The Governmental Accounting Standards Board is asking for help as it develops a comprehensive model for revenue and expense recognition for state and local governments.
GASB released an Invitation to Comment document Thursday asking for input. GASB wants to create a stronger framework to address various types of transactions, including some for which there’s currently no guidance. The board also hopes to improve the comparability of how transactions are accounted for and reported by state and local governments, and to offer more useful information to people who use financial reports for making decisions and assessing accountability.
The effort comes at a time when GASB’s sister standard-setting board, the Financial Accounting Standard Board, deals with the new revenue recognition standard that is taking effect this year for public companies.
GASB’s document, Revenue and Expense Recognition, discusses two models: an exchange/nonexchange model, and a performance obligation/no performance obligation model. The exchange/nonexchange model relies on a classification process based on the existing definition for exchange transactions. The recognition process in the model would be based on the current guidance for nonexchange transactions and a standardized recognition approach for exchange transactions.
The performance obligation/no performance obligation model includes a classification process based on a tentative definition of a performance obligation. That recognition process would keep the current guidance for transactions without a performance obligation, but it also would apply a structured recognition approach for transactions classified as containing a performance obligation.
“This Invitation to Comment lays out potential paths forward for establishing comprehensive guidance for revenue and expense transactions,” said GASB chairman David A. Vaudt in a statement. “The board needs stakeholder feedback on the potential benefits and challenges of the two models before it begins to develop potential changes to the standards for future input.”
The Invitation to Comment is considered to be a staff document, so it doesn’t contain a board proposal to pursue either model. It’s mainly supposed to get feedback from constituents at an early stage of the project before deliberations over new or revised standards begin.
GASB is asking for feedback on the document by April 27, 2018. Written comments can be sent to the Director of Research and Technical Activities, Project No. 4-6I, and either emailed to firstname.lastname@example.org or mailed to the GASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.
A series of public hearings on the ITC are scheduled:
• May 6, 2018, in St. Louis, Mo. (in conjunction with the annual conference of the Government Finance Officers Association)
• May 18, 2018, in Burlingame, Calif. (near San Francisco airport)
• May 30, 2018, in Norwalk, Conn. (at the Financial Accounting Foundation offices)
More information about the locations of the public hearings is in the Invitation to Comment. The deadlines for written notice of intent to participate in the hearings are April 13 for the May 6 public hearing and April 27 for the May 18 and 30 public hearings.
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