Governmental Accounting Requirements Board chair Joel Black has been overseeing GASB for practically two years as state and native governments take care of the persevering with fallout from the pandemic whereas accounting for all the help they obtained from the federal authorities.
He has plans for GASB because the board prepares to challenge new requirements on compensated absences, accounting adjustments and error corrections, whereas additionally weighing points like using digital property corresponding to cryptocurrency, digital monetary reporting and subsequent occasions. As well as, GASB can also be monitoring how state and native governments are adjusting to requirements which were issued lately in areas corresponding to pensions, different post-employment advantages and leases.
Black started chairing GASB in July 2020, on the peak of the pandemic, after 16 years on the Atlanta-based agency Mauldin & Jenkins and, previous to that, a dozen years at KPMG. Considered one of his high priorities is to enhance know-how at GASB, as he was doing within the audit follow at M&J.
Governmental Accounting Requirements Board chair Joel Black
“After I left the agency, a regional agency within the South, I had been put accountable for the audit follow,” he instructed Accounting At present. “A few of my targets are utilizing know-how to change into extra environment friendly and efficient in our outreach and the way we do analysis. Understanding how know-how goes to have an effect on us as a standard-setter is one thing that we’re taking note of. I would like us to grasp how that evolution to digital monetary reporting is going on, after which make sure that we’re not an obstacle to progress, however that no matter our function is in that course of as an ordinary setter to be sure that customers of presidency monetary data are getting the suitable data in a manner that’s simply usable for them.”
One of many requirements due out quickly from GASB is on accounting for compensated absences, updating an ordinary that got here out in 1992. Black expects it would in all probability be issued in June.
“We undertook the challenge to attempt to modernize that literature as a result of GASB 16, which is the present steering for compensated absences, got here out a very long time in the past, and people kinds of advantages have advanced,” stated Black. “Once we issued that, the steering talks a couple of distinction between trip depart and sick depart. Now a variety of organizations and governments have PTO, which is a mix of these. So how does PTO time work in a comparable manner, accounting sensible, to a authorities which may nonetheless have trip and sick [days], versus a authorities that simply has PTO that mixes them? We wished to relook at that literature and attempt to modernize it, and be sure that for all the present methods during which these advantages are offered, the accounting permits for that and can lead to constant steering.”
He expects that GASB will in all probability challenge a last customary in June for the finished absences challenge. Different tasks afoot at GASB embrace redeliberations on the conceptual framework and disclosure framework, together with accounting adjustments and error corrections for prior-period changes. Like the finished absences customary, the accounting adjustments and error corrections last customary will in all probability be issued in June as effectively.
“That’s considerably comparable in that it was fairly previous steering that was introduced over on account for a transaction that perhaps ought to have occurred within the prior interval or was the results of a change in your accounting coverage,” stated Black. “For instance, the previous literature was a bit of bit difficult for folks to generally work out which sort of accounting adjustments they had been. Is it a change in precept? Is it a change in estimate? Is it an error correction? And so what we did is we outlined these three buckets higher and added a brand new bucket for which we had been generally getting questions.”
Stakeholders had been asking for extra readability about account for when there’s a change in a part unit, corresponding to a authorities fund being added or eliminated.
“We obtained plenty of questions and the literature didn’t actually handle them,” stated Black. “The brand new customary will higher outline these 4 completely different buckets after which describe what the accounting ought to be for every of them.”
The omnibus customary was authorized a number of weeks in the past at a board assembly, and incorporates a set of technical corrections to both make completely different GASB pronouncements extra constant or to assist with implementation of a present customary by tweaking it a bit.
“There are about 4 or 5 various things that we’re masking in that omnibus,” stated Black. “Will probably be GASB 99 after we get it processed and launched.”
The omnibus could also be issued as quickly as this week.
As a part of a assessment of its technical plan for 2022, GASB added a serious challenge on going concern uncertainties and extreme monetary stress disclosures to its technical agenda, together with pre-agenda analysis on an ordinary for subsequent occasions. GASB has additionally been doing post-implementation critiques of a few of its present requirements to see how effectively they’ve labored in follow, together with its pension requirements and different post-employment advantages, often known as OPEB, in addition to truthful worth, together with requirements for leases and fiduciary actions.
“With the older requirements, pensions is the furthest alongside in that assessment,” stated Black. “For the others, leases and fiduciary are fairly early of their assessment.”
GASB has held a number of roundtable discussions on the pension requirements the place various kinds of stakeholders, together with customers, preparers and auditors, have talked about a few of the points they’ve encountered.
“The suggestions I sense from these roundtables is that largely the requirements are working effectively, doing what they had been meant to do and getting a greater image of these liabilities on the government-wide statements,” stated Black. “However there could possibly be some potential tweaks that we make alongside the way in which that could possibly be necessitated. We’ll take a look at that on the finish of the assessment and see what the general suggestions are, after which the board will determine whether or not or not we have to make any such tweaks.”
Leases and associated requirements
The leases customary, GASB 87, would put leases on the stability sheet for the primary time for a lot of state and native governments, a lot because the Monetary Accounting Requirements Board’s leases customary would do for corporations. As with many personal corporations, state and native governments appear to be ready to implement it (see story). The federal support that went out to state and native governments within the wake of the pandemic has shifted their priorities to creating positive it’s getting used the place it’s wanted.
“After I exit and discuss to stakeholders and attend their conferences, what they’ve largely for the final 12 months and a half plus been centered on is spending the stimulus funding that they obtained in an environment friendly, efficient manner that’s compliant with the necessities,” stated Black. “They’re spending a variety of time and vitality on that, just like many people within the accounting and finance occupation.”
State and native governments have additionally had their arms full with the so-called Nice Resignation as they attempt to maintain onto their workforce, together with within the accounting and finance division. The leasing customary has gone on the again burner for a lot of state and native governments as they take care of extra urgent priorities, however they’re getting round to it.
“I’ve confidence that the governments are going to implement it on time,” stated Black. “We’re getting 40 to 50 technical inquiries on leases fairly constantly every quarter for the final, I’d say, 5 quarters. So persons are engaged on it. I’m assured that they will get that carried out in 2022 when the efficient date comes.”
However, he’s nervous that GASB hasn’t been fielding many inquiries about two different latest requirements, GASB 94, which offers with public-private partnerships (P3), and GASB 96, for subscription-based data know-how preparations (SPITA).
“These two are actually cousins of GASB 87 as a result of they’re each financings and so they construct on the identical accounting idea that the lease customary was constructed on, that these financings are liabilities and have to be on the stability sheets, however then they’ve further layers of complexity as a result of the transactions that they’re interacting with are extra advanced,” stated Black. “That necessitated them to be separate requirements. They’re efficient largely in 2023, a 12 months after the lease customary, and we aren’t getting many questions on both of these. They’re just like leases. For those who take a look at a P3 contract, a variety of occasions it in all probability meets the definition of a lease, but it surely actually is a P3 as a result of it has these added complexities. Or the identical with a SPITA. It actually meets that definition of a lease, however due to these added complexities, it truly is a SPITA. So we’d anticipate that as folks had been working by way of GASB 87 and the lease customary and taking a look at their populations and a few of these contracts that we may be getting extra questions on whether or not it’s a SPITA or a lease? And we aren’t getting a lot of these questions. We aren’t getting many questions on 94 and 96, which is a 12 months later in its effectiveness. We’re perhaps a bit of involved, however we’re engaged on getting that message out.”
The general public-private partnerships customary, GASB 94, expands on an earlier customary. “GASB 60 was service concession preparations, which was a type of public-private partnership,” stated Black. “We had literature that coated how you’ll current if you happen to had one among these agreements. The P3 customary, 94, broadens the umbrella to embody not solely these service concession preparations however different comparable kinds of preparations. Our focus is on ensuring that the accounting mannequin for it is smart, and the property {that a} authorities may purchase as a part of a kind of are accounted for on the proper time and that any obligations they could have associated to them present up as effectively.”
GASB has been calling consideration to these upcoming necessities at its conferences and seminars, particularly now that state and native governments are beginning to take a better take a look at the leases customary.
Accounting for federal pandemic support
The pandemic support from the federal authorities has helped state and native governments to stabilize their funds, and the robust financial restoration final 12 months additionally helped deliver in additional tax income, permitting some states to see surprising finances surpluses.
“We’re actually centered on the accounting and monetary reporting,” stated Black. “Early on there have been a variety of questions when the CARES Act first got here. We issued in June of 2020 a technical bulletin, which didn’t create new GAAP however utilized present income recognition GAAP particularly to the CARES Act. We answered a variety of these frequent questions and purposes. We’ve been very centered since then on the [American] Rescue Plan funding and the next stimulus cash, a variety of which went on to native governments, whereas CARES went to the states and obtained handed by way of to the locals. A few of the locals had been getting extra direct federal cash than they had been used to getting, which brings about compliance points that we’re not as nervous about, however accounting points had been those we had been nervous about. We spent a variety of time in our schooling efforts a 12 months in the past, ensuring these native governments knew in regards to the technical bulletin and had been bringing any inquiries to us.”
Along with the leases customary, the requirements for fiduciary actions and nonexchange transactions, corresponding to grant income, have been prompting extra technical inquiries in the previous couple of years because of the stimulus funding.
“What we’re discovering is that technical bulletin the place we talked about when to acknowledge income for the CARES Act funding was simply relevant to the Rescue Plan funding by the native governments,” stated Black. “So whereas we had been open to issuing steering and serving to folks in the event that they wanted assist, largely we predict they’ve obtained the accounting steering they should account for it. What they spend a variety of time on is grant reporting to the federal authorities or being positive they’re in compliance with the federal necessities. The accounting of it, I believe, from our preliminary technical steering has been comparatively simple.”
However, some watchdog teams corresponding to Reality in Accounting have warned about the way in which that some states and cities are accounting for his or her funds and making maybe overly optimistic finances projections, particularly with pension liabilities and different authorities obligations for retiree well being care developing sooner or later. They’ve been urgent for GASB to regulate its requirements to be extra upfront about their projected money owed.
“We do hear from Reality in Accounting, and we take heed to them the identical manner we do all our stakeholders,” stated Black. “They largely have been commenting lately on the Monetary Reporting Mannequin Challenge, which is one among our large complete ongoing tasks. In that challenge we had been trying specifically on the governmental funds and what could be the suitable measurement, focus and foundation of accounting for these funds, which is the place teams like Reality in Accounting have some concern as a result of measurement focus-based accounting is sort of a shorter-term perspective.”
GASB has listened to the suggestions and made some changes to the proposal. “Whereas it is not a last customary and we nonetheless have a methods to go to complete that reexamination of the reporting mannequin and what customary may outcome from that, we now have tentatively redeliberated the suggestions based mostly on what we heard from Reality in Accounting and others and determined to retain some model of a short-term perspective within the governmental funds,” stated Black.
Governments are distinctive entities with their very own accounting requirements, however there’s a want to indicate each the short- and long-term money move, tax income and expenditures.
“What we’re engaged on now’s attempting to be sure that the descriptions of these two completely different monetary statements that each present the identical exercise however in numerous methods are articulated effectively and offered effectively within the monetary statements,” stated Black. “So if you happen to’re trying on the governmental funds, you recognize that that is only a sort of short-term concentrate on flows, what went out and in. If you need an image of what the actual value of companies had been, then you definately’ve obtained to go to the government-wide statements, which embrace full financial sources and measurement focus, and be sure that folks perceive these two views are each wanted to get a full image.”
GASB frequently asks its advisory council, GASAC, in regards to the highest precedence tasks it ought to pursue sooner or later. The highest 4 vote getters had been capital property, subsequent occasions, digital monetary reporting and digital property. Capital property and subsequent occasions are each in GASB’s pre-agenda analysis section. The employees is engaged on evaluating the sooner literature for each subjects, how they’re at the moment being accounted for, and any potential enhancements that GASB may make. Black anticipates that analysis can be carried out over the following 12 months or so on every of these subjects after which the board will determine whether or not to take up a challenge on both of them. For digital monetary reporting. GASB is principally simply monitoring the exercise in that house to grasp how customers are consuming monetary data now and sooner or later.
“It’s nonetheless not an official standard-setting challenge,” stated Black. “It in all probability by no means can be an ordinary. We’re not going to require digital monetary reporting, however we don’t need to be in the way in which. We need to perceive it to see what affect it ought to have on us as a standard-setter and what function we should always have in it. It’s one thing we’re going to spend so much of time on, and our advisory council has instructed us that that’s a excessive precedence for them.”
Digital property
In December, GASB additionally added digital property to its monitoring exercise listing. Like FASB, which is trying into including a challenge on intangible property to its agenda, many accountants wish to see extra detailed requirements for account for cryptocurrency like Bitcoin and digital property like nonfungible tokens, or NFTs.
“At our final assembly, we obtained an replace from the workforce on what governments are doing with digital property and we’ll proceed to watch that and see whether it is pervasive and prevalent sufficient, if there’s an achievable standard-setting challenge the place requirements may assist and whether or not the board ought to take it on as challenge,” stated Black. “It’s one thing we’re definitely taking a look at intently.”
The 2 boards attempt to keep in sync of their standard-setting efforts. “We work intently with them in order that we will share analysis and information, however we now have considerably completely different literature,” stated Black. “For instance, we’re not seeing governments put money into digital property a lot, besides in pension funds, and even there it appears at this level comparatively restricted. If they’re doing it, the few that may be doing it are usually doing it by way of index funds, though there’s one giant pension fund that appears to have instantly invested in some digital property.”
The board already has an ordinary, GASB 72, on truthful worth, that defines what an funding is, and it differs from FASB’s truthful worth measurement customary.
“It basically says if you are going to buy one thing and your intent on buying it was for its capability to generate earnings or income and you’ll convert it to money to pay for items or companies, that’s an funding and it’s best to worth it at truthful worth,” stated Black. “A pension fund that may be investing in digital property within the authorities world in all probability ought to be taking a look at GASB 72, making use of that funding definition, and if it meets it, making use of truthful worth accounting to it.”
Few state and native governments are even discussing the potential for accepting cryptocurrency or different digital property to pay for taxes or charges, though one state, Colorado, lately determined to permit that. Lawmakers in California and Colorado have additionally launched laws that will allow it.
“It could possibly be turning into extra prevalent, however at that time you’re accepting it as cost,” stated Black. “Its unique acquisition wasn’t for earnings or revenue era. It’s not an funding. Then what do you do with it? I don’t have a solution for what our literature would name that at this cut-off date, however that will be one thing we’re taking a look at. Additionally, with confiscated property or unclaimed property, governments may be holding digital property below both of these areas. What would the accounting mannequin be for that? Ought to these be the identical as an intangible asset? Are they in our literature? That’s one thing we have to proceed to take a look at and concentrate on. We aren’t seeing a lot of it now, however there’s a variety of discuss it. It’s one thing we’re taking a look at to see if we should always begin a extra totally shaped challenge.”