GASB has issued guidance for state and local governments that is intended to unify the identification and financial reporting of fiduciary activities.
GASB Statement No. 84, Fiduciary Activities, addresses what constitutes fiduciary activities for financial reporting, how they should be reported, and when liabilities to beneficiaries should be noted.
While governments must report fiduciary activities in fiduciary fund financial statements, existing standards aren’t detailed enough in describing them. That’s led to variances in how such activities are identified and reported.
The requirements of this statement will enhance consistency and comparability by:
- Establishing specific criteria for identifying activities that should be reported as fiduciary activities
- Clarifying whether and how business-type activities should report their fiduciary activities.
“Greater consistency and comparability enhances the value provided by the information reported in financial statements for assessing government accountability and stewardship,” the guidance states.
The criteria focus on:
- Whether a government is controlling the assets of a fiduciary activity.
- The beneficiaries with whom a fiduciary relationship exists.
Separate criteria identify fiduciary component units and post-employment benefit arrangements that are fiduciary activities.
An activity meeting the criteria in Statement 84 should be reported in a fiduciary fund in the basic financial statements. Governments with activities meeting the criteria should present a statement of fiduciary net position and a statement of changes in fiduciary net position.
Four fiduciary funds that should be reported include:
- Pension (and other employee benefit) trust funds
- Investment trust funds
- Private-purpose trust funds
- Custodial funds
Custodial funds generally should report fiduciary activities not held in a trust or equivalent arrangement if that meets specific criteria, according to the guidance.
The new requirements take effect for reporting periods beginning after Dec. 15, 2018. GASB encourages earlier application.
Changes made to comply with the guidance should be retroactively applied by restating financial statements for all prior periods presented. If that’s not practicable, “the cumulative effect, if any, of applying this statement should be reported as a restatement of beginning net position (or fund balance or fund net position, as applicable) for the earliest period restated,” the guidance states.
For the first period of applying the guidance, financial statement notes should indicate the nature of the restatement and its effect. If prior periods aren’t restated, the reason why should be indicated.