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Responding to GASB request for the Public Comment - Research Paper Example

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The Government Accounting Standards Board (GASB) is responsible for standards that are important for reporting of finances and developing accounting standards for local governments and state. Therefore, when the body issued exposure drafts for comment, far-reaching benefits…
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Responding to GASB request for the Public Comment
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Running Head: The GASB Exposure Drafts The GASB Exposure Drafts The GASB Exposure Drafts The Government Accounting StandardsBoard (GASB) is responsible for standards that are important for reporting of finances and developing accounting standards for local governments and state. Therefore, when the body issued exposure drafts for comment, far-reaching benefits abound for the citizenry. The major reason why these exposure drafts are offered for public comment is for those concerned to give their thoughts on the drafts so that they can be considered. Furthermore, since the documents affect the general public, it is important that the public get the chance to comment on them so that unintended consequences do not occur. It is also a very good avenue for a person to exercise his/her rights as the law demands that the exposure drafts be availed to them. Another benefit of providing public comment is for the practicality of the changes recommended to be assessed by the general public and experts alike.
The critical elements of the draft are that a sole or agent employer should on its basic financial statement show a net pension liability that is a result of the pension liability less the value of net assets available to pay for pension benefits and also that the calculation of the pension liability should be made in accordance with the individual level-percent-of-pay entry age normal funding method (Buck Research, 2011). These elements are not present in the current standards and allow pension information or any other supplementary information that may be required to be presented in notes. They also allow for the use of a number of funding methods to be used when doing accounting disclosures which was not permitted in the previous standards.
Government agencies usually have component units that are considered as legally separate organizations although these agencies include them in their financial statements. However, the new standards proposed in the exposure drafts will require those government agencies and the component units deemed as being fiscally dependent have a financial or burden relationship. The proposed standards will determine how those organizations that do not meet financial accountability concepts will be handled if the government deems it to be misleading to exclude them. The way that component units initially went about their reporting will also be amended to make sure that their reporting is done as if they were part of the government. Management of the government agencies will have an operational responsibility towards these component units in addition to the benefit/burden relationship in case additional parameters are needed for component units that are in “substantially the same governing body” provision.
Let me start by thanking GASB for the opportunity to present my comment. It is my understanding that the accounting and reporting measures proposed by GASB should reflect the long-term cost of employer’s benefits. However, the new standards propose the new measure of pension expense (PE) as the best suited to measure the long-term cost. In my opinion, the current measure, the annual required contribution (ARC) is a better indicator of the long-term costs than that which is proposed. The PE better measures the short-term fluctuations as it is reflective of the net pension liability adjusted for inflows and outflows whereas the ARC reflects contributions by the employers and that are necessary to pay employee benefits over a long period of time. Depending on the circumstances, both the ARC and the PE could be pulling opposite directions.
Buck Research (2011). GASB Issues Exposure Drafts of Amended Standards for Public Retirement Systems. FYI (for your information) 34: 61, August 2 Read More
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