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Governmental Update: GASB 68

By Elizabeth Thyer, CPA, Audit Manager

Government entities have been providing pension benefits to their employees for many years. The promise that pension benefit payments will be made to employees when they retire creates an accounting liability for the governmental entity. Governmental Accounting Standards Board (GASB) Statement No. 68 requires the pension liability to be reported in the financial statements of governments providing these benefits and will be implemented for the fiscal year ended June 30, 2015. GASB 68 did not create this pension liability, but it is meant to improve the approach to measuring and reporting the liability in the financial report. While GASB 68 establishes how governmental entities should account for and report pensions, it does not determine how much those governmental entities are required to contribute to their pension plans.

Most governmental entities in Iowa participate in the Iowa Public Employees’ Retirement System (IPERS). IPERS is a cost-sharing multiple-employer-defined benefit pension plan and each participating government will recognize its proportionate share of the pension liability. For the fiscal year ended June 30, 2015, the Statement of Net Position will include a line item for Net Pension Liability and will also reflect Deferred Outflows of Resources and Deferred Inflows of Resources. Deferred outflows of resources represent a consumption of net position that applies to a future period and will not be recognized as an expense/expenditure until then. Deferred inflows of resources represent an acquisition of net position that applies to a future period and will not be recognized as a revenue until that time.