On June 25, 2012, the Governmental Accounting Standards Board adopted new standards for accounting and reporting of financial statements for public sector retirement systems. Statement No. 67, Financial Reporting for Pension Plans, and Statement No. 68, Accounting and Financial Reporting for Pensions, replace existing standards in effect since 1994. Pensions for public employees have become a controversial topic as state and local governments struggle with their costs in an economic downturn. As reported by the Pew Center, the gap between states’ employee benefit obligations and the funds available to pay those benefits was approximately $1.38 trillion in fiscal year 2011, a 9% increase from the previous year. The true cost of public employee pensions will become clearer under these modifications which regulate how pension costs are reflected in financial statements. For the first time liabilities will be reported on the balance sheet. These net pension liabilities are calculated as the difference between the total pension liability and the assets set aside to pay current employees, retirees and beneficiaries. This is vastly different than the manner in which governments presently report liabilities, currently computed as the difference between the contributions to a pension plan versus what is actually funded. This research paper examines the history of the Governmental Accounting Standards Board, previous GASB standards and the provisions included in Standards No. 67 and 68. Also included is the cycle of implementation of these new standards and future implications of these new GASB standards on the proper reporting of financial statements.
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