AICPA Groups Comment on Two GASB Proposals

The American Institute of CPAs’ (AICPA) State and Local Government Expert Panel (SLGEP) and Private Companies Practice Section (PCPS) Technical Issues Committee have submitted comment letters to the Governmental Accounting Standards Board (GASB) on Exposure Drafts (EDs), Fiduciary Activities and Certain Asset Retirement Obligations.

GASB described the primary objective of the Fiduciary Activities project as developing “guidance regarding whether and how governments should report fiduciary activities in their general purpose external financial reports.”  The ED, Certain Asset Retirement Obligations, would establish guidance for governments to use in determining the timing and pattern of recognition for liabilities related to asset retirement obligations and corresponding deferred outflows of resources,” GASB stated.  GASB described an asset retirement obligation as a “legally enforceable liability associated with the retirement of a tangible capital asset, such as the decommissioning of a nuclear reactor.”

The SLGEP wrote in its April 13 letter on the Fiduciary Activities ED that it believes a government’s accountability for assets held in a fiduciary capacity should be communicated through a description of the activities in the notes to the financial statements versus GASB’s proposal to report such activities in fiduciary fund financial statements. The panel communicated a similar position in its April 6, 2015 letter to GASB in response to the Preliminary Views on the same topic.

The PCPS Technical Issues Committee wrote in its April 12 letter that adoption of this proposed standard will have a significant impact on many local school districts and how they account for student activity funds. Under the proposed criteria, TIC believes many student activity funds will become part of governmental funds. Revenue of the fund will be accounted for as part of governmental fund revenue – a significant change from today’s agency fund accounting.  TIC had significant concerns regarding the reporting of student activity funds under the proposal and suggested that custodial funds be presented in the same manner as agency funds under current standards.

Both groups issued letters to the GASB in response to the ED on Certain Asset Retirement Obligations.  The April 12 TIC letter and March 31 SLGEP letter were supportive of the project but each offered observations and recommendations for the Board to consider when finalizing the Statement.