BECOME A SUBSCRIBER!
Did you purchase this product from a bookstore?
If you did, it's important for you to become a subscriber. John Wiley & Sons, Inc. may publish, on a periodic basis, supplements and new editions to reflect the latest changes in the subject matter that you need to know in order stay competitive in this everchanging industry. By contacting the Wiley office nearest you, you'll receive any current update at no additional charge. In addition, you'll receive future updates and revised or related volumes on a thirty‐day examination review.
If you purchased this product directly from John Wiley & Sons, Inc., we have already recorded your subscription for this update service.
To become a subscriber, please call 1‐877‐762‐2974 or send your name, company name (if applicable), address, and the title of the product to
| mailing address: | Supplement Department |
| John Wiley & Sons, Inc. | |
| One Wiley Drive | |
| Somerset, NJ 08875 | |
| e‐mail: | subscriber@wiley.com |
| fax: | 1‐732‐302‐2300 |
| online: | www.wiley.com |
For customers outside the United States, please contact the Wiley office nearest you:
| Professional & Reference Division | John Wiley & Sons, Ltd. |
| John Wiley & Sons Canada, Ltd. | The Atrium |
| 22 Worcester Road | Southern Gate, Chichester |
| Etobicoke, Ontario M9W 1L1 | West Sussex, PO19 8SQ |
| CANADA | ENGLAND |
| 416‐236‐4433 | Phone: 44‐1243‐779777 |
| Phone: 1‐800‐567‐4797 | Fax: 44‐1243‐775878 |
| Fax: 416‐236‐4447 | Email: customer@wiley.co.uk |
| Email: canada@jwiley.com | |
| John Wiley & Sons Australia, Ltd. | John Wiley & Sons (Asia) Pte. Ltd. |
| 33 Park Road | 2 Clementi Loop #02‐01 |
| P.O. Box 1226 | SINGAPORE 129809 |
| Milton, Queensland 4064 | Phone: 65‐64632400 |
| AUSTRALIA | Fax: 65‐64634604/5/6 |
| Phone: 61‐7‐3859‐9755 | Customer Service: 65‐64604280 |
| Fax: 61‐7‐3859‐9715 | Email: enquiry@wiley.com.sg |
| Email: brisbane@johnwiley.com.au |
Interpretation and Application of GENERALLY ACCEPTED ACCOUNTING PRINCIPLES for State and Local Governments
Copyright © 2018 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per‐copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750–8400, fax (978) 646–8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748–6011, fax (201) 748–6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762–2974, outside the United States at (317) 572–3993, or fax (317) 572–4002.
Wiley publishes in a variety of print and electronic formats and by print‐on‐demand. Some material included with standard print versions of this book may not be included in e‐books or in print‐on‐demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data
Names: Ruppel, Warren, author.
Title: Wiley GAAP for governments 2018 : interpretation and application of
generally accepted accounting principles for state and local governments /
Warren Ruppel.
Other titles: GAAP for governments 2018
Description: Second Edition. | Hoboken, New Jersey : John Wiley & Sons, Inc.,
[2018] | Revised edition. | Includes index. |
Identifiers: LCCN 2018023923 (print) | LCCN 2018027218 (ebook) | ISBN
9781119409182 (Adobe PDF) | ISBN 9781119409199 (ePub) | ISBN 9781119396246 (paperback)
Subjects: LCSH: Finance, Public–Accounting–Standards–United States.
Classification: LCC HJ9801 (ebook) | LCC HJ9801 .R87 2018 (print) | DDC
657/.835–dc23
LC record available at https://lccn.loc.gov/2018023923
Cover Design and Image: Wiley
Governmental accounting is a specialized area that has undergone significant changes over the past few decades. As governmental accounting standards have developed, the complexities of preparing financial statements for governmental entities have greatly increased. Providing meaningful financial information to a wide range of users is not an easy task. Adding to these challenges, the Governmental Accounting Standards Board (GASB) brought sweeping changes to the governmental financial reporting model and is now continuing the process of addressing many important accounting areas related to that model.
Given this rapidly changing environment, the financial statement preparer needs a technical resource that provides more than accurate, competent technical information. The resource needs to be written to fit today's governmental accounting environment. It needs to take a fresh look at some of the long‐standing accounting questions faced by governments and to provide meaningful up‐to‐date information on recently issued and soon‐to‐be‐issued accounting pronouncements.
The purpose of this book is to meet these needs by providing a useful, complete, and practical guide to governmental accounting principles and financial reporting. Throughout, the book will provide the reader with:
The approach used in this book is to provide the reader with useful information in a usable format. Accounting theory must correspond with practical examples to be useful, because theory seldom matches the specific situation. For technical information to be usable, it must be clearly presented without clutter and unnecessary repetition. The substance of accounting requirements must also be understood in order for them to be properly applied. Understanding the reasons why technical requirements exist is an important ingredient in properly applying accounting standards.
The 2018 edition of this book begins with an overview of governmental accounting principles and a description of the various types of funds currently in use by governmental entities. It then describes basic financial statements and provides guidance for reporting various assets, liabilities, revenues, and expenses/expenditures. Finally, it examines the accounting and financial reporting requirements for several specific types of governmental entities. The book also includes a “Disclosure Checklist,” which should prove very helpful in determining the completeness of a governmental entity's financial statement disclosures.
This book would not have come to fruition without the hard work and perseverance of a number of individuals. John DeRemigis of John Wiley & Sons had the confidence to work with me in developing the original concept for the book and in ensuring its continuing quality and success. Pam Reh's efforts in producing past editions of the book are greatly appreciated, as are the current members of the Wiley team.
Of course, the time and effort needed to write and maintain this book would not be possible without a supportive family, for which I am grateful to my wife, Marie, and my sons, Christopher and Gregory.
Woodcliff Lake, NJ
March 2018
Warren Ruppel, CPA, is a Partner at Marks Paneth LLP, New York, in the firm's Nonprofit, Government and Healthcare Group, where he serves as the Practice Leader for Government Services. He formerly was the assistant comptroller for accounting of the City of New York, where he was responsible for all aspects of the City's accounting and financial reporting. He has over 35 years of experience in governmental and not‐for‐profit accounting and financial reporting. He began his career at KPMG after graduating from St. John's University, New York. His involvement with governmental accounting and auditing began with his first audit assignment—the second audit ever performed of the financial statements of the City of New York. From that time he served many governmental and commercial clients until he joined Deloitte & Touche in 1989 to specialize in audits of governments and not‐for‐profit organizations. Mr. Ruppel has also served as the chief financial officer of an international not‐for‐profit organization.
Mr. Ruppel has served as an instructor for many training courses, including specialized governmental and not‐for‐profit programs and seminars. He has also been an adjunct lecturer of accounting at the Bernard M. Baruch College of the City University of New York. He is the author of five other books, OMB Circular A‐133 Audits, Not‐for‐Profit Organization Audits, Not‐for‐Profit Accounting Made Easy, Government Accounting Made Easy, and Not‐for‐Profit Audit Committee Best Practices. He is also the government specialist for SmartPros online CPA Report, in which he appears quarterly to provide a governmental accounting and auditing update.
Mr. Ruppel is a member of the American Institute of Certified Public Accountants as well as the New York State Society of Certified Public Accountants, where he served on the board of directors and chaired its Audit Committee. He also serves on the Governmental Accounting and Auditing Committee and is a past president of the Foundation for Accounting Education. He is a past president of the New York Chapter of the Institute of Management Accountants. Mr. Ruppel is a member of the New York State Government Finance Officers Association, where he serves on its Accounting, Auditing and Financial Reporting Committee. He also serves on the Special Review Committee of the national Government Finance Officers Association. In addition, he is a member of the Executive Advisory Board to the Department of Accounting and Taxation of St. John's University.
The 2018 Governmental GAAP Guide incorporates all of the pronouncements issued by the Governmental Accounting Standards Board (GASB) through February 2018. This chapter is designed to keep the reader up to date on all pronouncements recently issued by the GASB and their effective dates, as well as to report on the Exposure Drafts, Preliminary Views, and Invitations to Comment (ITCs) for proposed new statements or interpretations that are currently outstanding. This chapter also includes relevant information on the GASB's Technical Agenda for the upcoming year to give readers information as to potential areas for future GASB requirements.
| GASB Statement | Effective Date | Where in This Book | |
| 72 | Fair Value Measurement and Application | Periods beginning after June 15, 2015 | Chapter 12 |
| 73 | Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 | Fiscal years beginning after June 15, 2016, for pensions not within the scope of GASB 68 Fiscal years beginning after June 15, 2015, for asset reporting and GASB 67 and 68 Amendments |
Chapter 17 |
| 74 | Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans | Fiscal years beginning after June 15, 2016 | Chapter 22 |
| 75 | Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions | Fiscal years beginning after June 15, 2017 | Chapter 17 |
| 76 | The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments | Periods beginning after June 15, 2015 | Chapter 2 |
| 77 | Tax Abatement Disclosures | Periods beginning after December 15, 2015 | Chapter 9 |
| 78 | Pensions Provided through Certain Multi‐Employer Defined Benefit Plans | Periods beginning after December 15, 2015 | Chapter 17 |
| 79 | Certain External Investment Pools | Periods beginning after June 15, 2015 | Chapter 12 |
| 80 | Blending Requirements for Certain Component Units—An Amendment of GASB Statement No. 14 | Periods beginning after June 15, 2016 | Chapter 11 |
| 81 | Irrevocable Split‐Interest Agreements | Periods beginning after December 15, 2016 | Chapter 12 |
| 82 | Pension Issues—An Amendment of GASB Statements No. 67, No. 68, and No. 73 | Periods beginning after June 15, 2016 | |
| 83 | Certain Asset Retirement Obligations | Periods beginning after June 15, 2018 | Chapter 14 |
| 84 | Fiduciary Activities | Periods beginning after December 15, 2018 | Chapter 8 |
| 85 | Omnibus 2017 | Periods beginning after June 15, 2017 | Chapters 11, 12, 14, 17 |
| 86 | Certain Debt Extinguishment Issues | Periods beginning after June 15, 2017 | Chapter 15 |
| 87 | Leases | Periods beginning after December 15, 2019 | Chapter 19 |
The GASB has a number of Exposure Drafts and Invitations to Comment that it has issued, which will affect future accounting and financial reporting requirements when final standards are developed. The following provides a brief synopsis of what is being covered by each Exposure Draft and Invitation to Comment document. Readers should always be aware that the GASB often modifies proposal stage literature based upon its continuing deliberations and consideration of comments that it receives on each Exposure Draft and Invitation to Comment document.
The GASB issued an Exposure Draft of a Comprehensive Implementation Guide that addresses a variety of new questions and amends certain answers in previously issued Implementation Guides. The requirements of a final Implementation Guide would be effective for periods beginning after June 15, 2018.
GASB Implementation Guides are considered authoritative GAAP for governments and consist of a series of very specific questions and answers that are designed to assist financial statement preparers and auditors to implement GASB Statements. In some cases, they address practice questions that arise; in another case, they address questions that the GASB chose not to specifically address in a GASB Statement itself.
The GASB issued this Exposure Draft in June 2017 to provide an update and clarification to the disclosures required for debt. The Exposure Draft defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of payment of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. This definition is meant to clarify that the debt disclosures apply to private placements of debt, for which there had been some diversity in practice. In addition, existing disclosures and proposed additional information are to be provided for direct borrowings and direct placements of debt separately from other debt.
The requirements of this proposed Statement would be effective for reporting periods beginning after June 15, 2018. Earlier application would be encouraged.
In November 2017 the GASB issued this Exposure Draft to improve the consistency of reporting a government's majority interest in a legally separate organization. The Exposure Draft specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government's holding of the equity interest meets the definition of an investment.
A majority equity interest that meets the definition of an investment would be measured using the equity method, unless it is held by a special‐purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or a permanent fund, which would measure the majority equity interest at fair value. For all other holdings of a majority equity interest in a legally separate organization, a government would report the legally separate organization as a component unit, and the government or fund that holds the equity interest would report an asset related to the majority equity interest using the equity method.
The Exposure Draft also would require that governments use acquisition value to measure the assets, deferred outflows of resources, liabilities, and deferred inflows of resources at the date of acquisition of a component unit in which the primary government acquired a 100 percent equity interest. Transactions presented in flows statements of the component unit in that circumstance would include only transactions that occurred subsequent to the acquisition.
The requirements of this proposed Statement would be effective for reporting periods beginning after December 15, 2018. Earlier application would be encouraged.
The GASB issued this Exposure Draft in November 2017 to address the capitalization of interest during a construction period. Under the provisions of the Exposure Draft, interest incurred during the period of construction would be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resource. In other words, interest would no longer be capitalized during construction, meaning that it would no longer be included in the historical cost of a capital asset.
The requirements of this proposed Statement would be effective for reporting periods beginning after December 15, 2018. Earlier application would be encouraged.
In December 2016 the GASB issued this ITC to address the accounting used by governmental funds, currently the modified accrual basis of accounting and the current financial resources measurement focus. This ITC requests commentary on three different replacement models for the current model. These are the near‐term financial resource model (near‐term meaning 60–90 days), the short‐term resources model (short‐term meaning one year), and the long‐term financial resources model (similar accounting to what is used in the government‐wide statements, except that capital assets would not be recorded).
The ITC also requests comments on alternative presentations for the resource flows statement, the requirement for presenting a cash flows statement, and a proposed simplification between the government‐wide and governmental fund financial statements.
While this is a very preliminary phase of this project, it seems almost certain that there will be changes made to the basis of accounting and measurement focus used by governmental funds.
In January 2018 the GASB issued this ITC related to a project to develop a comprehensive revenue and expense model. According to the ITC, the GASB believes this is necessary because:
As stated, the GASB will be considering whether it would be appropriate to adopt a “performance obligation” approach for revenue recognition, which is the basis used in a recent FASB standard on revenue recognition. Clearly, this project is broader that the FASB's standard in that it also addresses expense recognition.
The GASB has a number of additional important projects on its agenda that will likely affect governmental accounting and financial reporting in the future. Some of the more significant projects are as follows.
Financial reporting model. The first ITC discussed earlier in this chapter is part of this project, which is taking a fresh look at the basic financial reporting model required by GASBS 34, as amended, to determine if it is working effectively and whether any changes to the model need to be made.
Conduit debt. This project will address the accounting and financial reporting for entities that issue debt on behalf of other organizations, such as industrial development agencies. In most cases, these entities do not report the debt on their financial statements. This project will address whether that continues to be the appropriate accounting treatment and whether there would be any circumstance in which the debt would be reported by the issuing entity.
The GASB, as always, maintains an active agenda, and the accounting and financial reporting standards for governments are consistently evolving. Financial statement preparers need to keep an eye on emerging new GASB pronouncements to ensure that they have adequate time to plan for their implementation, as well as to inform financial statement users about their potential impacts.