From the Chairman's Desk

From the Chairman's Desk
By David A. Vaudt, GASB Chairman

A Chinese proverb says that wisdom begins with calling things by their correct names. I think there is a strong tie between that notion and two of the major projects the GASB is working on this year—leases and fiduciary activities.

One of the key goals of the leases project is to better align the accounting and financial reporting of a transaction with its economic reality. A central element of the fiduciary activities project focuses on clearly defining just what these activities are and how they would best be reported.

In this column, I'll look at these projects and what they're intended to do. I'll also address how the Board works to ensure we issue our standards and proposals in a timely manner while remaining cognizant of the competing demands on our stakeholders' time. In other words, how do we time the issuance of our documents without overwhelming your already busy workload?

Leases

In February 2016, the Board issued a proposal for public comment that would establish new guidance for leases. In the Exposure Draft, the Board proposes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset.

This proposal represents another important piece of the puzzle of requiring governments to report liabilities on the face of the financial statement.

This proposal represents another important piece of the puzzle of requiring governments to report liabilities on the face of the financial statement. In our view, only when all of those pieces are in place can stakeholders gain a complete and comprehensive picture of a government's financial condition.

The Exposure Draft addresses both lessee and lessor accounting. As proposed, lessees would recognize a lease liability and an intangible right-to-use lease asset. The lessor would recognize a lease receivable and a deferred inflow of resources, which is consistent with the Board's position that the receivable relates to future periods.

Our sister board, the Financial Accounting Standards Board, is preparing to release its final guidance on leasing in the coming weeks. Our Board has greatly benefited from leveraging the FASB's work in this area. Although we went in different directions in some areas, our conclusions up to this point have been informed by the FASB's efforts.

If you are interested in a high-level look at key aspects of the GASB leases proposal, I encourage you to check out this article along with a video overview of the proposal featuring members of the GASB leases team—in this edition of the GASB Outlook.

Fiduciary Activities

The proposal is intended to result in clear guidance that establishes what fiduciary activities are, when governments have them.

Late last year, we issued a proposal for public comment on fiduciary activities. The proposal is intended to result in clear guidance that establishes what fiduciary activities are, when governments have them, and whether and how governments should report them in their financial statements.

This project was first added to the GASB's agenda in August 2013. The Board exposed its preliminary views for public comment in late 2014.

After nearly a year of redeliberating comments the Board received, we issued an Exposure Draft on fiduciary activities in December 2015. The comment period will continue through March 31, 2016, and it is important that you share your views with us before we begin redeliberations this spring. Your input and feedback can have a real impact on the guidance the Board is scheduled to issue in the fourth quarter of 2016.

If you are interested in taking a deeper dive into this issue, take a look at this article on fiduciary activities prepared by the GASB staff.

Work Flow

Over the course of 2015, the GASB issued eight final Statements. As you can see, more are planned for 2016.

The volume of new pronouncements ebbs and flows, but we always consider stakeholders' workloads and stagger implementation dates accordingly.

Simply put, the Board will not issue a final Statement if it believes the release will create an undue burden on those required to implement it.

Simply put, the Board will not issue a final Statement if it believes the release will create an undue burden on those required to implement it. That includes the effective date and transition provisions of the standards.

It is important to focus on when new standards are required to be implemented, not simply on when they are issued. Several Statements may have been issued in 2015 but no government will have to implement each new Statement simultaneously. Effective dates are established in a manner that minimizes overlap with the implementation of other standards. Also, not all standards apply to all governments.

As always, producing standards that clearly communicate information about governments that users need is our goal—one that guides everything we do.