Effective dates for various GASB standards are here or coming soon, making now the time to identify those that need to be on your radar for implementation. The table below provides a summary of effective dates. We’ve also included a brief summary of each standard and various action items to start on now. For a more detailed look at some of the standards, including those with added complexity such as GASB 84 and GASB 87, you can dig deeper with the many related articles and archived webinars listed below.
GASB 83: Asset Retirement Obligations
GASB 83 defines asset retirement obligations and establishes the methodology for recording as a liability. Entities with enforceable legal obligations associated with the retirement of tangible capital assets should recognize a liability and corresponding deferred outflow of resources in full accrual financial statements.
Key considerations include determining if there is a legal obligation, and if the costs for the retirement obligation are significant as well as considering if the asset has any possibility of ever being retired. Read our article GASB 83: Asset retirement obligations, for more information.
Effective dates for various GASB standards are here or coming soon, making now the time to identify those that need to be on your radar for implementation.
GASB 83 action items: Review your listing of capital assets, and brainstorm to determine if there are significant legal obligations associated with the retirement of those assets. This likely requires discussion with department heads and others who have direct knowledge of potential obligations associated with these assets within your organization.
GASB 84: Fiduciary Activities
GASB 84 establishes criteria for the identification of fiduciary activities and provides guidance on reporting them. This standard also clarifies that standalone business-type entities should report fiduciary activities, if applicable. Fiduciary activities can be identified through various paths laid out in the standard: (1) fiduciary component units that are pension or OPEB plans, (2) other fiduciary component units, (3) pension or OPEB arrangements that aren’t component units, and (4) other fiduciary activities.
In addition to identifying fiduciary activities, the standard also impacts how these activities are reported. It replaces the current “agency fund” terminology with the term “custodial fund.” It also requires reporting of changes in fiduciary net position — additions and deductions — within the financial statements of all types of fiduciary funds, including custodial funds.
Consider other activities that now may potentially need to be reported as fiduciary and reported for the first time.
GASB 84 is expected to move various activities into or out of fiduciary funds and to potentially require the reporting of certain activities that historically haven’t been included in governmental financial statements.
This standard is too complex to detail here so we’ve compiled other materials to help you prepare for implementation:
GASB has also issued an implementation guide (Implementation Guide No. 2019-2), which is critical to fully understanding the implications of this standard.
GASB 84 action items: Read the standard and the related implementation guide. Review your most recently audited financial statements to identify activities that have previously been reported as fiduciary that may no longer meet the definition. These may need to be removed from the financial statements or moved to a governmental or proprietary fund. Identify activities that previously have been reported as governmental or proprietary that now meet the definition of a fiduciary activity. Consider other activities that now may potentially need to be reported as fiduciary and reported for the first time. Financial systems will need to change to add new accounts to track additions and deductions for all fiduciary activities, and any changes in activity classifications may require budgetary adjustments to move activities into or out of the governmental funds.
GASB 87: Leases
GASB 87 establishes new guidance for lease accounting for lessees and lessors and eliminates the classification of leases into operating or capital leases. The definition of a lease under this new standard is a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) for a period of time in an exchange-like transaction. Control requires both the right to obtain the present service capacity from use of the underlying asset and the right to determine the nature and manner of use of the underlying asset.
The standard doesn't apply to a short-term lease, which is a lease that, at its start, has a maximum possible term, including any options to extend, of 12 months or less. There are various other exclusions, including contracts that transfer ownership, leases of tangible assets that are investments, and certain regulated leases (such as airport-airline agreements), among others.
Even if the agreement isn’t titled a lease, it may still meet the definition under the standard.
Lessees will record a lease liability measured at the present value of payments expected to be made during the lease term and a related lease asset to be amortized over the shorter of the lease term or useful life of the underlying asset. Lessors will record a lease receivable and a related deferred inflow of resources to be recognized in a systematic and rational manner over the term of the lease. As you might guess, this standard will bring some complexities. GASB has issued a separate implementation guide (Implementation Guide No. 2019-3). In addition, we’ve compiled several of our own resources to help you understand implementation:
GASB 87 action items: Read the standard and the related implementation guide. Review your organization’s agreements and contracts to identify any that meet the definition of a lease under this standard. Even if the agreement isn’t titled a lease, it may still meet the definition under the standard. Brainstorm other routine transactions that are exchange-like for a right to use a nonfinancial asset.
GASB 88: Debt Disclosures
GASB 88 stipulates certain disclosures related to debt. Disclosures required under this new standard include unused lines of credit, assets pledged as collateral, significant terms related to default or termination with finance-related consequences or subjective acceleration clauses, as well as separate identification of direct borrowings and direct placements. Direct borrowings and direct placements are obligations in which a loan agreement is entered into with a lender directly or a debt security is issued directly to an investor, respectively. Examples to consider include debt issued directly from a state-financing authority, state aid anticipation notes, county contractual obligations, and installment purchase agreements.
GASB 88 action items: Review debt agreements for any disclosure items that are now required and update any debt schedules to separately identify direct borrowings and direct placements to comply with the new footnote requirements.
GASB 89: Interest Incurred During Construction
GASB 89 eliminates capitalized interest costs incurred during construction for business-type activities; all interest will now be expensed. Implementation is done prospectively, and early adoption is allowed —and may be beneficial to simplify accounting. For further detail, take a look at our article, GASB 89: Changes to interest cost capitalization.
GASB 89 action item: Consider early adoption to simplify accounting.
GASB 90: Majority Equity Interests
GASB 90 defines majority equity interests in legally separate entities and specifies how they should be reported. If the equity interest meets the definition of an investment under GASB 72, report the equity interest as an investment using the equity method. That is, unless the holder of the equity interest is a government engaged only in fiduciary activities, a fiduciary fund, an endowment, or a permanent fund. In these cases, the equity interest will be reported at fair value. If the equity interest doesn’t meet the definition of an investment under GASB 72, report the legally separate entity as a component unit and the equity interest as an asset of the fund that holds the equity interest using the equity method. Keep in mind, if the component unit is blended, this equity interest would be eliminated. In situations where a 100% equity interest in a legally separate entity is acquired, GASB 90 also specifies how to account for the acquisition.
For more information, take a look at our article, GASB releases Statement 90, Majority Equity Interests.
GASB 90 action item: Analyze the holdings of legally separate organizations for applicability of this standard.
GASB 91: Conduit Debt Obligations
GASB 91 clarifies the definition of conduit debt and provides a single method of reporting these obligations (disclosure only). If your organization issued any conduit debt that’s currently recognized as a liability, the treatment will need to change. Because the standard clarifies the definition of conduit debt, you should also consider whether any other debt obligations would now fall under the new definition.
GASB 91 action item: Consider whether any of your organization’s obligations meet the definition of conduit debt and need to be analyzed further.
The new standards and their implementation can be complex. With effective dates here — and others coming soon — it’s important for organizations to understand the changes and their implications.
Our experts stay on top of GASB standards. If you have questions on the implementation of any of the new standards, we’re happy to help — feel free to give us a call.