Georgia County Government - Winter 2014 - (Page 32)

FEATURE 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. Brief History 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 32 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 expense; namely: * The funding method used to determine the plan's liability and expense; * The methods used to amortize unfunded liability changes; * 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 financial statement. Significant Changes The significant changes required by the new GASB pension accounting rules can be summarized: * 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 assumptions applied for financial reporting purposes were the same methods and assumptions applied to determine the plan's funding requirements. Under the new rules, pension accounting does not need to reflect the methods used to determine a plan's funding requirement. * Assets will be recognized at fair market value.

Table of Contents for the Digital Edition of Georgia County Government - Winter 2014

President’s Message
Director’s Desk
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