Two American Institute of CPAs (AICPA) panels recently submitted comments to the Governmental Accounting Standards Board (GASB) on its Invitation to Comment (ITC), Revenue and Expense Recognition. The primary objective of the ITC is to obtain stakeholder feedback on the development of a comprehensive revenue and expense model for state and local governments.
The State and Local Government Panel, in its April 26 letter, provided feedback on all of the various models of revenue recognition presented by GASB in the ITC. However, the Panel indicated its strong support for the “alternative model” which distinguishes transactions as exchange or nonexchange and then applies a performance obligation recognition approach for exchange transactions. The Panel cited the notion that governmental funding intuitively falls into exchange and nonexchange categories and its interest in aligning recognition of exchange transactions to other standard setters by means of a performance obligation approach. Representatives of the Panel will participate in upcoming GASB hearings on the topic.
Similarly, TIC’s April 24 letter supported the exchange/nonexchange model. TIC noted that the issue of classifying a transaction as exchange or nonexchange is consistent with the FASB grants project. Grantors and grantees would benefit from a review from both sides of this topic for clarification and consistency. The Post Implementation Review (PIR) performed on Statement 33 determined that, generally, the statement was effective. TIC believes that it would be easier to address the issues identified than to create a new unfamiliar methodology that really doesn’t appear to be consistent with governmental transactions.