NEWS RELEASE 02/20/03

Governmental Accounting Standards Board Issues Exposure Draft on Other Postemployment Benefits to Increase Transparency

Norwalk, CT, February 20, 2003—The Governmental Accounting Standards Board (GASB) has published two Exposure Drafts of proposed Statements on financial reporting of postemployment benefits. They are Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions and Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The proposed guidance is expected to produce greater transparency for decision-makers who rely on state and local governments’ financial statements. The Exposure Drafts are available on the GASB website. 

In addition to pensions, many state and local governmental employers provide other postemployment benefits (OPEB) as part of the total compensation offered to attract and retain the services of qualified employees. OPEB includes postemployment healthcare, as well as other forms of postemployment benefits, such as life insurance, when provided separately from a pension plan. The proposed Statement on employer reporting would establish standards for the measurement, recognition and display of OPEB expense or expenditures and related liabilities in the financial reports of state and local governments.

“Currently, most governmental employers finance OPEB plans on a pay-as-you-go basis, and financial statements generally do not report financial effects of OPEB until the promised benefits are paid, often many years after the related employee services are received,” said Project Manager Karl Johnson.

Under the proposed accounting change, governments would:

• measure the cost of benefits, and recognize OPEB expense, on the accrual basis of accounting in periods that approximate employees’ years of service; 
   
• provide information about the actuarial accrued liabilities for promised benefits associated with past services and whether, or to what extent, those benefits have been funded; and 
   
• provide information useful in assessing potential demands on the employer’s future cash flows.

The companion Exposure Draft would establish uniform financial reporting standards for OPEB plans and would supersede the previously issued interim guidance.

The proposed overall approach to reporting of OPEB generally is consistent with that adopted by the GASB for pension reporting.

Both Exposure Drafts may be obtained through the GASB Order Department at 800-748-0659.

About the Governmental Accounting Standards Board

The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board's diverse constituency, including preparers and auditors of government financial statements, users of those statements and members of the academic community. More information about the GASB can be found at its website www.gasb.org.

Governmental Accounting Standards Board

Improving governmental accountability through better financial reporting