GASB Issues Statement No. 63
Author: Joel Haaser
In June 2011, the Governmental Accounting Standards Board (GASB) issued Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This statement provides financial reporting guidance for deferred outflows and deferred inflows of resources, originally introduced and defined in Concepts Statement No. 4, Elements of Financial Statements, as a consumption of net assets applicable to a future reporting period and an acquisition of net assets applicable to a future reporting period, respectively. Further, Concepts Statement No. 4 also identifies net position as the residual of all other elements presented in a statement of financial position.
The primary purpose of the new standard was to clarify where these new elements were to be reported in the statement of financial position. GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, and Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, previously identified certain transactions requiring the use of deferred outflows and deferred inflows of resources.
With the implementation of GASB 63, the Statement of Net Assets will become the Statement of Net Position. Along with the name change, the Statement of Net Position will include two new classifications separate from assets and liabilities. Amounts reported as deferred outflows of resources are required to be reported in a Statement of Net Position in a separate section following assets. Likewise, amounts reported as deferred inflows of resources are required to be reported in a Statement of Net Position in a separate section following liabilities. In addition, the totals of these two new classifications should be added to the total for assets and liabilities, respectively.
Another change to financial reporting will include new definitions and calculations of former net asset classifications—invested in capital assets, net of related debt, restricted and unrestricted. Invested in capital assets, net of related debt will be titled “Net Investment in Capital Assets.” The title of the other two classifications will remain the same. The calculations used in arriving at the balances of the classifications will be similar to what they were before, but each will include the new components of deferred outflow and deferred inflow of resources consistent with the placement of assets and liabilities, respectively. For example, the restricted component of net position now will generally consist of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.
In addition to the need for establishing a framework detailing how these new elements should be reported, GASB continues to review the presentation of deferred balances and their effect on a government’s net position. The organization recently issued Statement No. 65, Items Previously Reported as Assets and Liabilities. GASB also is deliberating other projects that may result in the recognition of deferred outflows and deferred inflows of resources.
The provisions of this statement are effective for financial statements for periods beginning after December 15, 2011, though earlier application is encouraged. Accounting changes adopted to conform to the provisions of this statement should be applied retroactively by reclassifying the Statement of Net Position and balance sheet information, if practical, for all prior periods presented.
For more information on how the proposed changes could affect you, contact your BKD advisor.