Late last month, the Governmental Accounting Standards Board (GASB) voted to approve two new standards - Statement No. 67 and Statement No. 68 - with the aim of streamlining state and local governments' accounting and financial reporting of public employee pensions.

In a recent statement, GASB chairman Robert H. Attmore said the accounting compliance change "will improve the way state and local governments report their pension liabilities and expenses, resulting in a more faithful representation of the full impact of these obligations."

A closer look at the new statements

Specifically, Statement No. 67, Financial Reporting for Pension Plans, overhauled the existing guidance for most pension plans' financial reports. Statement No. 68, Accounting and Financial Reporting for Pensions, put in place new reporting requirements for governments to provide pension benefits to employees, replacing the related guidelines set by Statement No. 27 and Statement No. 50.

The new legislation affected projections of benefit payments, discount rates and attribution methods. Accounting technology needs to be updated in order to ensure compliance with the new guidance.

GASB unveiled the public pension plan accounting proposals in July of last year, with the aim of increasing transparency and uniformity among plans. Before the final rules were announced, the board offered a three-month comment period and held public hearings in Chicago, New York and San Francisco.

"The point is so people have the best information to make the best decisions," Attmore said at the time, as quoted by Pensions & Investments.

Not all communities must follow the new guidance

Although the new legislation is intended to be rolled out across the nation, some communities won't have to follow it. As the Kansas Reporter notes, a 30-year-old state law allows local governments to opt out of Generally Accepted Accounting Principles standards that meet particular conditions.

"Kansas law allows local governments to use something more elementary, called cash basis accounting, if their financial affairs are relatively simple," the source explains. Cash basis accounting can be handled with simple accounting software.

Counties and cities must apply for GAAP exemption through the Kansas Department of Administration (KDA) - and many get it. Indeed, according to the KDA's municipal accounting chief, Roger Basinger, GAAP standards are upheld by just six of the state's 105 counties and 14 percent of its cities. 

For more information about the new legislation, click here.