Revenue and Expense

Why did the GASB issue this Invitation to Comment?

This Invitation to Comment is the product of the Board’s initial consideration of issues related to the standards for recognizing revenue and expense. The Board initiated a project on this topic for several reasons:
  • Existing guidance for exchange revenue and expense transactions is limited, resulting in inconsistent reporting of information by governments.
  • Existing guidance for nonexchange revenue and expense transactions, though generally effective, could be clarified and improved.
  • A comprehensive revenue and expense recognition model may improve the comparability and usefulness of the information governments report to the public.
  • Other accounting standards setters recently moved to a “performance obligation” approach for revenue recognition and this is an opportune time to consider whether such an approach would be appropriate for governments.
GASB Educational Video Series
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What is an Invitation to Comment?

An Invitation to Comment is a type of due process document that the GASB uses in the early stages of exploring a topic that:
  1. Is particularly complex,
  2. Touches upon foundational issues that may have broad implications, or (c) May be the subject of significant disagreement among the GASB’s stakeholders.  
An Invitation to Comment seeks public feedback on relevant issues before the Board begins to consider developing new standards or revisions of existing standards. As such, it does not present a preference of the Board, which is equally interested in feedback on all matters covered by the Invitation to Comment.

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What does the Invitation to Comment cover?

The Invitation to Comment is intended to broadly address revenue and expense, with a few notable exceptions:
  • Transactions addressed by guidance issued since the GASB published its Concepts Statements on the definitions of financial statement elements (assets, liabilities, and so on) and measurement—for instance, the recent standards on pensions and other postemployment benefits
Transactions related to investments, derivatives, and other financial instruments, capital assets, and some liabilities, because they require specialized guidance.
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What is a recognition model?

The Invitation to Comment represents the first stage in potentially developing a comprehensive “model” for recognizing revenue and expense. A comprehensive model would provide governments with the guidance necessary to determine when to report revenue and expense in their financial statements. That guidance would detail three key steps:
  1. Classification—identifying what type of transaction has occurred
  2. Recognition—determining when to report revenue or expense in the financial statements
  3. Measurement—determining how much revenue or expense to report (in other words, the amount shown in the financial statements). 
The Invitation to Comment presents two alternative comprehensive models for revenue and expense recognition: the “exchange/nonexchange” model and the “performance obligation/no performance obligation” model (More information on these models is available in the document).
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What Does the GASB Want to Know?

The GASB relies on the comments of the people who prepare and audit financial statements to assess the technical accuracy and appropriateness of potential approaches to addressing accounting and financial reporting issues. The users of financial information, on the other hand, help the GASB understand whether or not the information that would result from the proposals would be useful for fulfilling their need for governmental financial information.
The Invitation to Comment poses four questions on specific issues, but the Board is seeking feedback from the public on all matters in the document. The Board is interested in stakeholder views regarding the pros and cons of each of the recognition models. The substance of the comments from each of the GASB’s stakeholders is more important to the GASB’s deliberations than the total number of people for or against the models.
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How Can I Share My Views with the GASB?

One way for stakeholders to express their opinions to the GASB is by written comments, which can be submitted in two ways:
  • By email—send comments to (identifying Project No. 4-6I)
  • By traditional mail to: 
Director of Research and Technical Activities
Project No. 4-6I
Governmental Accounting Standards Board
401 Merritt 7, PO Box 5116
Norwalk, CT 06856-5116
Comments should be submitted no later than April 27, 2018.
Stakeholders also can share their views with the GASB members in person or by telephone at one of three public hearings:
  • May 6, 2018, in St. Louis, MO
  • May 18, 2018, in Burlingame, CA
  • May 30, 2018, in Norwalk, CT 
Deadlines and instructions for notifying the GASB of intent to participate in a public hearing can be found in the Invitation to Comment.
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