Accounting Update
FOCUS
Staunton
May 13, 2008
Larry Goldstein, President
Campus Strategies
May 13, 2008
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Agenda
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Recently issued GASB documents and
upcoming effective dates
GASB Statement No. 50
GASB Statement No. 51
GASB Statement No. 52
FASB UPMIFA FSP
May 13, 2008
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Recently Issued
GASB Documents
May 13, 2008
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Recently Issued Documents
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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)…
May 13, 2008
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Recently Issued Documents
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2007-08 Comprehensive Implementation
Guide (10/07)
Statement 52—Land and Other Real
Estate Held as Investments by
Endowments (11/07)…
May 13, 2008
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Recently Issued Documents
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Exposure drafts
 Derivatives (6/07)
 Fund balance reporting (2/08)
 Concepts Statement No. 2—Service
Efforts and Accomplishments
Reporting (4/08)
May 13, 2008
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Upcoming GASB
Effective Dates
May 13, 2008
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Effective Dates
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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…
May 13, 2008
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Effective Dates
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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 •
May 13, 2008
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GASB 50
Pension Disclosures
May 13, 2008
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Pension Disclosures
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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 •
May 13, 2008
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GASB 51
Intangible Assets
May 13, 2008
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Intangible Assets
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Assets that possess following characteristics
 Lack physical substance
 Nonfinancial nature
 Initial useful life extending beyond a
single reporting period…
May 13, 2008
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Intangible Assets
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Examples
 Patents, copyrights, trademarks
 Easements and land use rights
 Computer software
 Purchased or licensed
 Internally generated…
May 13, 2008
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Intangible Assets
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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
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Intangible Assets
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Exceptions
 Intangible assets acquired or created
primarily to generate income or profit
 Should 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
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Intangible Assets
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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
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Intangible Assets
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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
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Intangible Assets
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IGIA costs capitalized only when all three
criteria met
1. 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
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Intangible Assets
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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
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Intangible Assets
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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
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Intangible Assets
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Amortization
 Existing guidance for depreciating capital
assets generally applies to amortizing
intangible assets
 Not required for intangible assets with
indefinite useful lives
 Indefinite useful lives exist when there
are no factors that limit useful life…
May 13, 2008
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Intangible Assets
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Transition
 Provisions generally should be applied
retroactively
 Exceptions permitted for IGIA and
intangible assets with indefinite useful lives
at transition…
May 13, 2008
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Intangible Assets
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May 13, 2008
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 •
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Questions?
May 13, 2008
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GASB 52
Endowment Real Estate
May 13, 2008
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Endowment Real Estate
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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
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Endowment Real Estate
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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
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Uniform Prudent Management of
Institutional Funds Act (UPMIFA)
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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
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UPMIFA
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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
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UPMIFA
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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
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UPMIFA
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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
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UPMIFA
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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
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UPMIFA
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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
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UPMIFA
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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
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UPMIFA
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May 13, 2008
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…
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UPMIFA
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May 13, 2008
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…
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UPMIFA
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May 13, 2008
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…
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UPMIFA
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New disclosure requirements apply to all
NFPs—not just those in states adopting
UPMIFA
 For both donor-restricted and boarddesignated, 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
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UPMIFA
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Minimum information
 Description of board’s interpretation of
relevant law guiding net asset classification
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May 13, 2008
Description of endowment spending
(distribution) policy(ies)…
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UPMIFA
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Description of endowment investment
policy(ies)
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May 13, 2008
Return objectives and risk parameters
How the objectives relate to spending
policy(ies)
Strategies for achieving objectives…
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UPMIFA
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Composition of endowment by net asset
class
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Endowment roll-forward by net asset class
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Planned endowment distribution for next
year (if known)…
May 13, 2008
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UPMIFA
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Composition of endowment by net asset
class
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Endowment roll-forward by net asset class
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Planned endowment distribution for next
year (if known)…
May 13, 2008
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UPMIFA
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Composition of endowment by net asset
class
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Endowment roll-forward by net asset class
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Planned endowment distribution for next
year (if known)…
May 13, 2008
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UPMIFA
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Proposed FSP issued in February
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Comments were due by April 18
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Final FSP expected in June
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Anticipated effective date is for fiscal years
ending after June 15, 2008 (i.e., FY 2008)
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Monitor progress at www.fasb.org •
May 13, 2008
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Acknowledgements
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David Bean, GASB
Susan Budak, NACUBO FARM co-author
Wes Galloway, GASB
Jeff Mechanick, FASB
Ken Schermann, GASB
May 13, 2008
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Accounting Update
Questions, Comments,
and Reactions
[email protected]
(540) 942-9146
May 13, 2008
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