may 13, 20081 accounting upd ate focus staunton may 13, 2008 larry goldstein, president campus...
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May 13, 2008 1
Accounting Update
FOCUSStaunton
May 13, 2008
Larry Goldstein, President
Campus Strategies
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May 13, 2008 2
Agenda
Recently issued GASB documents and upcoming effective dates
GASB Statement No. 50 GASB Statement No. 51 GASB Statement No. 52 FASB UPMIFA FSP
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May 13, 2008 4
Recently Issued Documents
Statement 50—Pension Disclosures (an amendment of GASB Statements No. 25 and No. 27) (5/07)
Statement 51—Accounting and Financial Reporting for Intangible Assets (6/07)
Concepts Statement No. 4—Elements of Financial Statements (6/07)…
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May 13, 2008 5
Recently Issued Documents
2007-08 Comprehensive Implementation Guide (10/07)
Statement 52—Land and Other Real Estate Held as Investments by Endowments (11/07)…
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May 13, 2008 6
Recently Issued Documents
Exposure drafts Derivatives (6/07) Fund balance reporting (2/08) Concepts Statement No. 2—Service
Efforts and Accomplishments Reporting (4/08)
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May 13, 2008 8
Effective Dates
June 30, 2008 Statement 43—Phase II (OPEB plans) Statement 45—Phase I (Employers OPEB) Statement 48—Sales & Pledges of
Receivables and Future Revenues Statement 50—Pension Disclosures…
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May 13, 2008 9
Effective Dates
June 30, 2009 Statement 43—Phase III (OPEB plans) Statement 45—Phase II (Employers OPEB)
Statement 49—Pollution Remediation Obligations
Statement 52—Endowment Real Estate June 30, 2010
Statement 45—Phase III (Employers OPEB) Statement 51—Intangible Assets •
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May 13, 2008 11
Pension Disclosures
Driven by new OPEB standards Amends GASB 25 (pension plans) and GASB
27 (accounting for pensions by employers) Extends new disclosure requirements related
to OPEB to pensions Removes inconsistencies between original
pension disclosures and OPEB disclosures •
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Intangible Assets
Assets that possess following characteristics Lack physical substance Nonfinancial nature Initial useful life extending beyond a
single reporting period…
May 13, 2008 13© Campus Strategies
Intangible Assets
Examples Patents, copyrights, trademarks Easements and land use rights Computer software
Purchased or licensedInternally generated…
May 13, 2008 14© Campus Strategies
Intangible Assets
Intangible assets must be classified and reported as capital assets Existing authoritative guidance related to
capital assets extends to intangible assets But there are exceptions…
May 13, 2008 15© Campus Strategies
Intangible Assets
Exceptions Intangible assets acquired or created
primarily to generate income or profitShould be reported at cost or value at
time of donation Capital leases Goodwill resulting from a combination
transaction (e.g., merger, acquisition)…
May 13, 2008 16© Campus Strategies
Intangible Assets
Recognition—only if asset is identifiable Asset is separable (i.e., capable of being
separated and sold, transferred, licensed, etc.) or
Asset arises from contractual or other legal rights, regardless of whether rights are separable…
May 13, 2008 17© Campus Strategies
Intangible Assets
Internally generated intangible assets (IGIA) Created or produced by institution or entity
contracted by institution or Acquired from a third party and requiring
more than minimal incremental effort to achieve expected service capacity…
May 13, 2008 18© Campus Strategies
Intangible Assets
IGIA costs capitalized only when all three criteria met1. Specific objective for project determined,
including establishment of expected service capacity upon completion
2. Demonstration of technical or technological feasibility for completing project…
May 13, 2008 19© Campus Strategies
Intangible Assets
3. Demonstration of current intention, ability, and presence of effort to complete project If multiyear project, requirement for
continuing satisfaction of this criterion Outlays incurred prior to meeting criteria
should be expensed as incurred…
May 13, 2008 20© Campus Strategies
Intangible Assets
Standard includes guidance on applying the specified-conditions approach for recognition of computer software Guidance closely follows requirements of
AICPA SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use…
May 13, 2008 21© Campus Strategies
Intangible Assets
Amortization Existing guidance for depreciating capital
assets generally applies to amortizing intangible assets
Not required for intangible assets with indefinite useful livesIndefinite useful lives exist when there
are no factors that limit useful life…
May 13, 2008 22© Campus Strategies
Intangible Assets
Transition Provisions generally should be applied
retroactively Exceptions permitted for IGIA and
intangible assets with indefinite useful lives at transition…
May 13, 2008 23© Campus Strategies
Intangible Assets
Recognition required for all other intangible assets acquired in fiscal years ending after June 30, 1980 by phase 1 or 2 governments
Phase 3 governments are encouraged but not required to report other intangible assets •
May 13, 2008 24© Campus Strategies
Endowment Real Estate
Paragraph 19 of GASB 34 defines land as a capital asset Requires recognition at cost (or fair value at
time of donation) Many endowments hold land and other real estate
for investment purposes Standard applies to real estate held as true and
term endowments but not quasi-endowments…
May 13, 2008 © Campus Strategies 27
Endowment Real Estate
True and term endowment real estate should be measured at fair value
Changes in value should be reported in SRECNA as investment income
Investment disclosures per paragraph 15 of GASB 31 should be presented as appropriate •
May 13, 2008 © Campus Strategies 28
Uniform Prudent Management of Institutional Funds Act (UPMIFA)
Model act approved by National Conference of Commissioners on Uniform State Laws (07/06)
Enacted by 22 states and DC so far; under consideration by seven others Effective July 1, 2008 in Virginia
Updates the 1972 UMIFA in the area of investment management and endowment spending…May 13, 2008 29© Campus Strategies
UPMIFA
Eliminates concept of historic dollar value Enhances guidance on what constitutes
prudent endowment spending Authorizes spending from “underwater”
endowments Includes optional rebuttable presumption of
imprudence for spending below 2% or above 7% of market value…
May 13, 2008 30© Campus Strategies
UPMIFA
FASB Staff Position, FSP No. 117-a, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosure Requirements…
May 13, 2008 31© Campus Strategies
UPMIFA
Objectives Provide guidance on net asset
classification of donor-restricted endowment funds for not-for-profit organizations subject to UPMIFA
Improve endowment disclosures whether subject to UPMIFA, UMIFA, or other state law…
May 13, 2008 32© Campus Strategies
UPMIFA
Key questions Does ability to spend from “underwater”
endowments affect net asset classification? Does optional rebuttable presumption of
imprudence impose a temporary (time) restriction on a portion of otherwise unrestricted funds?...
May 13, 2008 33© Campus Strategies
UPMIFA
UPMIFA specifies that “Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution.” Does above language impose a time
restriction on a portion of otherwise unrestricted funds?...
May 13, 2008 34© Campus Strategies
UPMIFA
Conclusions If governing board concludes that state
law requires a portion of the fund—initial gift or appreciation—to be retained in perpetuity That amount is permanently restricted
Other amounts are temporarily restricted or unrestricted…
May 13, 2008 35© Campus Strategies
UPMIFA
If subsequent losses result in spending below amount required to be retained Loss must be recognized in
temporarily restricted until exhausted, then unrestricted Because overall fund accountability
is unchanged under UPMIFA—still accountable for full amount of fund…
May 13, 2008 36© Campus Strategies
UPMIFA
Rebuttable presumption language does not affect net asset classification Refer to EITF Topic No. D-49,
“Classifying Net Appreciation on Investments of a Donor-Restricted Endowment Fund” Unless law extends donor-imposed
restriction, no impact…
May 13, 2008 37© Campus Strategies
UPMIFA
An important caveat! Be sure to read actual language in
UPMIFA as adopted by in Virginia along with other relevant information Might reach a different conclusion
if law deviates from model legislation…
May 13, 2008 38© Campus Strategies
UPMIFA
New disclosure requirements apply to all NFPs—not just those in states adopting UPMIFA For both donor-restricted and board-
designated, must address net asset classification, net asset composition, changes in net asset composition, spending policy(ies), and related investment policy(ies) concerning endowment funds…
May 13, 2008 39© Campus Strategies
UPMIFA
Minimum information Description of board’s interpretation of
relevant law guiding net asset classification Description of endowment spending
(distribution) policy(ies)…
May 13, 2008 40© Campus Strategies
UPMIFA
Description of endowment investment policy(ies) Return objectives and risk parameters How the objectives relate to spending
policy(ies) Strategies for achieving objectives…
May 13, 2008 41© Campus Strategies
UPMIFA
Composition of endowment by net asset class
Endowment roll-forward by net asset class Planned endowment distribution for next
year (if known)…
May 13, 2008 42© Campus Strategies
UPMIFA
Composition of endowment by net asset class
Endowment roll-forward by net asset class Planned endowment distribution for next
year (if known)…
May 13, 2008 43© Campus Strategies
UPMIFA
Composition of endowment by net asset class
Endowment roll-forward by net asset class Planned endowment distribution for next
year (if known)…
May 13, 2008 44© Campus Strategies
UPMIFA
Proposed FSP issued in February Comments were due by April 18
Final FSP expected in June Anticipated effective date is for fiscal years
ending after June 15, 2008 (i.e., FY 2008) Monitor progress at www.fasb.org •
May 13, 2008 45© Campus Strategies
Acknowledgements
David Bean, GASB Susan Budak, NACUBO FARM co-author Wes Galloway, GASB Jeff Mechanick, FASB Ken Schermann, GASB
May 13, 2008 46© Campus Strategies
May 13, 2008 47
Accounting Update
Questions, Comments,
and Reactions
(540) 942-9146
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