A few weeks ago, RubinBrown provided summary guidance on Governmental Accounting Standards Board (GASB) No. 59 and No. 60. This alert provides similar information regarding Statements No. 61 and No. 62.
Governments and public colleges and universities are encouraged to familiarize themselves with both and evaluate the impact that they will have on the financial reporting process.
GASB Statement No. 61, The Financial Reporting Entity: Omnibus (GASB Statement No. 61) modifies the requirements for including component units within the financial statements of governmental entities. The key modifications are:
- For organizations that previously were required to be included as component units by meeting the fiscal dependency criterion, a financial benefit or burden relationship also would need to be present between the primary government and the organization for it to be included as a component unit.
- For organizations that should be included because the primary government’s management determines that it would be misleading to exclude them, GASB Statement No. 61 clarifies the manner in which that determination should be made and the types of relationships that generally should be considered in making the determination.
- GASB Statement No. 61 also modifies the criteria for determining when a component unit should be blended (as opposed to discretely presented).
- Finally, GASB Statement No. 61 requires primary governments to that own an equity interest in a legally separate organization (generally, a for-profit business) to report this equity interest as an asset.
GASB Statement No. 61 is effective for periods beginning after June 15, 2012.
GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (GASB Statement No. 62) incorporates into the GASB’s authoritative literature certain FASB and AICPA pronouncements issued prior to November 30, 1989. Governments have always been required to implement these pronouncements to the extent they do not contradict GASB guidance.
However, due to changes to FASB and AICPA standards over the past 21 years, including the recent adoption by FASB of the Accounting Standards Codification, these pre-1989 standards have become difficult to locate. Thus, this Statement brings the authoritative financial reporting literature for governments together in one place, thus eliminating the need for governmental entities to determine which FASB and AICPA pronouncement provisions apply to governments.
Additionally, GASB Statement No. 20 permitted governments with enterprise funds and business-type activities to elect to implement FASB pronouncements issued after November 30, 1989, to the extent these didn’t contradict GASB pronouncements. GASB Statement No. 62 eliminates this option.
GASB Statement No. 62 is effective for financial statements for periods beginning after December 15, 2011.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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