Important GASB Highlights

Pronouncements that are being implemented for the first time with fiscal years ending on June 30, 2024, include Statement 100, Accounting Changes and Error Corrections, and recent implementation guides.

Current implementation issues not only include those that are associated with Statements and implementation guidance that are effective for the first time, but also include day two (or year two) issues that are now being faced. While Arizona governments may be breathing a sigh of relief that the initial implementation of leases and subscription-based information technology arrangements (SBTIA) are in the rearview mirror, these are Statements that keep giving. Governments encounter modifications, terminations and remeasurements during the life of these arrangements. Fortunately, specific guidance is provided for each of these situations and how that guidance should be applied will be covered at the conference.

While many practitioners zero in on what is required in the current year, there are other requirements that have been released that will be effective in the near future that also deserve attention as governments plan. The first Statement on the horizon is Statement 101 which addresses compensated absences. It has been 31 years since the release of the last GASB Statement that tackled compensated absences. Of course, a lot has changed during this time period; not only in how some of these employee benefits are offered, but also in the underlying conceptual framework on which the GASB bases it standards. The most significant changes introduced in Statement 101 are in accounting and financial reporting for sick leave.

By the publication of this article, the GASB is expected to issue at least one additional Statement. The anticipated Statement 102 addresses certain risks disclosures related to concentrations and constraints. A concentration is a lack of diversity related to an aspect of a significant inflow of resources or outflow of resources that may be associated with, for example, employers or industries, or a type of inflows of resources. A constraint may be imposed by an external party or by formal action of a government’s highest level of decision-making authority. Examples of constraints identified in the Statement includes limitations on items, including raising revenue and incurring debt and mandated spending.

From a disclosure standpoint, the Statement establishes specific threshold criteria for a primary government reporting unit and all other reporting units that present a liability for revenue debt. This Statement is anticipated to become effective along with Statement 101 for fiscal years ending June 30, 2025.

Another project that is expected to result in a final pronouncement in the first half of 2024 is the financial reporting model (FRM) project. When FRM is mentioned, one may think that this Statement will include revisions to the governmental financial reporting model. However, the Board was not able to reach a resolution to basic measurement focus issues for governmental funds to the point where they believed would have moved the financial reporting model substantially forward. As a result, the scope of the project was modified to concentrate on five primary areas:

• management’s discussion and analysis (MD&A),
• unusual or infrequent items,
• presentation of the proprietary funds statement of revenues,
• expenses
• and changes in fund net position, major component unit information and budgetary information.

This Statement is expected to be effective for fiscal years ending June 30, 2026. Again, this may appear to be in the distant future, but the fiscal period where this Statement will first be required to be applied for is less than 18 months away.

Obviously, final Statements wis currently lion’s share of a practitioner’s attention, but there are several other projects that the GASB currently is debating that are noteworthy. Those projects include one of the most important projects to have appeared on the GASB’s technical agenda since it was established in 1984: the revenue and expense project. While the scope of this project does not cover every governmental revenue and expense, its reach is expected to be very broad and is anticipated to set the foundation for future recognition standards. An exposure draft on the proposed revenue and expense standards is schedule to be released in early 2025.

A proposed Statement on the disclosure and classification of certain nonfinancial assets was issued in September 2023 with a comment period that closed January 5, 2024. While that title of this proposed Statement does not necessarily scream for attention, the proposals do address some very important issues, including capital assets held for sale.

Other noteworthy projects include one that will address going concern uncertainties and severe financial stress; a project on infrastructure assets; a project on subsequent events; and an ongoing project on implementation guidance.

David Bean is the CEO of Governmental Accounting Research, LLC.  After serving as the director of research and technical activities for the Governmental Accounting Standards Board for over 30 years, he retired from the GASB in 2021. Bean will be speaking at the ASCPA’s Governmental Accounting Conference on February 2, 2023.