Conceptual Framework: Recognition
Project Description: The objective of this project is to develop recognition criteria for whether information should be reported in state and local governmental financial statements and when that information should be reported. This project ultimately will lead to a Concepts Statement on recognition of elements of financial statements.
Preliminary Views issued September 2018
- Accounting and Financial Reporting Issues
- Project History
- Current Developments
- Work Plan
- Recent Minutes
- Minutes Archive
- Tentative Board Decisions to Date
- Project staff:
Conceptual Framework: Recognition—Project Plan
Background: The Board frequently must decide whether an item of information should be recognized in the financial statements and when such an item should be recognized. In the past, the Board has relied on the conceptual framework of other standards setters and analogous examples from practice or previous standards to make such decisions. This method of making decisions tends to lead to certain inconsistencies in financial reporting standards and could result in too much reliance being placed on accounting concepts that were not developed for a governmental environment.
Thus, the project on recognition is needed to provide the GASB with conceptual guidance as to when elements of financial statements should be reported in specific financial statements. This will entail developing recognition criteria and will include a discussion of when elements of financial statements are recognized using different measurement focuses. For the GASB to make consistent financial reporting decisions, it is necessary to have (1) definitions of the elements of financial statements, (2) a basis for determining when elements of financial statements should be recognized in the financial statements, and (3) a basis for determining which measurement approach (for example, initial amounts or remeasured amounts) is appropriate for reporting the elements. The GASB issued a Concepts Statement on the definitions for the elements of financial statements in 2007 and on measurement of elements of financial statements in 2014. A conceptual framework project on recognition is necessary to complete the conceptual basis for reporting items in traditional financial statements.
Accounting and Financial Reporting Issues. The project is considering the following issues:
- What messages are financial statements conceptually attempting to convey? (In other words, what is the story that the financial statements attempt to communicate, or what questions should be answered by reading different financial statements and financial statements prepared using different measurement focuses? For example, the statement of cash flows answers the question, “What happened to cash during the year?”)
- What is the relationship among objectives of financial reporting (user needs), financial statements, measurement focuses at the conceptual level?
- How does when an element is recognized affect the meaning that is to be conveyed by a particular financial statement?
- What are the fundamental recognition criteria necessary to report an element in a financial statement?
- Pre-agenda research approved: August 2005
- Combined with measurement project on current technical agenda: December 2005
- Task force established? Yes, but replaced by the task force appointed for the reexamination of the financial reporting model
- Deliberations began: December 2007
- Preliminary Views approved: June 2011
- Comment period: July–September 2011
- Public hearings held: October 2011
- User interviews conducted regarding Preliminary Views: October–November 2011
- Separated from measurement project: December 2011
- Project placed on hold pending financial reporting model reexamination: January 2012
- Deliberations recommenced in conjunction with the Financial Reporting Model project: October 2015
- Preliminary Views approved: September 2018.
- Comment period: September 2018–February 2019
|Board Meetings||Topics to Be Considered|
|January-February 2019:||Comment period.|
|March 2019:||Public hearings and user forums.|
|June 2019-January 2020:||Redeliberate issues based on due process feedback.|
|February 2020:||Discuss first draft of the concepts section of an Exposure Draft of proposed recognition concepts.|
|May 2020:||Discuss preballot draft of an Exposure Draft of proposed recognition concepts.|
|June 2020:||Discuss ballot draft of an Exposure Draft of proposed recognition concepts and consider for approval.|
|July–September 2020:||Comment period.|
|October 2020:||Public hearings.|
|December 2020–September 2021:||Redeliberate issues based on due process feedback.|
|November 2021:||Discuss draft of a final Concepts Statement.|
|December 2021:||Discuss preballot draft of a final Concepts Statement.|
|February 2022:||Discuss ballot draft of a final Concepts Statement and consider for approval.|
Conceptual Framework: Recognition—Recent Minutes
Minutes of Teleconference, September 12, 2018
The Board reviewed and provided suggested edits to a ballot draft of the Preliminary Views, Recognition of Elements of Financial Statements, which included the alternative views of two Board members. The Board approved the issuance of the Preliminary Views in a four to three vote.
Minutes of Meetings, August 22–24, 2018
The Board reviewed and provided clarifying edits to a preballot draft of the Preliminary Views, Recognition of Elements of Financial Statements. The Board then agreed that the project staff should present a ballot draft for consideration at the September 2018 teleconference meeting.
Minutes of Meetings, July 10–12, 2018
The Board reviewed and discussed the alternative views of two Board members and the position of another Board member related to the draft of the Preliminary Views, Recognition of Elements of Financial Statements, deciding to include a reference to the limitations of financial reporting. The Board then tentatively decided that the comment deadline for the Preliminary Views will be February 15, 2019. The Board reviewed the draft Preliminary Views, suggested edits, and agreed that the staff should prepare a preballot draft of the Preliminary Views, including the alternative views of the two Board members, for discussion at the August 2018 meeting.
Minutes of Meetings, May 29–31, 2018
The Board reviewed draft sections of the Preliminary Views, Recognition of Elements of Financial Statements, tentatively deciding that it was no longer necessary to include the additional elaboration on recognition of deferred outflows of resources and deferred inflows of resources for financial statements prepared using the economic resources measurement focus. The Board also provided clarifying edits.
Minutes of Meetings, March 6–8, 2018
The Board reconsidered tentative Board decisions reached in 2012 on recognition using the economic resources measurement focus. Those tentative decisions relate to (a) the definition of economic resources measurement focus, (b) recognition concepts for the economic resources measurement focus, (c) recognition of deferred outflows of resources and deferred inflows of resources, and (d) the three-step hierarchy for recognition of elements. The Board tentatively decided to reaffirm those decisions. The Board then tentatively decided that those proposals should be included in the upcoming Preliminary Views on recognition concepts.
Conceptual Framework: Recognition—Tentative Board Decisions to Date
The Preliminary Views, Recognition of Elements of Financial Statements, was approved in September 2018.