Georgia County Government - Winter 2014 - (Page 32)
GASB's New Rules on
UNIFORMITY and DISCLOSURE
An overview of the newly issued GASB rules applicable to
public pension plans, the reasons for their implementation
and issues created by new standards.
By Bill Karbon
Editor's Note: Originally published in the
winter 2014 issue of Plan Consultant magazine. Copyright 2014, the American Society
of Pension Professionals & Actuaries.
Used by permission.
THE 2008 ECONOMIC collapse and subsequent slow recovery stressed public pension
plans as tax revenue declined during a period
of increasing plan costs resulting from poor
market returns. During this same period the
Government Accounting Standards Board
(GASB) has been revising the accounting and
financial reporting rules applicable to public
pension plans requiring increased uniformity
and disclosure. All local government officials
could benefit from an overview of these newly
issued GASB rules, the reasons for their implementation, the most significant changes and
the issues created by the new GASB standards.
The current public pension plan accounting
rules are found in GASB Statements 25, 27 and
50. Statements 25 and 27 were issued in 1994
and became effective in the late 1990s. GASB
50 which was issued in 2007 amended the
applicable notice disclosure and Statements
25 and 27 required supplementary information.
In January 2006, the GASB approved
a project to review Statements 25 and 27
effectiveness creating a postemployment
benefit accounting and financial reporting
project being added to the technical agenda.
Ultimately, from October 2009 through June
2010, the GASB reached tentative conclusions on basic employer accounting and
financial reporting issues which were presented for public comment. The GASB's
GEORGIA COUNTY GOVERNMENT
Preliminary Views on Pension Accounting
and Financial Reporting was then issued on
June 26, 2010.
After a comment period, an exposure draft
followed and on June 25, 2012, the GASB
issued Statements 67 and 68 amending GASB
Statements 25, 27 and 50. Statement 67 details
plan level financial reporting rules and is effective for fiscal years beginning after June 15,
2013. Statement 68 details the accounting and
financial reporting rules impacting a jurisdiction's balance sheet and income statement
effective for fiscal years beginning after
June 15, 2014. The GASB encourages earlier
application of these rules.
Reasons for Accounting Changes
The major reasons for changing the
accounting rules are pension accounting
standardization and a purposeful intent to
reflect a plan's "true" liability on the sponsoring jurisdiction's balance sheet.
Like the private sector pension accounting rules, the new GASB requirements will
standardize the methods used in reporting
and disclosing a public plan's liability and
* The funding method used to determine the
plan's liability and expense;
* The methods used to amortize unfunded
* The discount rate determination process.
Ultimately, the public pension accounting
changes will provide financial report users
a clearer picture of the size and nature of a
defined benefit plan's financial obligations.
Historically, a public pension plan's
unfunded liability (actuarial accrued liability
less plan assets) was a disclosure item while
the asset or liability on the jurisdiction's
financial statements reflected the cumulative difference between the annual pension cost and the employer's contributions
to the plan. In many instances, there was
a modest difference between the pension
cost and actual plan contribution generating an insignificant balance sheet impact.
Under the new rules, the unfunded liability
becomes a balance sheet item which most
likely will adversely impact a jurisdiction's
The significant changes required by the
new GASB pension accounting rules can
* The total pension liability is determined
using a uniform funding method,
namely the entry age normal
method. Prior to GASB
Statements 67 and 68,
actuarial methods and
for financial reporting purposes were
the same methods and assumptions applied to
Under the new
not need to reflect
the methods used
to determine a plan's
* Assets will be recognized
at fair market value.
Table of Contents for the Digital Edition of Georgia County Government - Winter 2014
From the Prospect’s Perspective: A Look at Economic Development From the Perspective of Potential Businesses
ACCG District Days at the Capitol
The 2015 Legislative Preview: Preparing for Successful County Advocacy
Cultivating Future Leaders: A Look at GCAPS
Centennial Celebration Year in Review
Jefferson County finds Benefit in ACCG Equipment Leasing Program
GASB’s New Rules on Uniformity and Disclosure
Extension News: Leftover Harvests Feed Inmates; Thanks to UGA Extension Collaborative Effort
Partner News: The Value of Communication: Digital Signage
News & Notes
Index of Advertisers
Georgia County Government - Winter 2014