Need to Know:
Fiduciary Activities Final Statement

 

The GASB is preparing to issue a final Statement, Fiduciary Activities, in early 2017. State and local governments currently are required to report their fiduciary activities in fiduciary fund financial statements; however, the standards in place are not explicit about what constitutes a fiduciary activity for accounting and financial reporting purposes. Consequently, there is diversity in practice regarding the identification and reporting of fiduciary activities.
The Statement the GASB is now finalizing is intended to improve guidance regarding what constitutes a fiduciary activity for accounting and financial reporting purposes and how fiduciary activities should be reported.

The Statement the GASB is now finalizing is intended to improve guidance regarding what constitutes a fiduciary activity for accounting and financial reporting purposes and how fiduciary activities should be reported. It is designed to enhance the consistency and comparability of fiduciary activity reporting by state and local governments and to improve the usefulness of fiduciary activity information primarily for assessing the accountability of governments in their roles as fiduciaries.

What guidance will the Statement provide?


The Statement will establish criteria for identifying and reporting fiduciary activities of all state and local governments. The criteria for activities that are not reported in a component unit generally focus on:
  • Whether a government controls the assets of the activity at issue, and
  • The beneficiaries with whom the fiduciary relationship exists.
An activity that meets the criteria will be reported in a fiduciary fund in the basic financial statements. Governments with activities that meet the criteria will present both a statement of fiduciary net position and a statement of changes in fiduciary net position.

The Statement will establish criteria for identifying and reporting fiduciary activities of all state and local governments.
An exception to that requirement is provided for a business-type activity—such as a utility or university—that holds assets in a custodial fund for three months or less. Otherwise, business-type entities should report their fiduciary activities in fiduciary fund financial statements.

The Statement describes four types of fiduciary funds:
  • Pension (and other employee benefit) trust funds,
  • Investment trust funds,
  • Private-purpose trust funds, and
  • Custodial funds.
A custodial fund will report fiduciary activity resources that are not held in a trust agreement or equivalent arrangement that meets specific criteria. Many activities that are now reported in agency funds will be reported in custodial funds.

A fiduciary component unit, like some employee benefits plans, when reported in the fiduciary fund financial statements of a primary government, will combine its information with its own component units, if any, and aggregate that combined information with the primary government’s fiduciary funds.

The Statement also will require that a government recognize a liability in a fiduciary fund when an event has taken place that obliges the government to disburse fiduciary resources. Events that oblige a government to disburse fiduciary resources occur when a demand for the resources has been made or when no further action or condition is required to be met by the beneficiary to be entitled to receive the resources.

When Will the Guidance Take Effect?


The requirements of the forthcoming Statement will be effective for reporting periods beginning after December 15, 2018, with earlier application encouraged.