SACS Minutes, November 2012, Attachment B

Discussion Draft: Governmental Accounting Standards Board (GASB) Statement 65 (GASB 65), Items Previously Reported as Assets and Liabilities

Summary: GASB 65 was issued in March 2012. This Statement identifies items currently classified as assets or liabilities that should be reclassified as either deferred outflows of resources or deferred inflows of resources, or in some cases as inflows (e.g., revenues) or outflows (e.g., expenditures). The Statement becomes effective 2013–14. It is available for download from the GASB Website.

The California Department of Education (CDE) expects the impact of this statement on local educational agencies (LEAs) to be minimal. There are a few items identified that may require LEAs to reclassify certain assets or liabilities as deferred outflows or deferred inflows of resources, or as inflows or outflows, but these items probably occur infrequently.

Background: GASB Concepts Statement 4, Elements of Financial Statements, identifies two new financial statement elements – deferred outflows of resources and deferred inflows of resources. Concepts Statement 4 also specifies that recognition of these financial statement elements should be limited to instances specifically identified in GASB authoritative pronouncements. GASB 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, provides financial statement presentation guidance for deferred outflows and inflows of resources but does not specifically identify items that should be recognized as such. GASB 65 was issued to identify these items.

Implications for LEAs: As noted above, a few items identified in GASB 65 to be reclassified may apply to LEAs. For example, in governmental funds, certain unavailable revenue that is currently reported as a liability (deferred revenue) will be reported as a deferred inflow of resources. Another example is the deferred debit or credit amount resulting from a debt refunding. These amounts are currently reported as an asset or liability, respectively, but will now be reported as a deferred outflow of resources or a deferred inflow of resources.

In addition, GASB 65 limits the use of the term “deferred” to deferred inflows of resources and deferred outflows of resources. This means that the term “deferred revenues” will need to be changed to reflect this directive.

Finally, GASB 65 clarifies that deferred outflows and inflows should be included in the determination of major funds.

The provisions of GASB 65 will necessitate some changes to the SACS software fund forms and government-wide reports, including conversion entries. The CDE also plans to issue more detailed guidance in the near future regarding implementation of the provisions of GASB 65 as well as GASB 63.