GASB addresses component units, deferred compensation plans

By Ken Tysiac

GASB issued a new standard Tuesday that is designed to reduce costs and increase the consistency and comparability of reporting on state and local governments’ fiduciary component units.

The guidance is included in Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The statement is designed to mitigate costs associated with reporting on certain employee benefit plans. The statement also is intended to improve the reporting of Sec. 457 deferred compensation plans that meet the definition of a pension plan, and for benefits provided through those plans.

Statement 97:

  • Includes guidance for determining whether a primary government is financially accountable for a potential component unit.
  • Requires a Sec. 457 plan to be classified as either a pension plan or another employee benefit plan, depending on whether the plan meets the definition of a pension plan.
  • Clarifies that Statement No. 84, Fiduciary Activities, as amended, should be applied to all arrangements organized under Sec. 457 to determine whether those arrangements should be reported as fiduciary activities.

Effective date guidance is available in the standard, which is posted on GASB’s website.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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