New GASB Implementation Guide for Government PensionsLegal Compliance Resource
March 12, 2014 — 1,014 views
Those who prepare and audit statements of local and state governments can now refer to a guide chalked out by the non-profit, GASB, which sets standards in accounting. The guide is aimed at helping local auditors and those chalking out statements for timeframes that begin after June 15 this year.
The guide, created in a question and answer format, covers issues that involve the application of Statement 68 for pensions. Also, there are topics that relate to identifying situations that require out-of-the-ordinary funding, measuring employers’ pension liabilities, and expenses involving pension, among others. There was a similar guide published last year for the previous Statement 67.
All about the guide and GASB
The guide, which also answers questions on how to make a transition to new standards, comes with a helpful glossary, where all terms are explained. The examples here are illustrative and help those involved get a comprehension of pension standards and how to apply them. All the implementation guides of GASB are available free of cost online, and can be easily downloaded. The newest implementation guide is available at http://www.gasb.org/cs/ContentServer?c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176163784087 . GASB is a private organization started in 1984 that helps establish GAAP in state and local bodies and though, GASB’s standards cannot be enforced by federal law, many states require that their standards be enforced.
The pension crisis
Meanwhile, the US is facing a crisis in public pensions, and local and state bodies are finding it increasingly difficult to afford high pensions to government staff. Experts across the country have called for pension reforms. GASB has a new rule that needs municipalities to take into account liability of pension in their balance sheets, and without pension reform, local governing bodies with plans sans funds can’t get enough credit. Pension underfunding is a problem in some state governments which has been a result of them choosing discounts where return rates on pension fund investments are high.
The balance sheets of several state and local governing bodies have shown that there is big chasm between what is promised to those retiring and how funds are allocated to take care of those promises. This gap is estimated at 27 percent of the GDP, and could make a big impact on the nation’s economy.
GASB standards, it is hoped, will help cope with a big crisis in funding that is just around the corner, if not already here. Better accounting and implementation could address the financial crisis in many local governments. It was in 2012 that GASB approved new standards for accounting public pensions. The rules have been aimed at creating greater accountability and transparency.