Codification of Pre-November 30, 1989, FASB Pronouncements
 

Primary Objective: The objective of this project is to specifically identify provisions in Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board Opinions, Accounting Research Bulletins of the AICPA Committee on Accounting Procedure, and AICPA Accounting Interpretations, issued on or before November 30, 1989 (collectively, the "FASB pronouncements"), as referenced in paragraph 17 of GASB Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, that do not conflict with or contradict GASB pronouncements and to incorporate those provisions into the GASB’s literature.

Status: The Board reviewed the ballot draft of the Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements at the December 2010 meeting. The Board approved the release of the Statement. 
 

• Project Plan
• Minutes for Deliberations
  
• Major Tentative Decisions to Date
   

Codification of Pre-November 30, 1989, FASB Pronouncements —Project Plan

Background: GASB Statement 34, paragraph 17 provides that FASB and AICPA pronouncements issued on or before November 30, 1989, should be applied to the reporting of governmental and business-type activities "unless those pronouncements conflict with or contradict GASB pronouncements." This means that financial statement preparers are currently required to identify which provisions within the FASB and AICPA pronouncements are applicable to them. Furthermore, this requirement generally is open to interpretation by financial statement preparers regarding what provisions in the FASB and AICPA pronouncements are considered conflicting and contradictory. Over the years, the GASB staff has answered numerous technical inquiries regarding the application of FASB and AICPA pronouncements issued on or before November 30, 1989. However, the staff responses are fact- and circumstance-specific and, therefore, have not been disseminated to the GASB's constituents. The project would benefit preparers and auditors by clearly identifying which FASB and AICPA pronouncement provisions to apply to state and local governments. It also would benefit financial statement users because the resulting financial statements would reflect a more consistent application of these FASB and AICPA pronouncements.

The need for this project is made more urgent by the July 1, 2009, launch of the FASB Accounting Standards Codification, which supersedes all previous FASB and AICPA pronouncements as the official authoritative literature. Identifying the provisions applicable to governments within the restructured FASB authoritative literature (originating from FASB and AICPA pronouncements issued on or before November 30, 1989) is not feasible. If this proposed project ultimately results in the issuance of final standards, the applicable FASB and AICPA provisions will be accessible in the GASB's authoritative literature.

The primary issue is identifying the various accounting and financial reporting requirements in the FASB and AICPA pronouncements that should be incorporated into the accounting and financial reporting level (a) literature. The process involves evaluating the pronouncements at varying levels of detail based upon the subject matter embedded within them, its relevance to the government environment and the previous actions, if any, taken by the GASB to address the subject matter.

1. Conflicting and Contradictory Literature
   
   Certain FASB and AICPA pronouncements can be identified as conflicting in whole with current GASB literature; for example, FASB Statement No. 95, Statement of Cash Flows, and related pronouncements. GASB Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, for example, is the result of the GASB's review of FASB and AICPA pronouncements for applicability to governmental entities. Therefore, FASB Statement 95 and other pronouncements addressing the reporting of cash flows will remain excluded from GASB literature and further deliberation on the reporting of cash flows will not be necessary. There are others much like FASB Statement 95, including but not limited to the pronouncements mentioned in the Basis for Conclusions of GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting.
   
   In addition to pronouncements that conflict in whole, certain provisions within applicable pronouncements can be identified as conflicting with GASB literature. For example, APB Opinion No. 26, Early Extinguishment of Debt, as amended, "concludes that all extinguishments of debt are fundamentally alike" and "that accounting for such transactions should be the same regardless of the means used to achieve the extinguishment." However, GASB Statement No. 23, Accounting and Financial Reporting for Refundings of Debt Reported by Proprietary Activities, contradicts that conclusion and provides different reporting guidance for debt extinguishments accomplished by debt refundings. The debt extinguishment guidance in APB Opinion 26 should still be applied to governments when they extinguish their debt in other ways, such as through liquidation of assets or a debtor's forgiveness. Therefore, the provisions within APB Opinion 26 can be modified accordingly and incorporated into GASB literature as they pertain to debt extinguishments other than debt refundings.
    
2. FASB and AICPA Pronouncements Specifically Referenced in Current GASB Literature
   
   Certain pronouncements have been referred to in GASB literature as the applicable guidance to be followed by governments. The project generally proposes that this guidance residing in the FASB and AICPA literature be incorporated into the GASB literature. However, certain provisions within these pronouncements conflict with current GASB literature and the Board will consider whether to omit them from or to modify and incorporate these specific provisions into the GASB Codification. For example, FASB Statement No. 13, Accounting for Leases, as amended and interpreted, is designated in NCGA Statement No. 5, Accounting and Financial Reporting Principles for Lease Agreements of State and Local Governments, as the lease accounting guidance to be followed by governments with lease arrangements. However, FASB Statement 13, as amended, requires that entities that transfer lease receivables to a third party follow FASB Statement No. 77, Reporting by Transferors for Transfers of Receivables with Recourse. GASB Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, provides guidance to governments for the transfer of receivables such as for leases, and therefore governments would usually apply it in lieu of FASB Statement 77. Consideration will be given to whether the provisions pertaining to the transfer of lease receivables should be eliminated or a reference to GASB Statement 48 should replace the FASB Statement 77 reference in the provision being incorporated.
    
3. Other Commonly Applied FASB and AICPA Pronouncements
   
   The general approach taken in this project is to incorporate FASB and AICPA pronouncements that are commonly applied by governments, such as FASB Statements No. 52, Foreign Currency Translation and No. 57, Related Party Disclosures. Minor adaptations will be necessary to improve their relevance in the government environment and specific provisions within pronouncements will be considered as to whether they conflict with or contradict GASB literature.
    
4. Specialized Industry Standards
   
   The GASB mission statement provides that the Board should "consider the applicability of its standards to the separately issued general purpose financial statements of governmentally owned special entities." With that in mind, the Board will consider the relevance to governments of specialized guidance in the FASB and AICPA pronouncements to determine what should be incorporated. At the July 2009 meeting, the Board concluded that it would not consider guidance pertaining to less relevant industries, such as motion picture films and record and music, because those standards rarely would apply to governments.
    

Accounting and Financial Reporting Issues: The project will identify the provisions of the FASB and AIPCA pronouncements, as amended as of November 30, 1989, that are applicable to state and local governments. The provisions that are applicable to state and local governments and not in conflict with or contradictory to GASB pronouncements will be incorporated into the GASB literature. Modifications will be made as appropriate to recognize the effects of the government environment without affecting the substance of the provisions.

Project History: A draft project proposal was considered by the Governmental Accounting Standards Advisory Council (GASAC) at its March 2008 meeting and positive feedback was provided by the members. The GASAC members rated the project a high priority at that time.

A draft project prospectus was considered by the GASAC at its March 2009 meeting, and positive feedback was provided by the members. The GASAC members rated the project a high priority among research and potential projects in the GASB's technical plan. The project was added to the Board's current technical plan at its April 2009 meeting.

At the April 2009 meeting, the Board added the project to its current agenda. An expert group subsequently was formed to offer feedback on the project staff's initial review of the pre-November 30, 1989, FASB and AICPA pronouncements. This review entailed analyzing the FASB and AICPA pronouncements and dividing them into the following categories: pronouncements superseded prior to November 30, 1989; those that in their entirety conflict with or contradict GASB standards; those that are not applicable to governments; those with limited application to governments (this category was further narrowed during the Board's deliberations to those with rare application to governments); and those that are applicable to governments. The project staff asked the members of the expert group for their opinions regarding the appropriateness of these categorizations and for their thoughts on potential applicability issues not yet raised.
 

At the July 2009 meeting, the Board tentatively reached the following conclusions:

• The scope of the project is to consider for incorporation into GASB literature only those FASB and AICPA pronouncements issued prior to November 30, 1989, which do not conflict with or contradict GASB standards and which are applicable to governmental and business-type activities and to proprietary funds reported in the basic financial statements.
   
• FASB and AICPA pronouncements with rare or no application to governments will not be incorporated in the proposal.
   
• Any FASB pronouncements issued subsequent to November 30, 1989, including amendments, interpretations, and technical corrections to prior standards, will not be considered for incorporation into GASB literature under this project. The Board determined that this decision also applies to FASB Statement No. 13, Accounting for Leases. Therefore, the Board will consider only whether FASB Statement 13, as amended and interpreted as of November 30, 1989, should be incorporated into GASB literature.
   
• The FASB and AICPA pronouncements that will be incorporated into GASB literature will be made applicable to governmental funds only to the extent that GASB literature already has made them applicable to governmental funds.
   
• The Board will consider incorporating applicable FASB and AICPA pronouncements into GASB literature even if those pronouncements will be addressed by a project currently on the GASB's research agenda.
   

At the August 2009 meeting, the Board tentatively reached the following conclusions:

• The provisions of APB Opinion No. 16, Business Combinations, and its related amendments and interpretations will not be considered further for incorporation into GASB literature; rather, the accounting for government combinations will be addressed in a separate project.
   
• FASB and AICPA pronouncements related to accounting for income taxes rarely are applicable to governments and, therefore, will not be considered for incorporation into GASB literature.
   
• FASB Statement No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, and its related amendments rarely are applicable to governments and, therefore, will not be considered for incorporation into GASB literature.
   
• Paragraph 7 of GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, as amended, will be revoked as part of this project.
   

At the September 2009 Teleconference, the Board tentatively reached the following conclusions:

• The Exposure Draft of the proposed Statement codifying certain pre-November 30, 1989 FASB and AICPA pronouncements into GASB literature will include a proposal for a one-year transition period following the planned issuance of the proposed Statement on December 15, 2010.
   

At the October 2009 Teleconference, the Board tentatively reached the following conclusion:

• Provisions from certain appendices of FASB and AICPA pronouncements issued on or before November 30, 1989 will be considered for incorporation into GASB literature if they contain supplementary guidance that governments need in order to apply a given standard. However, guidance from these appendices that is illustrative in nature and only serves to complement the authoritative standards of a pronouncement will not be considered for incorporation.
   

At the November 2009 meeting, the Board tentatively reached the following conclusions:

• The proposed Statement will supersede GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, in its entirety.
   
• The effective date provisions of the Exposure Draft will encourage early application of the guidance provided in the proposed Statement.
   

The Board reviewed and provided suggested edits to a preballot draft of the Exposure Draft at the January 2010 meeting. At the January 2010 teleconference, the ballot draft was approved unanimously for issuance.

The Exposure Draft, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, was issued on January 29, 2010.

Codification of Pre-November 30, 1989, FASB Pronouncements—Minutes for Deliberations

Minutes of Meeting, December 7-9, 2010

The Board reviewed a ballot draft of Statement 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The Board, after making minor clarifying changes, voted unanimously to issue the final Statement.

Minutes of Meeting, October 25, 26, and 28, 2010

The Board reviewed and provided comments on a preballot draft of a final Statement, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. A ballot draft of the final Statement will be reviewed by the Board at the December 2010 meeting.

Minutes of Meeting, September 14-16, 2010

The Board continued its deliberations on comments received in response to the Exposure Draft, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The Board addressed comments received that were categorized into five sections: General Disagreement, Disagreement with the Inclusion or Exclusion of Certain Provisions, Guidance Included in the Proposed Statement Considered by Respondents to Be in Conflict with GASB Standards, Comments Seeking Guidance or Clarification, and Staff Recommended Changes Based on Comments. The Board provided suggestions to clarify the proposed Statement based on these comments. The Board also tentatively decided to incorporate the general principle of offsetting into the GASB literature from APB Opinion No. 10, Omnibus Opinion—1966, paragraph 7(1) based on the feedback received.

At the October 2010 meeting, the Board will discuss a preballot draft of the final Statement.

Minutes of Teleconference, August 27, 2010

The comment period for the Exposure Draft, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, ended on July 31, 2010. The Board began redeliberations on the Exposure Draft based on comments received from respondents. The Board addressed comments received that were categorized into four sections: General Disagreements, Disagreement with the Inclusion or Exclusion of Certain Provisions, Guidance Included in the Proposed Statement Considered by Respondents to Be in Conflict with GASB Standards, and Comments Seeking Guidance or Clarification. The Board tentatively decided to add a sentence in the summary of the proposed Statement further clarifying the Statement's effect on paragraph 7 of GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting. At the September 2010 meeting, the Board will continue its discussion of respondents' comments and deliberate on changes to the proposed Statement recommended by the staff.

Minutes of Teleconference, January 26, 2010

The Board reviewed a ballot Exposure Draft for the proposed Statement, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. After primarily making changes to further clarify the provisions of the ballot draft, the Board voted unanimously to proceed with the issuance of the Exposure Draft.

Minutes of Meeting, January 5-7, 2010

The Board reviewed a preballot draft of an Exposure Draft for the proposed Statement, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The Board primarily provided suggestions to further clarify the draft material. A ballot draft of a proposed Statement will be reviewed by the Board at the January 2010 teleconference.

Minutes of Meeting, November 18-20, 2009

The Board reviewed a draft standards section of an Exposure Draft for the proposed Statement, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The Board discussed the formatting and structure of the draft and primarily made editorial suggestions to its provisions.

The Board also discussed the impact of the proposed Statement on GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, and tentatively decided that the proposed Statement would supersede Statement 20 in its entirety.

In addition, the Board considered the effective date provisions of the proposed Statement and tentatively decided to encourage early application.

A preballot draft of the proposed Statement will be reviewed at the January 2010 meeting.

Minutes of Teleconference, October 27, 2009

The Board discussed whether provisions from certain appendices of FASB and AICPA pronouncements issued on or before November 30, 1989, should be considered for incorporation into the GASB literature. The Board tentatively decided that supplementary guidance from these appendices, which governments need in order to apply a given standard, should be considered for incorporation into the GASB literature. However, guidance from these appendices that is illustrative in nature and only serves to complement the authoritative standards of a pronouncement would not be considered for incorporation based on the Board’s tentative decision.

The Board also continued discussing an issue introduced at the October 2009 meeting regarding whether the Board should reconsider the tentative decision to incorporate FASB and AICPA guidance on extinguishments of debt in light of accounting and financial reporting issues recently brought to the staff’s attention pertaining to governments repurchasing their own debt securities. The Board recognized that there have been different interpretations of the applicability of those provisions in the past. In light of the effective date of the proposed standard, the Board upheld its original tentative decision to include the guidance on extinguishments of debt in the proposed Statement to incorporate FASB and AICPA guidance into the GASB literature.

Minutes of Meeting, October 6-8, 2009

The Board discussed the proposed format of the Exposure Draft for a proposed Statement regarding the codification of pre-November 30, 1989 AICPA and FASB pronouncements. The Board reviewed a sample of the proposed contents of the Exposure Draft, including selected provisions of the standards section and appendices.

The Board also discussed the effective date and transition period that would be proposed in the Exposure Draft. The Board tentatively decided that the Exposure Draft would include a proposal for a one-year transition period following the issuance of the final Statement.

In addition, after discussing certain issues recently brought to the project staff’s attention, the Board decided to reconsider at the October teleconference whether to incorporate into the GASB literature the AICPA and FASB guidance pertaining to extinguishments of debt.

Minutes of Teleconference, September 15, 2009

The Board continued its deliberations from the August 2009 meeting regarding a set of FASB and AICPA pronouncements issued prior to November 30, 1989, that are being considered for incorporation into GASB literature. The Board reviewed and made suggestions concerning these standards and modifications proposed by the project staff to adapt the guidance as closely as possible to the style and terminology generally used in GASB literature.

Additionally, after reviewing the project staff’s proposed modifications to the interim financial reporting guidance, the Board tentatively decided that the provisions of APB Opinion No. 28, Interim Financial Reporting, and its related amendment and interpretation should not be considered further for incorporation into GASB literature. The Board determined that based upon the prescriptive nature of the guidance in Opinion 28 and the related amendment, those pronouncements were in conflict with the principles established in NCGA Statement 1, Governmental Accounting and Financial Reporting Principles, on interim reporting and, therefore, should be not be incorporated into the GASB literature.

Minutes of Meeting, August 26-28, 2009

The Board continued its deliberations on FASB and AICPA pronouncements issued before November 30, 1989, to be considered for incorporation into GASB literature. After reviewing the project staff’s proposed modifications to the business combinations guidance, the Board tentatively decided that the provisions of APB Opinion No. 16, Business Combinations, and its related amendments and interpretations should not be considered further for incorporation into GASB literature but, rather, that the accounting for government combinations should be addressed in the separate project currently included on the GASB Research Agenda. In addition, the Board discussed the applicability to governments of FASB pronouncements concerning accounting for income taxes. It tentatively was determined that those standards rarely are applicable to governments and, therefore, should not be considered for incorporation into GASB authoritative literature. Similarly, the Board tentatively agreed that FASB Statement No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, and its related amendments have rare application to governments and, therefore, should not be considered for incorporation into GASB authoritative literature.

The Board also reviewed research conducted by the staff related to the application of paragraph 7 of GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, as amended, by governments. Based upon this research, the Board tentatively decided to propose that paragraph 7 of Statement 20, which applies to FASB pronouncements issued after November 30, 1989, be eliminated as part of this project.

Additionally, the Board reviewed and made suggestions regarding a second set of FASB pronouncements considered to be applicable to governments, as well as modifications proposed by the staff to adapt the literature as closely as possible to the style and terminology generally used in GASB literature. The Board will continue its deliberations on this set of pronouncements at the September teleconference.

Minutes of Meeting, July 14-16, 2009

The Board began deliberations on FASB pronouncements issued before November 30, 1989, to be considered for incorporation into GASB literature. The Board reviewed the project staff’s initial categorization of the pronouncements into the following groups: pronouncements superseded prior to November 30, 1989; those that in their entirety conflict with or contradict GASB standards; those that are not applicable to governments; those with limited application to governments; and those that are generally applicable to a large number of governments. The Board tentatively agreed with the classification of superseded pronouncements and offered suggestions on reclassifying certain pronouncements among the other categories. The Board tentatively decided that the pronouncements that conflict with or contradict GASB standards and those that are inapplicable to governments should not be considered for incorporation into GASB literature. The Board also deliberated whether pre-November 30, 1989 FASB pronouncements with limited application to governments should be considered for incorporation. It tentatively was decided by the Board that, of the pronouncements categorized as having limited application to governments, only those that have “rare” application to governments should not be considered for incorporation into GASB literature. The Board decided that it would review all other pronouncements in the rare applicability category, including certain specialized industry guidance, and consider whether to incorporate these pronouncements into GASB literature.

The Board also deliberated whether it should consider incorporating pre-November 30, 1989 FASB pronouncements that have focuses similar to that of projects currently on the GASB’s research agenda, for example, pronouncements addressing business combinations. The Board tentatively decided that it should review these FASB pronouncements.

In addition, the Board tentatively determined that the appropriate scope of the project is to consider only those FASB pronouncements issued prior to November 30, 1989 that (1) are applicable to governmental and business-type activities and to proprietary funds reported in the basic financial statements and (2) do not conflict with or contradict GASB standards. FASB pronouncements issued subsequent to November 30, 1989, including amendments, interpretations, and technical corrections to prior standards, tentatively would not be considered for incorporation into GASB literature under this project. The Board tentatively determined that this decision also applies to FASB Statement No. 13, Accounting for Leases. Thus, the Board would only consider whether FASB Statement 13, as amended and interpreted as of November 30, 1989, should be incorporated into GASB literature.

The Board also tentatively agreed that FASB pronouncements incorporated into GASB literature should be made applicable to governmental funds only to the extent that GASB literature already has specifically made them applicable to governmental funds.

The Board also reviewed and made suggestions regarding the first set of FASB pronouncements considered to be applicable to governments, as well as modifications proposed by the staff to adapt the literature as closely as possible to the style and terminology generally used in GASB literature. The remaining applicable pronouncements are scheduled to be discussed at the August Board meeting.

Codification of Pre-November 30, 1989, FASB Pronouncements —Major Tentative Decisions to Date

Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, was approved in December 2010.