Government


  A new GASB proposal is designed to help state and local governments clearly identify the appropriate guidance to apply to their financial reporting.

GASB issued the proposal, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, as an exposure draft.

The proposed statement, available at tinyurl.com/o2xvgmt, would change the “GAAP hierarchy” for state and local governments. The GAAP hierarchy lists the order of priority for pronouncements a government should follow.

GASB is proposing reducing the GAAP hierarchy to two categories of authoritative GAAP. Currently, four categories of authoritative GAAP are described in GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments.

Under the proposal, the two categories of authoritative GAAP would consist of:

  • GASB statements of governmental accounting standards.
  • GASB technical bulletins and implementation guides, as well as guidance from the AICPA that is specifically cleared by GASB.


The proposal is intended to improve implementation guidance by elevating its authoritative status and requiring that all implementation guidance be exposed for public comment.

“Applying accounting standards can sometimes be complex, but identifying the right standards to apply should not be,” GASB Chairman David Vaudt said in a news release. “The GAAP hierarchy proposal will help stakeholders be more efficient by bringing all authoritative accounting and financial reporting literature together in one place.”

To accompany the proposed hierarchy, GASB issued a proposed implementation guide, which would be a culmination of all implementation guidance and would elevate the level of such implementation guidance in the GAAP hierarchy. The change in the level of authoritativeness of implementation guidance necessitated certain changes to the existing guidance. A list and description of changes can be found in Appendix C of the proposed implementation guide, which is available at tinyurl.com/kcu3tux.

The proposed guidance would take effect for financial statements for periods beginning after June 15, 2015.

Comments are sought on the proposals by Dec. 31 and can be emailed to director@gasb.org. Comments on the hierarchy proposal should be addressed to the Director of Research and Technical Activities, Project No. 33-1ED, and comments on the implementation guide proposal should be addressed to the Director of Research and Technical Activities, Project No. 33-2ED.


  Transparency is increasing in state and local government employee pension reporting, and financial statement preparers and auditors need to be ready for the changes new GASB pension standards will bring.

GASB Statement No. 67, Financial Reporting for Pension Plans, and GASB Statement No. 68, Accounting and Financial Reporting for Pensions, were issued in June 2012. The new standards will substantially change the accounting and financial reporting for public employee pension plans and the state and local governments that participate in such plans.

GASB Statement No. 67 takes effect for financial statements for periods beginning after June 15, 2013, and GASB Statement No. 68 takes effect for financial statements for fiscal years beginning after June 15, 2014.

Employers that participate in cost-sharing multiple-employer pension plans will face challenges as the accounting and financial reporting will no longer be based on funding. Upon implementation of GASB Statement No. 68, employers in cost-sharing plans will recognize their proportionate share of the collective pension amounts for benefits the plan provides.

If the obligation to provide pension benefits exceeds the assets available for those benefits, the participating employers will need to report their share of that net pension liability in their financial statements. The AICPA Governmental Audit Quality Center and the AICPA State and Local Government Expert Panel (SLGEP) produced a white paper describing some of the difficulties the new reporting requirements may create for employers who participate in cost-sharing plans—and how they can be overcome. The white paper is available at tinyurl.com/lfvpewz.

The SLGEP also issued a white paper that includes guidance for the plan with regard to testing employer census data in an audit of financial statements of single-employer and cost-sharing multiple-employer plans. It is available at tinyurl.com/k6qk848.

More information on the SLGEP is available at the AICPA’s “GASB Matters” webpage at tinyurl.com/pcjosfy.

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