On March 20, 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 85, Omnibus 2017, to address various practice issues identified during the implementation and application of certain GASB statements.
The provisions of Statement No. 85 amend and clarify guidance under a variety of topics with the intent to enhance consistency in the application of accounting and financial reporting requirements.
Blending Component Units
A primary government that’s a business-type activity—such as a public university or hospital—that presents its activities in a single column on financial statements may present a component unit as blended if it meets the blending criterion described in paragraph 53 of GASB Statement No. 14, The Financial Reporting Entity, as amended.
Reporting Negative Goodwill
In an acquisition that occurs before the effective date of GASB Statement No. 69, Government Combinations and Disposals of Government Operations, an acquiring government should apply Statement No. 69 to account for the difference when the consideration provided exceeds the net position acquired. This means negative goodwill shouldn’t be reported—instead, the acquiring government should report the difference as a deferred outflow of resources attributable to future periods in a systematic and rational manner.
Fair Value Measurement and Application
Statement No. 85 requires a unit of account of real estate held by an insurance entity to be classified as an investment if it meets the definition of an investment supplied in Statement No. 72, Fair Value Measurement and Application; otherwise, it should be classified as a capital asset.
Additionally, money-market investments and participating interest-earning investment contracts may be measured at amortized cost if they have a remaining maturity of one year or less at the time of purchase.
Accounting and Reporting for Pensions and Other Postemployment Benefits (OPEB)
Measuring Pension and OPEB Liabilities
In financial statements prepared using the current financial resources measurement focus, liabilities to employees for defined pensions and OPEB should be measured from the end of the reporting period.
Recognizing On-Behalf Payments in Employer Financial Statements
Statement No. 85 requires employers to recognize expenditures for pension or OPEB payments made on behalf of their employees equal to the total of the amounts paid during the period by nonemployer contributing entities—a state contributing to a retirement system covering public school teachers, for example—and the change in nonemployer contributing entities amounts that are normally expected to be liquidated with expendable and available financial resources. Both of these amounts include payables to a pension or OPEB plan.
An employer should recognize revenue equal to the amount of expenditures unless on-behalf payments aren’t legally required to be made by a nonemployer contributing entity for defined contribution pensions or defined contribution OPEB. In this case, revenue should be recognized in an amount equal to payments received plus the amount receivable at year-end.
Presenting Payroll-Related Measures in Required Supplementary Information (RSI)
Covered payroll—also known as the payroll on which contributions to the OPEB plan are based—for single-employer defined-benefit OPEB plans and cost-sharing, multiple-employer, defined-benefit OPEB plans should be presented in RSI schedules. No measure of payroll should be presented if contributions aren’t based on a measure of pay.
Statement No. 85 also clarifies the measure of payroll for trust-administered OPEB plans.
Classifying Employer-Paid Member Contributions
When applying Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other than Pension Plans, payments made by an employer to satisfy plan-member contribution requirements should be classified as plan-member contributions.
For purposes of applying Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, including the determination of a cost-sharing employer’s proportion, payments made by an employer to satisfy plan-member contribution requirements should be classified as employee contributions. These expenses should be recognized in the period for which the contribution is assessed and classified in the same manner as similar compensation (excluding OPEB).
Financial Statement Notes
For OPEB provided through certain multiple-employer, defined-benefit plans, the following information must be disclosed:
- Plan name
- Entity that administers the plan
- Identification of the plan as cost sharing
- A statement on whether the plan issues a publicly available financial report and, if so, how to obtain the report
- Benefit terms
- Contribution requirements
- Balance, terms, and description of employer payables
Effective Dates and Transition
Statement No. 85 is effective for reporting periods beginning after June 15, 2017, although earlier application is encouraged.
If practical, the requirements should be applied retroactively by restating financial statements for all prior periods presented.
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If you have any questions or would like to better understand how Statement No. 85 affects government entities, contact your Moss Adams professional.