Project Pages

Technical Corrections—2012

Project Description: The objective of this project is to resolve conflicting accounting and financial reporting guidance that resulted from the issuance of two recent standards—Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This project considers how to address conflicts in those pronouncements with Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, and Statement No. 13, Accounting for Operating Leases with Scheduled Rent Increases.

Status: Statement No. 66, Technical Corrections—2012, was issued in March 2012.

Technical Corrections—Project Plan

Background: The first issue is related a provision (paragraph 63) in Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, that if a single fund is used to account for an entity's risk financing activities, that fund should be either the general fund or an internal service fund. However, the fund type definitions in Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, would appear to allow for some of these activities to be reported in a special revenue fund.

The second issue is related to the how the difference between the proceeds and the carrying value of the receivables sold should be recognized. Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, paragraph 13 provides that the transferee government should recognize receivables acquired at the purchase price. However, Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, paragraph 442, provides that in cases where the purchase price of a loan (a receivable) differs from the related loan’s principal amount at the date of purchase, the difference should be recognized as an adjustment of yield over the life of the loan.

The final issue is related to recognition of rental revenues and expenses for certain operating leases. Specifically, for operating leases that require payments with scheduled rent increases that include a rental payment in one or more years that is artificially low when viewed in the context of earlier or later payment requirements (rent reduction or “rent holiday”), Statement No. 13, Accounting for Operating Leases with Scheduled Rent Increases, paragraph 6(a) and (b) allows the lessor government to recognize operating lease payments on either a straight-line basis over the lease term or the estimated fair value of the rental. However, Statement 62, paragraphs 222 and 227(b), which include specific guidance on accounting for operating lease payments that vary from the straight-line basis, do not allow the use of the fair value method that is permitted in Statement 13.

Accounting and Financial Reporting Issues:
  1. Should prescriptive guidance be provided to specify in what fund should be used to report an entity’s risk financing activities?
     
  2. In cases in which the purchase price of a loan (a receivable) differs from the related loan’s principal amount at the date of purchase, at which amount should the loan be reported at the date of purchase?
At the September 2011 teleconference, the Board reached a tentative agreement to address conflicting guidance between Statements 10 and 54 by proposing to delete paragraph 63 of Statement 10. The Board also reached a tentative agreement to address conflicting guidance between Statements 48 and 62 by proposing to delete the last three sentences of paragraph 442 of Statement 62. Finally, the Board reached a tentative agreement to address conflicting guidance between Statements 13 and 62 by proposing to delete paragraph 222 in Statement 62 and amend paragraph 227 of Statement 62 by deleting section (b) of that paragraph.

The Board reviewed a preballot draft of the Exposure Draft, offered various suggestions to improve the document, and requested that the staff prepare a ballot draft of the Exposure Draft to be discussed at the October 2011 meeting.

At the October 2011 meeting, the Board reviewed the ballot draft and unanimously approved the issuance of the Exposure Draft, Technical Corrections, an amendment of GASB Statements No. 10 and No. 62.


Technical Corrections—Minutes for Deliberations

Minutes of Meeting, March 6-8, 2012

The Board reviewed a ballot draft of Statement No. 66, Technical Corrections—2012, an amendment of GASB Statements No. 10 and 62, and made minor clarifying changes that will be reflected in the final Statement. The Board also considered a respondent comment letter which indicated that Paragraph 460 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which provides guidance on recognition by a transferor for servicing fees related to mortgage loans that are sold, conflicts with the provisions in Paragraph 13 of Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues. The Board voted unanimously to add this issue to Statement 66 and to include a requirement to delete Paragraph 460 of Statement 62 in its entirety. After approving this change, the Board voted unanimously to issue Statement No. 66, Technical Corrections—2012.

Minutes of Teleconference, February 9, 2012

The Board reviewed a preballot draft of Statement No. 66, Technical Corrections, an amendment of GASB Statements No. 10 and No. 62, and made minor clarifying changes that will be reflected in the ballot draft. After considering the need to align the effective date with Topic 2 (Items Previously Reported as Assets and Liabilities) and also considering the number of pronouncements that will become effective for periods beginning after June 15, 2012, the Board tentatively decided to change the effective date of the Statement to be effective for periods beginning after December 15, 2012.

Minutes of Meeting, January 24-26, 2012

The Board reviewed comments received in response to the Exposure Draft, Technical Corrections, an amendment of GASB Statements No. 10 and No. 62. The Board discussed amendments suggested by respondents to the Standards Section, Basis for Conclusions, Codification Instructions, and to the guidance on the purchase of a loan or group of loans in the final Statement. The Board tentatively decided to modify paragraph 21 in the Basis for Conclusions by deleting the last sentence, which discussed the current fund type definition limitations for risk financing activities.

Minutes of Meeting, October 3-5, 2011

The Board reviewed the ballot draft and unanimously approved the issuance of the Exposure Draft, Technical Corrections, an amendment of GASB Statements No. 10 and No. 62.

Minutes of Teleconference, September 8, 2011

The Board discussed and reached a tentative agreement to address conflicting guidance between Statements No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, paragraph 63, and No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, paragraphs 30–31, by proposing to delete paragraph 63 of Statement 10.

The Board also discussed and reached a tentative agreement to address conflicting guidance between Statements No. 48, Sales and Pledges of Receivable and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, paragraph 113, and No. 62, Codification of Accounting and Financial Reporting guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, paragraph 442, by proposing to amend paragraph 442 of Statement 62 by deleting the last three sentences of the paragraph.

Since this technical corrections project was added to the current agenda, a conflict between Statement No. 13, Accounting for Operating Leases with Scheduled Rent Increases, paragraph 6, and Statement 62, paragraphs 222 and 227(b) was identified. The Board discussed and reached a tentative agreement to address conflicting guidance between Statement 13, paragraph 6, and Statement 62, paragraphs 222 and 227(b), by proposing to delete paragraph 222 in Statement 62 and amend paragraph227 by deleting section (b) of that paragraph in Statement 62.

Technical Corrections —Major Tentative Decisions to Date

Statement No. 66, Technical Corrections—2012, was approved in March 2012.