The Governmental Accounting Standards Board (GASB) has issued a Preliminary Views document on the way municipalities would have to disclose pension obligations on their balance sheets.

Currently, as long as a municipality makes its required annual contributions, there is no disclosure of a liability on a municipality’s balance sheet. The unfunded obligation is disclosed in the Notes section of the financial statements.

GASB’s “preliminary view” is that this needs to change by putting the unfunded pension obligation on a municipality’s balance sheet as a liability.

What would this proposed change mean for your municipality? It depends on your funding level. For those municipalities that are well funded or even fully funded, the number to put on the balance sheet would be small or non-existent. For municipalities that are less well funded — 60-70 percent, for example — the number could be quite large and possibly dwarf the other numbers on the balance sheet.

Note that this is a preliminary view. GASB will continue to review these changes over the next year and implementation will likely be several years away.

We’ll keep you informed of these and other proposed changes GASB is considering. For more information, you can read a plain-language version of the report on the GASB website here.