May 19, 2016 TECHNICAL UPDATE Mark Thomas, Partner, KPMG LLP

Learning Objective Be familiar with certain of the new accounting pronouncements and understand the effects on the auxiliary organizations financial statements YEAR-END GAAP TRAINING 2 MAY 2016

New GASB Pronouncements GASB Statement No. 72, Fair Value Measurement and Application- This Year YEAR-END GAAP TRAINING 3 MAY 2016

New GASB Pronouncements, Pension/OPEB GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the scope of GASB Statement 68 and Amendment to certain provisions of GASB Statements 67 and 68, Issued June 2015 GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans other than Pensions Plan, June 2015 GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions, June 2015 GASB Statement No. 78, Pension Provided Through Certain Multiple-Employer Defined Benefit Pension Plans, December 2015 GASB Statement No. 82, Pension Issues – An amendment of GASB Statement No. 67, 68 and 73 YEAR-END GAAP TRAINING 4 MAY 2016

New GASB Pronouncements, Other GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, June 2015 GASB Statement No. 77, Tax Abatement Disclosures, August 2015 GASB Statement No. 79, Certain External Investment Pools and Pool Participants, (effective 6/30/16) GASB Statement No. 80, Blending Requirements for Certain Component Units, January 2016 GASB Statement No. 81, Irrevocable Split-Interest Agreements, March 2016 YEAR-END GAAP TRAINING 5 MAY 2016

Statement No. 72 Statement No. 72, Fair Value Measurement and Application Issued February 2015 Scope: Applicable to assets and liabilities measured at fair value Required for financial statements of all GASB reporters Effective dates: for fiscal years beginning after June 15, 2015 (effective June 30, 2016) YEAR-END GAAP TRAINING 6 MAY 2016

Statement No. 72 (cont.) Investments defined: A security or other asset that A government holds primarily for purpose of income or profit, and Has present service capacity based solely on its ability to generate cash or to be sold to generate cash. Measurement: GASB 72 requires ALL investments to be measured at fair value, except for certain exceptions (see below among others): Money market investments with remaining maturity at time of purchase of one year or less Investments held by qualifying external investment pools YEAR-END GAAP TRAINING 7 MAY 2016

Statement No. 72 (cont.) Net Asset Value (NAV) as a practical expedient to fair value as long as: Fair value is not readily determinable NAV is calculated as of the government’s measurement date NAV is calculated in a manner consistent with the FASB’s measurement principles for investment companies It is not probable that all or a portion of the investment will be sold at an amount other than NAV. Investments that are valued using the NAV practical expedient are not part of the fair value hierarchy and the associated disclosures by level. Separate disclosures for these investments are required. YEAR-END GAAP TRAINING 8 MAY 2016

Statement No. 72 (cont.) Disclosure Requirements Fair value measurements: The fair value measurement at the end of the reporting period The fair value hierarchy level within which the fair value measurement is categorized (Level 1, Level 2 or Level 3) A description of the valuation techniques used If there has been a change in valuation technique that has a significant impact on the result, the change and the reason(s) for making it YEAR-END GAAP TRAINING 9 MAY 2016

Knowledge Check #1 Disclosure Requirements The fair value measurement of investments at the end of the reporting period and the fair value hierarchy level within which the fair value measurement is categorized (Level 1, Level 2 or Level 3) is required for: a.All FASB reporting entities b.All GASB reporting entities c.Neither FASB or GASB reporting entities d.Both FASB and GASB reporting entities YEAR-END GAAP TRAINING 10 MAY 2016

Statement No. 73 Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the scope of GASB Statement 68 and Amendment to certain provisions of GASB Statements 67 and 68 Issued June 2015 Effective dates: for fiscal years beginning after June 15, 2015 (effective June 30, 2016, some parts 2017) YEAR-END GAAP TRAINING 11 MAY 2016

Statement No. 73 (cont.) establishes standards of accounting and financial reporting for defined benefit pensions and defined contribution pensions that are provided to the employees that are not within the scope of GASB 68 establishes requirements for governments that hold assets accumulated for purposes of providing pensions through defined benefit pension plans that are not administered through trusts YEAR-END GAAP TRAINING 12 MAY 2016

Statement No. 74 and No. 75 Statement No. 74, Financial Reporting for Postemployment Benefit Plans other than Pensions Plan, June 2015 Effective date: for fiscal years beginning after June 15, 2016 (effective June 30, 2017) GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions, June 2015 Effective date: for fiscal years beginning after June 15, 2017 (effective June 30, 2018) YEAR-END GAAP TRAINING 13 MAY 2016

Statement No. 75 Overview of employer standard - Conceptual shift in reporting OPEB liabilities in full accrual financial statements - Substantive changes to methods and assumptions used to determine actuarial information for GAAP reporting purposes YEAR-END GAAP TRAINING 14 MAY 2016

Statement No. 75 (cont.) Accounting and financial reporting Recognize a liability for the employer’s proportionate share of the collective net OPEB liability OPEB expense and deferred outflows or resources and deferred inflows of resources should be recognized for the following: a. Employer’s proportionate shares of collective OPEB expense and collective deferred outflows and deferred inflows of resources b. Change in proportion of the collective net OPEB liability c. Contributions during the measurement period d. Employer contributions subsequent to the measurement date YEAR-END GAAP TRAINING 15 MAY 2016

Statement No. 76 GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, June 2015 Effective date: for fiscal years beginning after June 15, 2015 (effective June 30, 2016) This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP YEAR-END GAAP TRAINING 16 MAY 2016

Statement No. 76 (cont.) GAAP Hierarchy: a. GASB Statements (Category A) b. GASB Technical Bulletins, Implementation Guides and literature of the AICPA cleared by GASB (Category B) *** If not specified above, consider accounting principles for similar transactions or other events with source of authoritative GAAP and then consider nonauthoritative literature from other sources (i.e. GASB Concepts Statements, pronouncements and other FASB, among others) YEAR-END GAAP TRAINING 17 MAY 2016

Statement No. 81 GASB Statement No. 81, Irrevocable Split-Interest Agreements, March 2016 Effective date: for fiscal years beginning after December 15, 2016 (effective June 30, 2018) The statement established the accounting and financial reporting standards for irrevocable split- interest agreements created through trusts in which a donor irrevocably transfers resources to an intermediary. YEAR-END GAAP TRAINING 18 MAY 2016

Statement No. 81 (cont.) Split-interest agreements are a type of giving agreement used by donors to provide resources to two or more beneficiaries, including governments. Requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities and deferred inflows of resources at the inception of the agreement. Recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. YEAR-END GAAP TRAINING 19 MAY 2016

Selected Recently Issued ASUs ASU , Going Concern ASU , Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items ASU , Simplifying the Presentation of Debt Issuance Costs ASU , Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share YEAR-END GAAP TRAINING 20 MAY 2016

ASU , Going Concern Effective date: for annual period ending after December 15, 2016 (effective June 30, 2017) Requires annual and interim assessment of the likelihood the entity will be unable to meet obligations as they become due for one year from the date the financial statements are issued or available to be issued. Substantial doubt = probable that the entity will be unable to meet its obligations for one year from financial statement issuance date. YEAR-END GAAP TRAINING 21 MAY 2016

ASU , Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items Effective date: for annual period beginning after December 15, 2015 (effective June 30, 2017) Eliminates concept of extraordinary items Disclosures of material items that are unusual in nature or occur infrequently remain. Intended to save time and reduce costs Aligns US GAAP more closely with IAS 1 Prospective or retrospective application YEAR-END GAAP TRAINING 22 MAY 2016

ASU , Simplifying the Presentation of Debt Issuance Costs Effective date: for annual period beginning after December 15, 2015 (effective June 30, 2017) Debt issuance costs presented in the balance sheet as a direct deductions from recognized liabilities Consistent with presentation of debt discounts More closely aligns U.S. GAAP with IFRS Consistent with Concepts Statement 6 YEAR-END GAAP TRAINING 23 MAY 2016

ASU , Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share Effective date (nonpublic entities): for annual period beginning after December 15, 2016 (effective June 30, 2018) Removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using NAV per share as a practical expedient YEAR-END GAAP TRAINING 24 MAY 2016

ASU (cont.) Investments that calculate NAV per share, but for which the practical expedient is not applied will continue to be included in the fair value hierarchy. Sufficient information must be provided to permit reconciliation of the fair value of assets categorized within the fair value hierarchy to the amounts presented in the balance sheet. YEAR-END GAAP TRAINING 25 MAY 2016

FASB Projects Financial Statements of NFPs (Redeliberations plan) Phase 1 Net asset classification – combining temporarily and permanently restricted net assets into single net asset class; disclosure of board-designated funds; underwater endowments; and placed-in-service option for expirations of capital restrictions Expenses including nature and analysis of expenses by function and nature Operating measures – improving disclosures by those NFPs that choose to present such a measure Liquidity – improving disclosures of information useful in assessing Statement of cash flows – methods of presenting operating cash flows (direct and/or indirect) YEAR-END GAAP TRAINING 26 MAY 2016

FASB Projects (cont.) Financial Statements of NFPs (Redeliberations plan) Phase 2 Operating measures – all other elements of the proposal Statement of cash flows – realignment of certain line items YEAR-END GAAP TRAINING 27 MAY 2016

Knowledge Check #2 Project on NFP Financial Statements PHASE 1 of the FASB’s expected standard on NFP financial statements is expected to cover all of the following topics, except for: a.Net asset classification b.Improved disclosures over liquidity c.Use of direct vs. indirect method of statement of cash flows d.Reporting expenses by function and by nature e.Reporting of endowments YEAR-END GAAP TRAINING 28 MAY 2016