Government building

Authored by Jodi Dobson and Gwen Zech

New accounting standards issued by the Governmental Accounting Standards Board (GASB) could have a significant impact on public sector organizations.

Since our last quarterly GASB update, the GASB moved 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. We start off our update with a few links to GASB coronavirus resources.

On July 2, 2020, GASB published Accounting and Financial Reporting Guidance Related to the Cares Act and Coronavirus Diseases GASB Technical Bulletin 2020-1.

On July 20, 2020, GASB added resources to Emergency Toolbox Addressing Issues Arising from COVID-19 Pandemic

As of June 2020, the following are the accounting standards that might impact your organization, including projected effective dates and resources from Baker Tilly technical research and the GASB website to use while implementing new standards.

GASB standards for future implementations and for which earlier application is encouraged

GASB Statement No. 84 – Fiduciary Activities
GASB 84 clarifies the criteria for identifying fiduciary activities, with the focus on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Activities meeting certain criteria should be reported in a fiduciary fund in the financial statements. GASB 84 is effective for fiscal years beginning after Dec. 15, 2019.

GASB Statement No. 84
Fiduciary activities changes affecting existing agency funds
Reporting fiduciary activities webinar
Understanding reporting requirements for fiduciary activities
GASB 84 fiduciary activities implementation reminders

Implementation Guide No. 2019-2, Implementation Guide for GASB Statement No. 84 – Fiduciary Activities
Guide 2019-2 contains questions and answers to assist in implementing GASB Statement No. 84. This guide is effective for reporting periods beginning after Dec. 15, 2019. Earlier application is encouraged if Statement No. 84 has been implemented.

Implementation Guide No. 2019-2
Guide 2019-2 paragraph 6 was amended by Implementation Guide No. 2020-1, which is effective immediately.

GASB Statement No. 87 – Leases
GASB 87 defines a lease as a contract that conveys control of the right to use another entity’s non-financial asset for a period of greater than one year. Purchased power agreements are exempt from this treatment (unlike the Financial Accounting Standards Board lease standard). GASB 87 is effective for fiscal years beginning after June 15, 2021.

GASB Statement No. 87
GASB 87: Lease accounting evaluation tool (NEW)
Five steps for implementing the GASB 87 lease standard
GASB 87 countdown: Are you ready for lease accounting changes
GASB 87: lease term podcast
GASB 87: lessee accounting podcast
GASB 87: lessor accounting podcast
Preparing for lease accounting under GASB 87

Implementation Guide No. 2019-3, Implementation Guide for GASB Statement No. 87 – Leases
Guide 2019-3 was issued in August 2019 and contains questions and answers to assist in implementing GASB Statement No. 87. This guide is effective for reporting periods beginning after June 15, 2021. Earlier application is encouraged if Statement No. 87 has been implemented.

Implementation Guide 2019-3
Additional lease implementation questions were issued in Implementation Guide 2020-1.

GASB Statement No. 89 – Accounting for Interest Cost Incurred before the End of Construction Period
GASB 89 requires that interest costs incurred before the end of a construction period will not be capitalized unless electing GASB 62 Regulated Operations accounting if these costs are included in utility rates. GASB 89 is effective for fiscal years beginning after Dec. 15, 2020.

GASB Statement No. 89
How capitalized interest changes impact utility rate cost recovery

GASB Statement No. 90 – Majority Equity Interests (amendment of GASB Statements No. 14 and No. 61)
GASB 90 defines a majority equity interest and specifies a majority equity interest in a legally separate organization should be reported as an investment if a government’s holding of the equity interest meets the definition of an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund or an endowment (including permanent and term endowments) or permanent fund. GASB 90 is effective for fiscal years beginning after Dec. 15, 2019.

GASB Statement No. 90

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 clarifies the existing definition of a conduit debt obligation, i.e. that it is not a liability of the issuer but it is a debt instrument having all of the following characteristics:

  1. A least three parties involved: 1) an issuer, 2) a third-party obligor and 3) a debt holder or debt trustee
  2. Issuer and third-party obligor are not within the same financial reporting entity
  3. Debt obligation is not a parity bond of the issuer, nor is it cross-collateralized with other debt of the issuer
  4. Third-party obligor or its agent, not the issuer, ultimately receives the proceeds from the debt issuance
  5. Third-party obligor, not the issuer, is primarily obligated for the payment of all amounts associated with the debt obligation

GASB 91 is effective for fiscal years beginning after Dec. 15, 2021.

GASB Statement No. 91
Additional GASB 91 implementation questions were issued in Implementation Guide 2020-1.

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 recent prior statements GASB has issued. This Omnibus addresses eight recent pronouncements, including GASB 87 – Leases, GASB 84 – Fiduciary Activities, and GASB 83 – Asset Retirement Obligations.

GASB 92 is effective for reporting periods beginning after June 15, 2021. Earlier application is encouraged and is permitted by topic.

GASB Statement No. 92

GASB Statement No. 93 – Replacement of Interbank Offered Rates
GASB 93 establishes accounting and reporting requirements 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 is effective for reporting periods ending after Dec. 31, 2021. The requirements in paragraphs 13 and 14 are effective for fiscal years periods beginning after June 15, 2021, and all reporting periods thereafter. Earlier application is encouraged.

GASB Statement No. 93

GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements
A public-private and public-public partnership arrangement (PPP) 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 PPPs and APAs. GASB 94 is effective for fiscal years beginning after June 15, 2022.

GASB Statement No. 94

GASB Statement No. 96 – Subscription-Based Information Technology Arrangements
GASB 96 provides guidance on accounting for Subscription-Based Information Technology Arrangements (SBITA) where 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. 96

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
The statement (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.

GASB Statement No. 97

The requirements of this Statement 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

Earlier application is encouraged and is permitted by specific requirement as follows:

  • Paragraph 4 of this Statement as it applies to arrangements other than defined contribution pension plans, defined contribution OPEB plans or other employee benefit plans
  • Paragraphs 6–9 of this Statement and the supersession of the remaining requirements of Statement 32 (as detailed in paragraph 3 of this Statement)

Questions 4.3 and 4.5 of Implementation Guide 2019-2, as amended, are effective for reporting periods beginning after Dec. 15, 2019. Earlier application is encouraged if Statement 84, as amended, has been implemented.

Implementation Guide No. 2020-1, Implementation Guide Update – 2020
Guide 2020-1 was issued in April 2020 and contains new questions and answers (Q&A) in addition to clarifying previously issued Q&A from past implementation guides. Topics covered include: The Financial Reporting Entity, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, Fiduciary Activities, Leases, Asset Retirement Obligations, Conduit Debt Obligations, Pensions and OPEBs. Questions in this guide are effective for reporting periods beginning after June 15, 2021 through Dec. 15, 2021. Earlier application is encouraged if related pronouncements have been implemented.

For more information on this topic, or to learn how Baker Tilly public sector specialists can help, contact our team.

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