AICPA Encourages GASB to Remove Certain Financial Statement Elements from Conceptual Framework

January 9, 2012

The American Institute of CPAs encouraged the Governmental Accounting Standards Board (GASB) to strongly consider removing the deferred outflows of resources and deferred inflows of resources elements from the Board’s conceptual framework.  Alternatively, the AICPA highly recommended that the Board attempt to further refine the definitions to achieve a better understanding and consistency surrounding when a transaction is an asset or liability versus a deferred inflow of resources or deferred outflow of resources.

In its Nov. 28, 2011 letter, the AICPA’s State and Local Government Expert Panel expressed its comments on the GASB Exposure Draft, Reporting Items Previously Recognized as Assets and Liabilities.  The stated objective of the Exposure Draft is to reclassify certain items reported as assets and liabilities to deferred outflows of resources or outflows of resources or deferred inflows of resources or inflows of resources in light of definitions of these terms established in GASB Concepts Statement No. 4, Elements of Financial Statements

The AICPA reiterated concerns previously expressed on GASB Concepts Statement No. 4 and other related due process documents regarding the deferred outflows of resources and deferred inflows of resources elements.  Concerns center around two major themes - a lack of clarity with the underlying element definitions and the addition of needless complexity to the governmental financial reporting model.  Both of these areas are discussed in depth in the Nov. 28, 2011 letter, as well as comments specific to the proposals in the Exposure Draft.

For more information about the Exposure Draft, read the November 2011 Journal of Accountancy article.