Industry Insights

GASB 68 Year Two – Lessons Learned

March 2017
Author:  Lisa Horn

Lisa Horn

Senior Manager


Not-for-Profit & Government

1801 California Street, Suite 2900
Denver, CO 80202-2606


The Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27, 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. GASB 68 also requires expanded note disclosures and required supplementary information (RSI). The standard’s goal was to improve the decision usefulness of information in employer and contributing governmental nonemployer financial reports and enhance the reports’ value for assessing accountability and interperiod equity by requiring recognition of the entire net pension liability and a more comprehensive measure of pension expense. The standard has been in effect for a full year, and while first-year implementation had a variety of challenges, accounting for year two of GASB 68 has been just as trying.

Employers subject to GASB 68 requirements must adjust the net pension liability, net pension expense and related pension deferrals. In addition, employers in cost-sharing multiple-employer plans must perform an analysis each year to record the change in proportionate share. Because the pension deferrals may switch between a deferred outflow and deferred inflow of resources, it’s important to remember which deferrals may be netted together and which are required to be reported gross.

For single-employer, agent and cost-sharing multiple-employer defined benefit pension plans, GASB 68 paragraphs 33 and 71 require these deferrals be reported as follows:

Deferred Item


Presentation (Gross or Net)

Differences between projected and actual investment earnings



Differences between expected and actual experience – economic and demographic factors



Changes of assumptions – future economic or demographic factors



For example, if in 2015 differences between expected and actual experience resulted in $500,000 of deferred outflow of resources, but in 2016 that difference resulted in $200,000 of deferred inflow of resources, those amounts can’t be netted together to show a deferred outflow of resources on the statement of net position or in the footnotes; it will result in two separate deferred balances. Conversely, if that same fact pattern was the result of a difference between projected and actual earnings on pension plan investments, those deferred amounts would be netted to present a deferred outflow of resources on the statement of net position and in the footnotes.

Contributions made subsequent to the measurement date should be reported as a deferred outflow of resources and recognized as a reduction of the net pension liability in the subsequent year. For cost-sharing multiple-employer plans, GASB 68 paragraph 71, the employer’s contributions and proportionate share of contributions should be reported on a gross basis from period to period but are allowed to be netted together during the same measurement period.

There have been instances where actuaries aren’t correctly reporting the deferrals in their reports. In those circumstances, the employer will need to have the actuary fix the deferrals or track them itself.

Additional clarification has been issued through GASB Implementation Guide No. 2016-1, Implementation Guidance Update—2016, and GASB Statement No. 82, Pension Issues—an amendment of GASB Statements No. 67, No. 68, and No.73, and includes:

Net Pension Asset

In cases where the pension calculation from GASB 68 results in a net pension asset, the balance of that asset should be classified as restricted net position, in the statement of net position, as it’s legally unavailable to the organization. If the net pension asset wasn’t included in restricted net position in the prior year, the change will need to be made to the prior-year net assets in the current-year financial statement presentation if comparative statements are shown.

Covered Payroll

GASB 82 amended the presentation requirements of payroll-related measures in RSI by replacing the measure of covered-employee payroll with the measure of covered payroll. Covered payroll is compensation to active employees on which the employer bases pension plan contributions. Covered-employee payroll is the payroll of employees provided with pensions through the pension plan. The amendment applies to single-employer and cost-sharing pension plans administered through trusts that meet the criteria in GASB Statement No. 67, Financial Reporting for Pension Plans—an amendment of GASB Statement No. 25, paragraph three as well as for employers that provide pensions through pension plans administered through trusts meeting the criteria in GASB 68 paragraph four.

Footnote Disclosures

For single-employer, agent and cost-sharing multiple-employer defined benefit pension plans, if the reporting entity has multiple plans, the disclosures need to include the total (aggregate for all pensions, whether provided through single-employer, agent or cost-sharing pension plans) of the employer’s pension liabilities and assets, deferred outflow of resources and deferred inflow of resources related to pensions. In addition, pension expense/expenditures for the period associated with net pension liabilities should be disclosed if the total amounts aren’t otherwise identifiable from information presented in the financial statements. The disclosure should show the allocation to governmental activities, business-type activities and discretely presented component units (DPCU) if multiple plans are involved, and the aggregate amounts should equal the total plan amounts as subsequently disclosed in the footnotes if a table is used.

In addition, the RSI schedule showing the employer’s allocation percentage should be reported as of the measurement date. The RSI schedule showing the contributions should be reported for the employer’s fiscal year. Therefore, unless the measurement date and fiscal year are the same, the amount reported as covered payroll will be different between the schedules.

For single-employer and agent-defined benefit plans, when the financial statements include a DPCU participating in the same plan as the primary government, separate disclosures are required for the primary government and the DPCU. The RSI is for the reporting entity as a whole.

If an employer participates in a pension plan in which the plan’s financial statements aren’t publicly available on the internet, all information about the elements of the pension plan’s basic financial statements—assets, deferred outflow and inflow, liabilities and net position—must be disclosed. This includes a detail of investments and GASB Statement No. 40, Deposit and Investment Risk Disclosures—an amendment of GASB Statement No. 3, risk disclosures and GASB Statement No. 72, Fair Value Measurement and Application, on fair value disclosures and any other GASB standard applicable to the plan.

Finally, for financial statements where allocations are made to fund financial statements, including between governmental activities and business-type activities, change in the proportion allocated must be evaluated and recorded if material, similar to a cost-sharing plan.

Contact your BKD advisor if you have any questions or concerns about GASB 68.

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