On February 1, 2018, the GASB issued an Invitation to Comment (ITC), Revenue and Expense Recognition, which discusses a comprehensive revenue and expense recognition model for state and local governments. The FASB has recently overhauled their revenue recognition model and the GASB is following suit with the issuance of this ITC.Why Do We Need a New Model?The GASB believes a comprehensive revenue and expense model is necessary because:
Proposed ModelsThe ITC addresses classification, recognition and measurement issues as well as potential benefits and potential challenges for each of the following models:
The GASB may consider other models based on feedback received. An alternative approach suggested in the ITC is a combination of the exchange/nonexchange model and the performance obligation/no performance obligation model. This alternative approach could base recognition of nonexchange transactions on existing guidance (found in GASBS No. 33, as amended) and nonexchange transactions on a performance obligation recognition approach (discussed above).The ITC also provides an appendix with illustrative examples for property tax, utility revenue and expense, and grants. Each of the examples are illustrated under both the exchange/nonexchange model and the performance obligation/no performance obligation model.Practical ConsiderationThe full ITC is available at www.gasb.orgWeighing InThe GASB is seeking input from stakeholders on the benefits and challenges in each of these two models. The GASB would like to obtain information before moving forward with deliberations on new or revised standards and is planning numerous public hearings to obtain feedback. Comments are due by April 27, 2018, and public hearings will be held in May in St. Louis, MO; Burlingame, CA; and Norwalk, CT.Practical ConsiderationDetails about how you can weigh in with your comment or presentation at a public hearing can be found on the GASB's website at www.gasb.orgFuture of the ProjectThe FASB indicates that a preliminary views document is projected for May of 2020, an exposure draft in December of 2021 and a final statement is not expected until March of 2023. As always, we will keep you informed of the project's progress along the way. If you have any questions related to the information above, reach out to your Elliott Davis advisor.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.