GASB proposal addresses transition concern in pension standards

BY KEN TYSIAC

GASB issued a proposal Tuesday that is designed to eliminate a potential source of understatement during a state or local government’s transition to the board’s new pension standard.

Under the current transition provisions, a GASB news release states, there is potential for understatement of restated beginning net position and expense during the first year that a state or local government implements GASB Statement No. 68, Accounting and Financial Reporting for Pensions.

GASB’s proposed statement would require, during transition, recognition of a beginning deferred outflow of resources for a state or local government’s pension contributions made between the measurement date of the beginning net pension liability and the beginning of the initial fiscal year of implementation.

This amount would be recognized regardless of whether it is practical to determine the beginning amounts of all other deferred outflows and inflows of resources related to pensions.

The provisions would take effect simultaneously with Statement No. 68, which is required to be applied in fiscal years beginning after June 15, 2014. GASB seeks comments on the proposal by Aug. 26.

GASB approved two new standards on pensions in June 2012. As a result of the new standards, unfunded pension liabilities will begin appearing on the balance sheets of state and local governments that provide defined benefit pensions.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

SPONSORED REPORT

How to audit high risk areas

Revenue recognition, internal control over financial reporting, accounting estimates and going concern are areas of audit that have emerged as particularly challenging and complex.

NEWS

Revenue recognition revisited

A reexamination of new revenue recognition rules has led to tinkering with the standard that is considered the biggest achievement of the convergence efforts of FASB and the International Accounting Standards Board.

INTERVIEW

Staying focused at the top

Olivia Kirtley, CPA, CGMA, an accomplished corporate director with almost 20 years of experience serving on boards, talks about strategic, risk, and compliance issues that keep board members up at night.