Tom Josiah Consulting, LLC

Items Previously Reported as Assets and Liabilities

Issued in March 2012, Statement No. 65 Items Previously Reported as Assets and Liabilities in essence is a follow up to Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position, and a clarification of Concept Statement 4, both of which were issued earlier.  Concept Statement 4 provides that reporting a deferred outflow or inflow of resources should be completed under instances identified by the Board.  As a follow to this, only two Statements, No 53 and 60 identify instances where assets and liabilities would be classify as deferred outflow or deferred inflow.

Statement No. 65 now establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows or resources, certain items that were previously reported as assets and liabilities.  It also recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities.  The requirements of this Statement apply only to accounting and financial reporting for governmental activities, business-type activities, proprietary funds, and fiduciary funds, except where noted by the Board.  The Statement provides a list of assets and liabilities that will now be considered deferred inflows or outflows of resources.  Examples of these items common to most governmental entities are:

1. Refundings of Debt – The difference between the reacquisition price and the net carrying amount of the old debt should be reported as a deferred outflow of resources or a deferred inflow of resources and interest expense should be amortized over future periods.
   
   
2. Imposed Nonexchange Revenue Transactions – Deferred inflows of resources should be reported when resources associated with imposed nonexchange revenue transactions are received or reported as a receivable before the period for which property taxes are levied or the period when resources are required to be used or when use is first permitted.
   
   
3. Government-Mandated Nonexchange Transactions and Voluntary Nonexchange Transations – Resources transmitted before the eligibility requirements are met, excluding time requirements should be reported as assets by the provide and as liabilities by the recipient.  Resources received before time requirements are met, but after all other eligibility requirements have been met, should be reported as a deferred outflow of resources by the provider and a deferred inflow of resources by the recipient.
   
   
4. Debt Issuance costs – these costs should be recognized as an expense in the period incurred except for any portion related to prepaid insurance costs. 

The Statement restricts the use of the term ‘deferred’ only to those items reported as deferred outflows of resources or deferred inflows of resources.  Also, per the Statement, assets should be combined with deferred outflows of resources and liabilities should be combined with deferred inflows of resources for purposes of fulfilling the major fund determination.

Statement No. 65 is effective for financial statements for periods beginning after December 15, 2012.  The board encourages earlier application.  In anticipation of the effective date of this Statement, business managers should be evaluating the changes that will be required under this Statement and if any early action is needed to ensure compliance with the provisions of the Statement.  Please contact me with further questions.