SEGAL Bulletins - Public Sector

July 2010

GASBfs Preliminary Views on Proposed Changes to Pension Accounting Standards for Public Sector Employers

The Governmental Accounting Standards Board (GASB) recently issued Preliminary Views on major issues related to Pension Accounting and Financial Reporting by Employers.1 This Preliminary Views is a step toward an Exposure Draft targeted for release in 2011 and, eventually, a new Statement of Government Accounting Standards that would replace the standards in the current Statement 27. This Bulletin summarizes the key proposals in the Preliminary Views, which would make fundamental changes to pension accounting standards for state and local governments.

PRELIMINARY VIEWS

GASB seeks comments on the following preliminary views:

IMPLICATIONS

If GASB incorporates the proposals outlined in its Preliminary Views into a final accounting standard, the consequences for state and local governments would be significant, including the following:

The proposed changes would have other implications. For example, the proposed change in how investment earnings are recognized will create less expense volatility in some situations and greater expense volatility in others.

GASB is accepting comments on the Preliminary Views until September 17, 2010. The Segal Company will submit comments that will be shared with clients.3 Segal encourages state and local governments to prepare their own comments to GASB.

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The Segal Company can be retained to work with employers, plan sponsors and their auditors in their efforts to determine the potential impact of the requirements in GASB's Preliminary Views on their plans and practices.

1
The Preliminary Views is available on the following page of GASB's Web site: http://www.gasb.org/cs/ContentServer?c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176156938122
2
"Net pension liability" is a new term introduced in this Preliminary Views. It essentially means the unfunded actuarial accrued liability using the market value of assets.
3
Segal's comments to GASB will also be accessible from the Hot Topics and What's New pages of Segal's Web site.

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