GASB: state and local governments must now report pension liabilities

By Susanna Moon

Chicago, June 25 - The Governmental Accounting Standards Board said it voted to approve two new standards under statements No. 67 and No. 68 to improve the accounting and financial reporting of public employee pensions by state and local governments.

"The new standards will improve the way state and local governments report their pension liabilities and expenses, resulting in a more faithful representation of the full impact of these obligations," GASB Chairman Robert H. Attmore said in a press release.

"Among other improvements, net pension liabilities will be reported on the balance sheet, providing citizens and other users of these financial reports with a clearer picture of the size and nature of the financial obligations to current and former employees for past services rendered."

Statement 68

Statement 68 requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability for the first time and to more comprehensively and comparably measure the annual costs of pension benefits.

The statement also enhances accountability and transparency through revised and new note disclosures and required supplementary information.

The statement requires governments that participate in defined benefit pension plans to report in their statement of net position a net pension liability.

The statement calls for immediate recognition of more pension expense than is currently required, the release noted.

Statement 68 requires cost-sharing employers to record a liability and expense equal to their proportionate share of the collective net pension liability and expense for the cost-sharing plan.

Statement 67

Statement 67 builds upon the framework for financial reports of defined benefit pension plans, which includes a statement of fiduciary net position (the amount held in a trust for paying retirement benefits) and a statement of changes in fiduciary net position, according to a press release by the GASB.

Statement 67 enhances note disclosures and required supplemental information for both defined benefit and defined contribution pension plans. Statement 67 also requires the presentation of new information about annual money-weighted rates of return in the notes to the financial statements and in 10-year required supplemental information schedules.

The provisions in statement 67 are effective for financial statements for periods beginning after June 15, 2013. The provisions in statement 68 are effective for fiscal years beginning after June 15, 2014. Earlier application is encouraged for both statements.

Statements 67 and 68 will be available for download from the GASB website in early August, and bound copies of the statements will be available for distribution soon after that. A plain-language description of the new requirements also will be available on the GASB website.

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