The Governmental Accounting Standards Board (GASB) has recently issued GASB Statements 79, 80 & 81. This blog provides a brief overview of these Statements.
GASB 79: Certain External Investment Pools and Pool Participants
This Statement sets up accounting and financial reporting standards for qualifying external investment pools that choose to measure for financial reporting purposes all of their investments at amortized cost. This Statement is also applicable to state and local government units participating in these pools. Specifically, GASB 79 addresses how the external investment pool transacts with participants, the requirements for portfolio maturity, quality, diversification, and liquidity, and the calculation and requirements of a shadow price. If an external investment pool meets the criteria in this Statement and measures all of its investments at amortized cost, the pool’s participants also should measure their investments in that external investment pool at amortized cost. If an external investment pool does not meet the criteria established by this Statement, the investment pool should apply the provisions in Paragraph 16 of GASB 31 Accounting and Financial Reporting for Certain Investments and for External Investment Pools, as amended, and participants in that pool should measure their investments at fair value, as detailed in Paragraph 11 of GASB 31, as amended.
When Is GASB 79 Effective?
The requirements of this Standard are effective for periods beginning after June 15th, 2015 (June 30, 2016 and December 31, 2016 financial statements), except for certain provisions on portfolio quality, custodial credit risk, and shadow pricing. Those provisions are effective for reporting periods beginning after December 15, 2015.
How Could This Impact Your Financial Statements?
Although other external investment pools exist, by far the most common investment vehicles meeting the above criteria in Pennsylvania are certain investments portfolios held with the Pennsylvania Local Government Investment Trust (PLGIT). In 2016, PLGIT determined that “…it will manage the Liquid Portfolios in accordance with GASB 79 requirements, as applicable, for continued use of amortized cost.” For governments for which this GASB is applicable, the footnote disclosure related to these investments covered by GASB 79 will be updated.
Related Links:
PLGIT Information Statement on GASB 79
GASB Statement No. 79 Full Text
GASB 80: Blending Requirements for Certain Component Units
GASB 80 amends the blending requirements for the financial statement presentation of component units of all state and local governments. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. However, this additional criterion is not applicable to component units included in the financial reporting entity as defined in GASB 39 Determining Whether Certain Organizations Are Component Units.
When Is GASB 80 Effective?
The requirements of this Standard become effective for reporting periods beginning after June 15, 2016 (June 30, 2017 and December 31, 2017 financial statements).
How Could This Impact Your Financial Statements?
This Statement does not impact the existing criteria for determination of a component unit, or the determination of a discrete or blended presentation. However, if you are a primary government which has created a not-for-profit corporation in which the primary government is the sole corporate member, your financial reporting presentation may need reviewed to determine if a change in presentation is necessary.
Related Links:
GASB Statement No. 80 Full Text
GASB 81: Irrevocable Split-Interest Agreements
The goal of GASB 81 is to improve accounting and financial reporting for irrevocable split-interest agreements in which is a government is a beneficiary of the agreement. Split-interest agreements are used by donors to provide resources to two or more recipients, including governments. These agreements can be created through trusts—or other legally enforceable agreements in which a donor transfers resources to an intermediary to hold and administer for the benefit of a government and at least one other beneficiary. GASB 81 requires that governments participating in split-interest agreements recognize assets, liabilities, and deferred inflows of resources at the beginning of the agreement. GASB 81 also requires that a government recognize assets representing its beneficial interests in split-interest agreements administered by a third party, if the government controls the present service capacity of the beneficial interests. Lastly, GASB 81 requires that a government recognize revenue when the resources become applicable to the reporting period.
When Is GASB 81 Effective?
The requirements of this Statement are effective for reporting periods beginning after December 15, 2016 (December 31, 2017 and June 30, 2018 financial statements).
How Could This Impact Your Financial Statements?
This Statement is expected to impact governments that receive private contributions, such as public colleges and universities, libraries, museums, and school districts. It will allow funds held by others in a trust to be recognized as an asset once the government is able to value the beneficial interest asset, offset by liabilities for interests assigned to other beneficiaries and a deferred inflow of resources for the government’s interest. In addition, the asset’s fair value will be re-measured at the end of each financial reporting period in accordance with GASB 72.
Related Links:
GASB Statement No. 81 Full Text
Do you have questions regarding the new standards? Contact bmccall@md-cpas.com to explore the implications for your organization.
Please note this summary update of GASB 79, 80 and 81 is not meant to substitute for reading the Statements in their entirety.