The benefits of preparing for GASB 84 now

The Latest Rules and Regulations That Impact Your Government Entity

GASB 84, government, accounting, financial statementsIn January 2017, the Governmental Accounting Standards Board (GASB) issued the final standard on identifying and reporting fiduciary activities under Statement No. 84. While GASB 84 is not effective until reporting periods beginning after December 15, 2018, application of the standard should be retrospectively applied, if practicable, to all periods presented. Therefore, if comparative financial statements are presented, preparing for the changes related to reporting fiduciary activities prior to the year of application may be highly beneficial in ensuring a smooth transition.

GASB 84 applies to all state and local governments engaged in fiduciary activities; however, the primary affect will be to special-purpose governments, such as utilities, which have generally not reported their fiduciary activities as fiduciary funds. According to the guidance:

“The requirements of this Statement will enhance consistency and comparability by (1) establishing specific criteria for identifying activities that should be reported as fiduciary activities and (2) clarifying whether and how business-type activities should report their fiduciary activities.”

The criteria referred to in the guidance focus on two main topics: whether a government is controlling the assets of a fiduciary activity, and the beneficiaries with whom a fiduciary relationship exists.

A governmental entity that participates in an activity that meets the specific criteria detailed in the standard should be reported in a fiduciary fund in the basic financial statements. In addition, the Statement identifies pension (and other employee benefit) trust funds, investment trust funds, and private-purpose trust funds as funds that should be reported as fiduciary funds. All other fiduciary activities not required to be reported within a trust fund should be reported as custodial funds, rather than agency funds, if the activity meets the specific criteria. In GASB 84, the existing agency fund type is eliminated to avoid any confusion between agency funds and agencies of the government. The Statement also details the reporting requirements in the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position.

One additional requirement to keep in mind when planning for these changes in reporting fiduciary activities in comparative financial statements – the Statement requires the government to disclose in the notes to the financial statements the nature of the restatement and its effect, or the reason for not restating prior periods presented in the financial statements.

Aaron Funk, CPA