GASB, based in Norwalk, Conn., defines generally accepted accounting principles for governments in the U.S. other than the federal government, much like its sister organization, the Financial Accounting Standards Board, defines GAAP accounting for the private sector.
Both FASB and GASB are part of the Financial Accounting Foundation.
The most significant proposed change is the movement of unfunded pension liabilities – the equivalent of debts owed to current and future retirees – onto government balance sheets.
Previously, governments disclosed unfunded liabilities in footnotes to their financial reports.
The new location for pension-related debts – or, in the case of well-funded plans, assets – will not change the reality of what governments owe, but the board believes the new rules will improve transparency.
Government pensions have been the source of recent political disputes and a wide range of states and cities have embraced reform, including Rhode Island, Utah, Wisconsin and the California cities of San Diego and San Jose.
The proposed changes also include provisions that make it easier to compare the pension finances of multiple governments by limiting the number of options available for determining liabilities.
GASB is also partly addressing criticism from financial economists and others who disapprove of the link established by the board between returns on pension assets and the value of pension liabilities.
Under GASB rules, governments discount their pension liabilities at a rate equal to their expected rate of return on pension assets.
The new proposal does not sever the link the between asset returns and the value of liabilities, but it does change the way discount rates are determined and provides for additional disclosures.
Last year, GASB released a draft of these changes and collected public input on the proposal which led to some changes.
In July, GASB will begin a two-year deliberation on retiree health insurance, commonly called other postemployment benefits, which will lead to new accounting rules in the summer of 2014.