The GASB has issued GASB Statement No. 84, Fiduciary Activities. The objective of the statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. The GASB determined there has been significant confusion and diversity in practice on this issue among state and local governments.
Statement No. 84 first establishes criteria for identifying whether an activity is a fiduciary activity. Separate criteria are set forth for:
- Fiduciary component units
- Pension and other post-employment benefit (OPEB) arrangements that are not component units
- Other fiduciary activities
The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists.
Statement No. 84 then specifies how fiduciary activities should be reported by state and local governments within their financial statements. An activity meeting the criteria described above should be reported in a fiduciary fund. Fiduciary funds should present a statement of fiduciary net position and a statement of changes in fiduciary net position. Governments that report using the business-type activity model also must present fiduciary activities in fiduciary funds. However, an exception to that requirement is provided for a business-type activity that normally expects to hold custodial assets for three months or less. In this case, an asset and liability for the fiduciary activity may be presented on the statement of net position in lieu of including separate fiduciary fund financial statements.
The statement describes four fiduciary funds that should be reported, if applicable:
- Pension (and other employee benefit) trust funds
- Investment trust funds
- Private-purpose trust funds
- Custodial funds
Custodial funds generally should report fiduciary activities that are not held in a trust or equivalent arrangement that meets specific criteria. Custodial funds replace agency funds that are currently used by state and local governments.
If one or more component units are determined to be fiduciary component units, the government should combine the information for all fiduciary component units and aggregate that combined information with the primary government’s fiduciary funds.
The statement also provides guidance on when a liability to the beneficiaries in a fiduciary fund should be recognized. Recognition should take place when an event has occurred that compels the government to disburse fiduciary resources. Events that compel a government to disburse fiduciary resources occur when a demand for the resources has been made or when no further action, approval, or condition is required to be taken or met by the beneficiary to release the assets. This guidance differs from current guidance for agency funds, under which all assets in an agency fund are completely offset by liabilities to beneficiaries.
The provisions of Statement No. 84 are effective for fiscal years beginning after December 15, 2018. Earlier application is encouraged. The full text of Statement No. 84 is available here.
Readers should not act upon information presented without individual professional consultation.