to the Concepts Statement and an initial document seeking input on the subject of reporting guidelines are planned for the first quarter of 2008.

    Contact:      Wilson Campbell (

    More information:   Service Efforts and Accomplishments Reporting project page

Intergovernmental Financial Dependency Risk

            A common interest among many types of financial statement users is the degree to which governments depend on individual types of revenue or revenue sources, particularly those over which a government has little or no control. The most significant of these revenue sources may be intergovernmental aid. This project was added to the current agenda in April 2007. The purpose of the project is to consider the needs of users to understand the risks associated with dependency on resources provided by other governments and to assess whether those needs are being met.

            Impact on the financial report: Uncertain at this time. If unmet needs are identified, additional information may be presented in the financial statements or notes.

            Status: Deliberations will commence late this year, with proposed standards potentially to be published for public comment in June 2008.

    Contact:      Roberta Reese (

    More information:   Intergovernmental Financial Dependency Risk project page