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GOVERNMENT ACCOUNTING
GASB Update for Wisconsin Communities
The Governmental Accounting Standards Board (GASB) has issued a number of new accounting standards that could have a significant impact on public sector organizations. As a result of the COVID-19 By Steven Henke, pandemic, GASB moved CPA forward with allowing delays in implementation of some new standards upon issuance of GASB Statement No. 95 – Postponement of the Effective Dates of Certain Authoritative Guidance, which became effective immediately. Other recently issued standards incorporated further-out effective dates. The effective dates noted in this article reflect the applicable revised implementation dates as set forth by GASB 95. In an effort to summarize several of the recent standards, this article will focus on those standards with a required implementation date for reporting periods beginning after Dec. 15, 2020 (i.e., Dec. 31, 2021, year-ends and later). The following GASB standards requiring upcoming implementation may impact your organization.
GASB Statement No. 87 – Leases
GASB 87 changes the accounting and financial reporting requirements of organizations that enter into contractual relationships that meet the definition of a lease for assets such as real estate, vehicles and equipment. The January/February 2021 issue of On Balance offers a detailed analysis of GASB 87. GASB 87 is effective for fiscal years beginning after June 15, 2021.
GASB Statement No. 89 – Accounting for Interest Cost Incurred Before the End of Construction Period
GASB 89 states that interest costs incurred before the end of a construction period should be recognized as an expense in the period incurred and should not be capitalized as part of the historical cost of the asset. GASB 89 is effective for reporting periods beginning after Dec. 15, 2020.
GASB Statement No. 91 – Conduit Debt Obligations
GASB 91 provides a single method of reporting conduit debt obligations by issuers and eliminates diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations and (3) related note disclosures. The Statement achieves these objectives by (a) clarifying the existing definition of a conduit debt obligation, (b) establishing that a conduit debt obligation is not a liability of the issuer, (c) establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations, and (d) improving required noted disclosures. GASB 91 is effective for reporting periods beginning after Dec. 15, 2021.
GASB Statement No. 92 – Omnibus 2020
Omnibus statements are issued by GASB to address practice issues identified after other standards have been approved for implementation. Omnibus statements “clear up the loose ends” for previously issued GASB statements. This Omnibus addresses topics from eight recent pronouncements, including GASB 87 – Leases, GASB 84 – Fiduciary Activities, and GASB 83 – Asset Retirement Obligations. Several of the GASB 92 topics are effective immediately, while the remainder of the topics are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 93 – Replacement of Interbank Offered Rates
GASB 93 establishes accounting and reporting guidance related to the replacement of Interbank Offered Rates such as the London Interbank Offered Rate (LIBOR) for hedging derivative instruments. As a result of global reference rate reform, LIBOR is expected to cease to exist in its current form after Dec. 31, 2021. The requirements of this Statement, except for paragraphs 11b, 13 and 14, are effective for reporting periods beginning after June 15, 2020. The requirement in paragraph 11b, the removal of LIBOR as an appropriate benchmark interest rate, is effective for reporting periods ending after Dec. 31, 2021. The requirements in paragraphs 13 and 14 are effective for fiscal years beginning after June 15, 2021.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements
A public-private and public-public partnership arrangement (PPP or P3) is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. An availability payment arrangement (APA) is an arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining or operating an underlying nonfinancial asset for a period of time in an exchange or exchange-like transaction. GASB 94 establishes financial reporting and accounting for P3s and APAs. GASB 94 is effective for fiscal years beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements
GASB 96 provides guidance on accounting for SubscriptionBased Information Technology Arrangements (SBITA) when the government contracts for the right to use another party’s software. The standards for SBITAs are based on the standards established in GASB Statement No. 87, Leases. GASB 96 is effective for fiscal years beginning after June 15, 2022.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457, Deferred Compensation Plans – an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32
GASB 97 (1) requires that a Section 457 plan be classified as either a pension plan or another employee benefit plan depending on whether the plan meets the definition of a pension plan and (2) clarifies that Statement 84, as amended, should be applied to all arrangements organized under IRC Section 457 to determine whether those arrangements should be reported as fiduciary activities. The requirements of GASB 97 are effective as follows: • The requirements in (1) paragraph 4 of this Statement as it applies to defined contribution pension plans, defined contribution OPEB plans and other employee benefit plans and (2) paragraph 5 of this Statement are effective immediately. • The requirements in paragraphs 6–9 of this Statement are effective for fiscal years beginning after June 15, 2021. • All other requirements of this Statement are effective for reporting periods beginning after June 15, 2021. During this unprecedented time for state and local governments, CPAs can play a valuable role in helping entities implement the GASB standards and comply with reporting requirements. Now is the time to develop a plan to ensure a smooth implementation of upcoming accounting standards.
Steven Henke, CPA, is a senior manager at Baker Tilly US LLP. He has been in the accounting and auditing industry for 40 years, serving state and local governments. Contact him at 414-777-5342 or steven.henke@bakertilly.com.
The information provided herein is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought.
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