Thomson Reuters has released a special report, GASB’S New Pension Standards Increase Audit Complexity. The report provides general considerations on governmental pension plans, narrows the focus to accounting considerations related to GASBS No. 68, and addresses critical auditing considerations.
The Governmental Accounting Standards Board’s (GASB’s) two new pension standards will increase complexity for auditors as well as for employers and plans. These new challenges are the result of GASBS No. 67, Financial Reporting for Pension Plans, and GASBS No. 68, Accounting and Financial Reporting for Pensions (which became effective for years beginning after June 15, 2013 and June 15, 2014, respectively).
This report addresses defined benefit pension plans, which are the majority of plans. Although these two new standards address both defined contribution plans and defined benefit plans, their most significant changes relate to defined benefit pension plans.
The U.S. Census Bureau reports there were almost 4,000 defined benefit pension systems covering more than 19 million plan members and receiving more than $100 billion of contributions from governments at the end of the 2012 fiscal year.
“GASBS No. 68 represents a huge change in the reporting of governmental pension plans in the financial statements of the employer from a funding-based or pay-as-you-go approach to an accounting-based approach,” said Mary Lou Wurdack, senior technical editor – audit and accounting with the Tax & Accounting business of Thomson Reuters. “To facilitate the transfer of information, GASBS No. 67 requires the plan’s financial statements to include new schedules and disclosures.”
While auditors of plan financial statements have already been addressing the new requirements related to GASBS No. 67 in their clients’ June 30, 2014 financial statements, auditors of employer governments most likely won’t be auditing the new pension amounts and disclosures until years ending June 30, 2015.
“Now is the time for auditors to begin communicating with the employer’s management and with plan administrators to ensure that the recommended audited plan information will be available for the employer’s audit,” added Steve Holland, executive editor – audit and accounting, with the Tax & Accounting business of Thomson Reuters. “If such information won’t be available, auditors should start educating their clients on how the opinions on certain opinion units might be modified because of the missing audit evidence.”
The special report is available for download online at no cost.
Thomson Reuters offers many resources to help users navigate the complex maze of GASB’s new pension standards, including the following: PPC’s Guide to Audits of Local Governments, PPC’s Practice Aids: Audits of Local Governments, PPC’s Guide to Preparing Governmental Financial Statements, PPC’s Interactive Disclosure Library for Governments, The PPC Governmental Update Newsletter, PPC’s SMART Practice Aids.
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