From the Chairman
By David A. Vaudt, GASB Chairman

Improving Revenue and Expense Information


Analyzing a government’s revenues and expenses can help financial statement users assess whether current-year revenues are sufficient to pay for the services provided that year and whether future taxpayers or ratepayers will be required to pay for liabilities related to services previously provided. However, this assessment today may be challenging because the current literature includes limited guidance for what is currently referred to as exchange transactions (for example, fees charged for services and expenses related to common operating costs).

Furthermore, certain practice issues have arisen since the implementation of guidance for nonexchange transactions. For example, the current definitions for exchange and nonexchange transactions can lead to inconsistent application of recognition provisions. These application issues result in similar governments recognizing similar transactions differently; which in turn diminishes comparability among governments and decision usefulness of information.
 
The Board is currently developing a model proposal that will address the classification, recognition, and measurement of revenue and expense.

The Board decided to add the Revenue and Expense Recognition project to its technical agenda in April 2016 after considering research conducted about exchange transactions and a post-implementation review conducted about nonexchange transactions. The Board decided that this project provided an opportunity to address revenue and expense recognition comprehensively. The aim of the project is to improve guidance related to revenues and expenses in order to enhance comparability and reliability of that information. The first step to accomplish this goal was the issuance of an Invitation to Comment in January 2018.


The Board is currently developing a model proposal that will address the classification, recognition, and measurement of revenue and expense that would broadly apply to a wide range of state and local government transactions. The Board is working toward releasing a Preliminary Views document in June 2020 that will ask you to share your thoughts about the proposed model.

To help keep you stay informed about the development of this project, the GASB will be highlighting key aspects of our work on the proposed model in the coming months. Please reach out if you have any questions.