Minutes Archive

Revenue and Expense Recognition

Minutes of Meetings, March 8–10, 2022

The Board continued redeliberations by discussing the foundational principles of this project’s model in Chapter 2 of the Preliminary Views, Revenue and Expense Recognition. The Board began by discussing the recognition methodology proposed for revenues and expenses. The Board specifically considered whether wholly unperformed contracts give rise to elements of financial statements in the scope of this project and tentatively decided to retain the recognition methodology proposed in the Preliminary Views, which is not based on recognition of wholly unperformed contracts. In support of that tentative decision, the Board also tentatively decided that a binding arrangement should be defined broadly to include contracts that (1) are unilateral, (2) are conditional, and (3) can be terminated without cause. The Board thereby rejected limiting the definition of binding arrangements to firm commitments.

Next, the Board discussed the role of collectibility in categorization of transactions. The Board tentatively decided not to include collectibility as a scope criterion for transactions included in the scope of this project because, generally, governments engage in revenue transactions motivated by their public purpose and, therefore, collectibility is not the predominant concern. Because a collectibility threshold is not proposed as a scope boundary, the Board also tentatively decided not to retain alternative revenue recognition models—specifically, the installment method and the cost recovery method—that are applicable to transactions in the scope of this project.

Minutes of Meetings, January 25–27, 2022

The Board continued redeliberations on the Revenue and Expense Recognition project by discussing binding arrangements, the first step in the four-step categorization methodology proposed in the Preliminary Views, Revenue and Expense Recognition. The Board began by discussing the level of assessment for categorization and tentatively decided that components of consideration are not a suitable categorization unit of account for this project. The Board tentatively reaffirmed its decision that the binding arrangement is the most suitable categorization unit of account. The Board tentatively decided that there should be two exceptions for the categorization unit of account: (1) If the binding arrangement includes more than one type of transaction and (2) If the transaction is evidenced by more than one binding arrangement. The Board tentatively decided that a definition of transaction should be developed to resolve the two exceptions.

Next, the Board discussed economic substance. The Board tentatively decided to retain economic substance as a characteristic of the binding arrangement. The Board also tentatively decided to retain the description of economic substance presented in the Preliminary Views, which proposed that economic substance results in an expected change in the risk, amount, or timing of the government’s cash flows, or an expected change in the government’s service potential.

The Board also began redeliberations about the five model assumptions proposed in Chapter 2 of the Preliminary Views. The Board tentatively decided to retain model assumptions 1 and 2 as part of the revenue and expense recognition model, as follows: revenues and expenses are of equal importance in resource flows statements; and revenues and expenses should be categorized independently and not in relation to each other. With regard to Model assumption 3, the Board tentatively agreed to retain the model assumption but will further consider a positive phrasing of this principle. A possible approach is to state that, for accounting and financial reporting purposes, the government is an economic entity, and generally acts as the principal in its revenue and expense transactions.

The Board also tentatively decided to retain model assumptions 4 and 5 as follows: symmetry should be considered, to the extent possible, in the application of the three components of the model; and a consistent viewpoint, from the resource provider perspective, should be applied in the analysis of revenues and expenses. Lastly, the Board tentatively decided to retain the expense recognition model proposed in the Preliminary Views, which was developed from the five model assumptions and does not focus on the consumption of resources acquired in an expense transaction.

Minutes of Meetings, December 14–16, 2021

The Board discussed how the concept of relevant component part as used in the Financial Reporting Model project compares with the concept of recognition unit of account as used in the Revenue and Expense Recognition project. The Board tentatively concluded that they are different accounting notions and should be retained as such in the respective projects. In addition, the Board provided direction about coordinating the work of the projects such that the resulting guidance will be aligned and not conflicting, including common terminology when possible.

Minutes of Meetings, November 2–4, 2021

The Board reviewed and discussed the results of the field test and the user forums, which were conducted to obtain feedback on the Preliminary Views, Revenue and Expense Recognition. The discussion was educational; the Board did not deliberate any issues and no decisions were reached.

Minutes of Meetings, August 10–12, 2021

The Board continued redeliberations on the Revenue and Expense Recognition project by discussing stakeholder feedback and general considerations on the Preliminary Views, Revenue and Expense Recognition, related to scope.
 
The Board began by discussing the general approach to the scope of the project. First, the Board tentatively decided to retain the scope approach developed in the Preliminary Views, a broad positive scope statement for revenue and expense recognition with the following three scope exclusion principles: (1) guidance related to capital assets or inventory; (2) guidance related to financial instruments; and (3) guidance related to postemployment benefits, compensated absences, or termination benefits. Next, the Board tentatively decided that the scope of the project should not be defined in the context of contracts with customers.
 
The Board continued by discussing stakeholder feedback on Scope Exclusion Principle (1) and tentatively reaffirmed its decision not to include guidance related to capital assets and inventory in the scope of the project. The Board also discussed the possibility of reconsidering decisions with regard to certain capital asset transactions when considering measurement proposals.
 
Next, the Board discussed stakeholder feedback on Scope Exclusion Principle (2) and tentatively reaffirmed its decision not to include guidance related to financial instruments in the scope of the project, except for contracts that meet the normal purchase and normal sales exception as provided in paragraph 14 of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. In addition, the Board tentatively reaffirmed its decision to include transactions with characteristics of both loans and grants in the scope of the project. The Board also tentatively decided to retain consideration provided in the form of a financing component when developing measurement guidance in the project.
 
The Board then discussed stakeholder feedback on Scope Exclusion Principle (3) and tentatively reaffirmed its decision not to include guidance related to postemployment benefits, compensated absences, or termination benefits in the scope of the project. In addition to the three scope exclusion principles, the Board also tentatively proposed to not consider in the scope of the project any guidance issued after Statement No. 65, Items Previously Reported as Assets and Liabilities, or being developed in projects on the Board’s current technical agenda.
 
The Board continued its redeliberations by discussing guidance that had been identified in the Preliminary Views as being in the scope of the project. The Board first discussed guidance related to special assessments and tentatively reaffirmed its decision that revenue and certain expense recognition guidance for special assessments is in the scope of the project; however, the Board tentatively decided that reexamination of Statement No. 6, Accounting and Financial Reporting for Special Assessments, is not considered in scope. Next, the Board tentatively reaffirmed its decision that revenue recognition for escheated property is in the scope of the project, if applicable; however, the Board tentatively decided that reexamination of escheat guidance provided in Statement No. 21, Accounting for Escheat Property, is not considered in scope. The Board then tentatively reaffirmed its decision that the revenue and expense recognition guidance for pass-through grants in paragraph 5 of Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, is in the scope of this project; however, the Board tentatively decided that reexamination of criteria for financial and administrative involvement is not considered in scope.
 
The Board next discussed revenue and expense recognition guidance for exchange and nonexchange transactions. The Board tentatively reaffirmed its decision that the recognition guidance for exchange revenue in paragraphs 23–28 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 FASB and AICPA Pronouncements, is in the scope of this project. Next, the Board tentatively reaffirmed its decision that the revenue and expense recognition guidance for cable television systems in paragraphs 397 and 398 of Statement 62 is in the scope of this project. Then the Board tentatively reaffirmed its decision that the expense recognition guidance for exchange transactions in paragraph 16 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, is in the scope of this project. Additionally, the Board tentatively reaffirmed its decision that the revenue and expense recognition guidance for nonexchange transactions in Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, is in the scope of this project.
 
The Board then tentatively reaffirmed its decision that the contingency guidance in paragraphs 96–113 of Statement 62 is not in the scope of the project.
 
Next, the Board discussed guidance that had been identified in the Preliminary Views as outside the scope of the project. The Board tentatively reaffirmed its decision not to include the guidance for regulated operations in paragraphs 476–500 of Statement 62. Then the Board tentatively reaffirmed its decision not to include the guidance for interfund activity in paragraph 112 of Statement 34 and in Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, in the scope of the project.
 
The Board continued its deliberations on scope by discussing topics that are partially in the scope of other guidance and tentatively decided to include the revenue and expense recognition guidance for service components, which was excluded from the scope of Statements No. 87, Leases; No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements; and No. 96, Subscription-Based Information Technology Arrangements.
 
The Board then discussed other scope topics related to the methods of communication as provided in Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements, and tentatively reaffirmed its decision that topics related to the presentation of revenues and expenses (such as classification of operating and nonoperating revenue or program revenue) are not in the scope of the project. Next, the Board tentatively reaffirmed its decision to exclude topics related to required supplementary information, supplementary information, and notes to financial statements from the scope of the project.
 
The Board tentatively decided to postpone consideration of whether to address guidance for the governmental funds measurement focus and basis of accounting in the project. Lastly, the Board tentatively decided to postpone deciding whether to provide guidance in the project for revenue recognition for certain intangible assets identified as outside the scope of Statement No. 51, Accounting and Financial Reporting for Intangible Assets, and Statements 87, 94, and 96.

Minutes of Meetings, June 30–July 2, 2021

The Board continued deliberations on the Revenue and Expense Recognition project by discussing stakeholder feedback related to the proposed categorization methodology and comprehensive model.

The Board discussed stakeholder feedback recommending the Board revert back to existing guidance and move forward with an exchange/nonexchange classification. The Board tentatively decided to refine and improve the categorization methodology proposed in the Preliminary Views, Revenue and Expense Recognition, paying special attention to the categorization of grants and addressing the concerns raised by stakeholders regarding each of the steps of the categorization.

Minutes of Meetings, August 10–12, 2021

The Board continued redeliberations on the Revenue and Expense Recognition project by discussing stakeholder feedback and general considerations on the Preliminary Views, Revenue and Expense Recognition, related to scope.
 
The Board began by discussing the general approach to the scope of the project. First, the Board tentatively decided to retain the scope approach developed in the Preliminary Views, a broad positive scope statement for revenue and expense recognition with the following three scope exclusion principles: (1) guidance related to capital assets or inventory; (2) guidance related to financial instruments; and (3) guidance related to postemployment benefits, compensated absences, or termination benefits. Next, the Board tentatively decided that the scope of the project should not be defined in the context of contracts with customers.
 
The Board continued by discussing stakeholder feedback on Scope Exclusion Principle (1) and tentatively reaffirmed its decision not to include guidance related to capital assets and inventory in the scope of the project. The Board also discussed the possibility of reconsidering decisions with regard to certain capital asset transactions when considering measurement proposals.
 
Next, the Board discussed stakeholder feedback on Scope Exclusion Principle (2) and tentatively reaffirmed its decision not to include guidance related to financial instruments in the scope of the project, except for contracts that meet the normal purchase and normal sales exception as provided in paragraph 14 of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. In addition, the Board tentatively reaffirmed its decision to include transactions with characteristics of both loans and grants in the scope of the project. The Board also tentatively decided to retain consideration provided in the form of a financing component when developing measurement guidance in the project.
 
The Board then discussed stakeholder feedback on Scope Exclusion Principle (3) and tentatively reaffirmed its decision not to include guidance related to postemployment benefits, compensated absences, or termination benefits in the scope of the project. In addition to the three scope exclusion principles, the Board also tentatively proposed to not consider in the scope of the project any guidance issued after Statement No. 65, Items Previously Reported as Assets and Liabilities, or being developed in projects on the Board’s current technical agenda.
 
The Board continued its redeliberations by discussing guidance that had been identified in the Preliminary Views as being in the scope of the project. The Board first discussed guidance related to special assessments and tentatively reaffirmed its decision that revenue and certain expense recognition guidance for special assessments is in the scope of the project; however, the Board tentatively decided that reexamination of Statement No. 6, Accounting and Financial Reporting for Special Assessments, is not considered in scope. Next, the Board tentatively reaffirmed its decision that revenue recognition for escheated property is in the scope of the project, if applicable; however, the Board tentatively decided that reexamination of escheat guidance provided in Statement No. 21, Accounting for Escheat Property, is not considered in scope. The Board then tentatively reaffirmed its decision that the revenue and expense recognition guidance for pass-through grants in paragraph 5 of Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, is in the scope of this project; however, the Board tentatively decided that reexamination of criteria for financial and administrative involvement is not considered in scope.
 
The Board next discussed revenue and expense recognition guidance for exchange and nonexchange transactions. The Board tentatively reaffirmed its decision that the recognition guidance for exchange revenue in paragraphs 23–28 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 FASB and AICPA Pronouncements, is in the scope of this project. Next, the Board tentatively reaffirmed its decision that the revenue and expense recognition guidance for cable television systems in paragraphs 397 and 398 of Statement 62 is in the scope of this project. Then the Board tentatively reaffirmed its decision that the expense recognition guidance for exchange transactions in paragraph 16 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, is in the scope of this project. Additionally, the Board tentatively reaffirmed its decision that the revenue and expense recognition guidance for nonexchange transactions in Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, is in the scope of this project.
 
The Board then tentatively reaffirmed its decision that the contingency guidance in paragraphs 96–113 of Statement 62 is not in the scope of the project.
 
Next, the Board discussed guidance that had been identified in the Preliminary Views as outside the scope of the project. The Board tentatively reaffirmed its decision not to include the guidance for regulated operations in paragraphs 476–500 of Statement 62. Then the Board tentatively reaffirmed its decision not to include the guidance for interfund activity in paragraph 112 of Statement 34 and in Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, in the scope of the project.
 
The Board continued its deliberations on scope by discussing topics that are partially in the scope of other guidance and tentatively decided to include the revenue and expense recognition guidance for service components, which was excluded from the scope of Statements No. 87, Leases; No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements; and No. 96, Subscription-Based Information Technology Arrangements.
 
The Board then discussed other scope topics related to the methods of communication as provided in Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements, and tentatively reaffirmed its decision that topics related to the presentation of revenues and expenses (such as classification of operating and nonoperating revenue or program revenue) are not in the scope of the project. Next, the Board tentatively reaffirmed its decision to exclude topics related to required supplementary information, supplementary information, and notes to financial statements from the scope of the project.
 
The Board tentatively decided to postpone consideration of whether to address guidance for the governmental funds measurement focus and basis of accounting in the project. Lastly, the Board tentatively decided to postpone deciding whether to provide guidance in the project for revenue recognition for certain intangible assets identified as outside the scope of Statement No. 51, Accounting and Financial Reporting for Intangible Assets, and Statements 87, 94, and 96.

Minutes of Meetings, June 30–July 2, 2021

The Board continued deliberations on the Revenue and Expense Recognition project by discussing stakeholder feedback related to the proposed categorization methodology and comprehensive model.

The Board discussed stakeholder feedback recommending the Board revert back to existing guidance and move forward with an exchange/nonexchange classification. The Board tentatively decided to refine and improve the categorization methodology proposed in the Preliminary Views, Revenue and Expense Recognition, paying special attention to the categorization of grants and addressing the concerns raised by stakeholders regarding each of the steps of the categorization.

Minutes of Meetings, May 20–21, 2021

The Board reviewed and discussed feedback from comment letters, public hearings, and user forums related to the Preliminary Views, Revenue and Expense Recognition. The Board agreed to keep the multiple components of the project together at this time. The Board also agreed to redeliberate overarching topics related to categorization and recognition before addressing issues related to measurement. No tentative Board decisions were made regarding the substantive issues of the Preliminary Views.

Minutes of Meetings, June 16–18, 2020

The Board discussed whether the expected benefits of the guidance proposed in the Preliminary Views justify the anticipated costs to preparers and other stakeholders. The Board tentatively decided that based on the information that is available at this time, the expected benefits of the proposals in the Preliminary Views justify the anticipated implementation and ongoing perceived costs of application.

Next, the Board reviewed a ballot draft of the Preliminary Views and provided clarifying edits. The Board then voted unanimously to approve the issuance of the Preliminary Views, Revenue and Expense Recognition.

Minutes of Meetings, May 6–8, 2020

The Board began discussing three terms, binding arrangement, transaction, and recognition unit of account as they relate to the application of the short-term financial resource measurement focus and accrual basis of accounting to transactions in the scope of this project. The Board tentatively decided that the assessment of short-term and long-term items in governmental funds should be made based on the recognition unit of account, which is each performance obligation for Category A transactions.

Next, the Board reviewed and provided clarifying edits on a preballot draft of the Preliminary Views, Revenue and Expense Recognition. The Board then agreed to move forward with a ballot draft of the Preliminary Views, which will be discussed at the June 2020 Board meeting.

Minutes of Meetings, March 24–26, 2020

The Board began deliberations by discussing the recognition of revenue and expense related to certain Category B transactions. The Board tentatively decided to propose five subcategories for Category B transactions: (a) imposed, (b) derived, (c) contractual binding arrangement, (d) general aid to governments, and (e) shared revenue.
 
For general aid to government transactions, the Board tentatively decided to propose that the resource provider and resource recipient recognize liabilities and assets when the payments are due, if (a) the resource provider has appropriated funds for the provision of resources, and the period applicable to the appropriation has begun, and (b) the resource provider has determined that it intends to provide the resources to the resource recipient. Additionally, the Board tentatively agreed to propose that in circumstances in which the resource provider cancels the appropriation, the determination be made based on the resource provider’s intent. That is, if the resource provider decides to postpone the payment, a payable and a receivable should be reported at the end of the fiscal period by the parties. This proposition effectively provides an exception to the first recognition criterion previously noted. Furthermore, if the resource provider decides that the omission is not a postponement, neither a payable nor a receivable should be reported at the end of the fiscal period by the parties.
 
For shared revenue transactions, the Board tentatively decided to propose that, in circumstances in which there is a periodic appropriation, the resource provider and resource recipient recognize liabilities and assets when the payments are due, if (a) the resource provider has appropriated funds for the provision of resources, and the period applicable to the appropriation has begun, and (b) the resource provider has determined that it intends to provide the resources to the resource recipient. The Board also tentatively agreed to propose that, in circumstances in which there is a continuing appropriation, the resource provider and resource recipient recognize liabilities and assets when the underlying transaction that is shared has occurred, if (a) the resource provider has appropriated funds for the provision of resources, and the period applicable to the appropriation has begun, and (b) the resource provider has determined that it intends to provide the resources to the resource recipient. Additionally, the Board tentatively decided to propose that in circumstances in which the resource provider cancels the appropriation, the determination be made based on the resource provider’s intent. That is, if the resource provider decides to postpone the payment, a payable and a receivable should be reported at the end of the fiscal period by the parties. This proposition effectively provides an exception to the first recognition criterion previously noted. Furthermore, if the resource provider decides that the omission is not a postponement, neither a payable nor a receivable should be reported at the end of the fiscal period by the parties.
 
Next, the Board deliberated collectibility in the categorization component and measurement component of the model. The Board reaffirmed its prior decision to not include collectibility in the categorization component either as a scope criterion or as a categorization aspect. The Board also tentatively decided that the installment method and the cost recovery method (footnote 8 of Statement No. 62, Codification of Accounting and Financial  Reporting Guidance Contained in  Pre-November 30, 1989 FASB and AICPA Pronouncements) for revenue recognition would not be carried forward because collectibility is not considered a scope issue. Furthermore, the Board tentatively decided to include existing collectibility guidance for the measurement component in the upcoming due process document (a Preliminary Views), for both Category A and Category B transactions. That is, revenue from both categories would be reported net of uncollectible amounts when there is a related revenue transaction, and no modification would be proposed to the existing relationship between collectibility and contingencies. Additionally, the Board tentatively decided to propose combining existing guidance on collectibility, including raising Category B literature to Category A literature, in the measurement chapter in the upcoming Preliminary Views. Lastly, the Board tentatively decided not to propose modifications to discounts and implied price concessions in the upcoming Preliminary Views; however, the topic would be highlighted in the measurement chapter as an issue that the Board would consider when developing proposed guidance for variable consideration in the next due process document.
 
The Board then discussed the draft materials to be included in the Preliminary Views.

Minutes of Meetings, February 11–13, 2020

The Board began deliberations by discussing the recognition of Category A expense transactions. The Board tentatively decided to propose that expense transactions be recognized over time in circumstances in which one of the two proposed criteria are met: (a) the government simultaneously receives and consumes the benefits provided by the counterparty’s performance as the counterparty performs or (b) the counterparty’s performance does not create a resource with an alternative use to the government, and the counterparty has an enforceable right to payment for performance completed to date. The Board also tentatively decided to propose that expense be recognized at the point in time at which neither of the two proposed criteria above are met. The Board considered an additional over time criterion (consistent with revenue recognition over time) in which the counterparty’s performance would create or enhance an asset such as work in process. The Board tentatively agreed that this criterion is not suitable application guidance for expense recognition over time because it requires capitalization of an outflow, a topic outside the scope of the project. In addition, the Board tentatively agreed to propose that the probability of compliance with grant requirements in the future would not be considered an expense recognition attribute (consistent with its revenue recognition conclusion). The Board tentatively concluded that its rationale is that the flow of resources meets the definition of a receivable (an asset). The assessment of whether the outflow is an expense cannot be made because the compliance with certain grant requirements takes place in the future.

The Board then discussed the organization of the materials to be included in the Preliminary Views.

Minutes of Meetings, January 7–9, 2020

The Board began deliberations by discussing a performance obligation recognition approach and application. The Board tentatively decided to propose that the fulfillment of a performance obligation for both revenue and expense recognition be described as the point at which there is a transfer of control over a resource. The Board then discussed revenue recognition over time or at a point in time. The Board tentatively decided to propose that revenue be recognized over time in Category A revenue transactions in the circumstances in which one of the three proposed criteria are met: (a) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs; (b) the entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced; (c) the entity’s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date. The Board also tentatively decided to propose that revenue be recognized at the point in time at which control of resources is transferred in Category A revenue transactions in the circumstances in which none of the three proposed criteria above are met. In addition, the Board agreed that recognition guidance for a series of distinct goods or services in Category A revenue transactions should be developed at a later date in conjunction with consideration or allocation of consideration.

The Board tentatively agreed to propose that a practical portfolio consideration be provided for recognition in the assessment of both binding arrangements and performance obligations if the government reasonably expects that the effects on the financial statements of applying this guidance to the portfolio would not differ significantly from applying this guidance to each binding arrangement and to each performance obligation. Additionally, the Board tentatively decided to propose that in circumstances in which it is probable that a provider will not provide the resources or will require a return of resources because eligibility requirements are no longer met or it becomes apparent that a recipient will not comply with purpose restrictions within the specified time limit, the provider recognize a receivable and the recipient recognize a liability, consistent with current provisions in Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. The Board also tentatively decided to propose that probability of compliance with grant requirements not be a revenue recognition attribute.

Next, the Board deliberated recognition principles of revenue and expense in Category B transactions. The Board tentatively agreed to propose that the primary criterion for the recognition of revenue or expense in Category B transactions be the time requirements, as defined in Statement 33 and specified in the binding arrangement for the transaction. The Board also tentatively decided to propose that in the absence of time requirements in the binding arrangement related to a Category B transaction, revenue and expense be recognized when the corresponding asset and liability are recognized. For derived Category B transactions, the Board tentatively decided to propose that an asset be recognized when the underlying transaction or activity on which the tax or fee is imposed occurs or when the resources are received, whichever occurs first, and revenue be recognized when the underlying transaction or activity occurs. For imposed Category B property tax transactions, the Board tentatively decided to propose that revenue be recognized in the period for which the tax is imposed. For imposed Category B regulatory fee transactions, the Board tentatively decided to propose that revenue be recognized when the individual or entity commits the act of applying and qualifies for a permit to engage in a regulated activity. For imposed Category B punitive fee transactions, the Board tentatively decided to propose that revenue be recognized when the individual or entity has committed or omitted an act which is a violation of a law for which a punitive fee is prescribed by the governing body’s legislation. For voluntary Category B transactions, the Board tentatively decided to propose that pledges for endowments be recognized as deferred inflows of resources when the promise is established and revenue be recognized when resources are received and the government can begin to comply with time requirements

The Board then discussed measurement topics. The Board reaffirmed its prior decision to base the measurement of revenues and expenses on the most liquid flow; that is, assets in revenue transactions and liabilities in expense transactions. Furthermore, the Board tentatively agreed to propose that measurement of assets and liabilities in the scope of this project be described as relying on the transaction amount. The Board also tentatively agreed to propose that the transaction amount be described as an allocated amount for Category A revenue and expense transactions. Specific provisions related to the allocation methodology will be developed after the upcoming due process document (a Preliminary Views). In addition, the Board tentatively agreed that the provision in Statement 33 requiring disclosure of transactions that are not recognized because they either are not measurable or are not probable of collection not be included in the upcoming due process document. For Category A grants in which each dollar of allowable cost establishes the fulfillment of a performance obligation, the Board tentatively decided to propose that the revenue measurement be based on the established grant reimbursement rate.

Finally, the Board provided feedback about the status of the project with respect to the upcoming Preliminary Views document and also provided feedback on a proposed illustration.

Minutes of Meetings, November 20–22, 2019
 
The Board began deliberations by discussing asset recognition in property tax transactions. The Board tentatively decided to propose that, in property tax transactions, an asset be recognized when the governing body legally enacts the tax, which should be identified as the imposition date. In addition, the Board tentatively decided that the terms lien, levy, and assessment should not be proposed to describe when a legally enforceable claim arises in a property tax revenue transaction. The Board then discussed additional research regarding the categorization of government-mandated transactions and tentatively reconfirmed that those transactions should be proposed as Category B transactions.
 
Next, the Board deliberated recognition principles for expense transactions. For Category A expense transactions, the Board tentatively decided to propose that a liability be recognized when the counterparty has performed an obligation through either action or forbearance. The Board also tentatively agreed to propose that for expenditure-driven grants, the grantor recognize a liability when the grantee has incurred allowable costs, pursuant to all applicable requirements evidenced in an executed grant agreement (the binding arrangement). Additionally, the Board discussed liability recognition for government-mandated and voluntary nonexchange Category B transactions but did not reach any tentative decisions. For Category A expense transactions, the Board tentatively decided to propose that a prepaid asset be recognized when the government provides resources prior to the counterparty’s performance. For Category B expense transactions, the Board tentatively decided to propose that a prepaid asset not be recognized when the government provides resources subject to time requirements or purpose restrictions that have not been fulfilled by the counterparty.
 
The Board continued deliberations by addressing the concept of “applicability to a reporting period” in the broader context of interperiod equity. The Board tentatively agreed to propose that applicability to a reporting period, for transactions in the scope of this project, be defined based on time requirements and fulfillment of a performance obligation. The Board also tentatively decided to propose that applicability to a reporting period not be used to analyze assets or liabilities and that deferred inflows and outflows of resources not be recognized in Category A revenue and expense transactions, in the scope of the project, in either the economic resources measurement focus or the short-term resources measurement focus. The Board also tentatively decided to propose that for Category B revenue and expense transactions, deferred inflows and outflows of resources be recognized based on the existence of time requirements. In addition, the Board tentatively decided to propose that the guidance require an analysis to follow the specific recognition hierarchical path and that, therefore, the elements be assessed for recognition in the prescribed sequential order.
 
Board discussions then turned to principles related to the identification of a recognition unit of account and distinct goods or services. The Board tentatively agreed to propose that a performance obligation in Category A transactions be described as distinct goods or services, which include: (a) distinct goods, such as the purchase of supplies; (b) distinct services, such as the provision of transportation; (c) bundles of goods or services, such as physician care and prescription drugs in patient care; and (d) a series of distinct goods or services, such as the provision or consumption of water or electricity, or the incurrence of allowable costs in expenditure-driven grants. For Category A grants, the Board tentatively decided to propose that the recognition unit of account be explicitly described as “allowable costs incurred in compliance with all grant requirements.”
 
In addition, the Board discussed the performance obligation recognition approach and tentatively agreed to propose that the fulfillment of a performance obligation be described as the point at which there is a transfer of control over a resource or asset.  The Board will determine which term (resource or asset) should be included in the description at a future meeting.
 
Finally, the Board discussed potential modifications to the scope of the project. The Board tentatively decided that guidance for intangibles that is outside the scope of the following pronouncements or projects will be assessed after the upcoming due process document (a Preliminary Views) to determine whether the transactions should be included in the scope of this project: Statement No. 51, Accounting and Financial Reporting for Intangible Assets, Statement No. 87, Leases, Subscription-Based Information Technology Arrangements, and Public-Private Partnerships.

Minutes of Meetings, October 15–17, 2019

The Board began deliberations by discussing the recognition component of the revenue and expense recognition model. The Board reviewed transactions in both Category A and Category B to identify when an increase in net assets, and therefore recognition of the receivable, should occur.
 
Asset recognition in Category A revenue transactions was discussed first by the Board. The Board tentatively decided that assets should be proposed to be recognized when the government has a right to receive by performing either an action (transfer of goods or services) or a forbearance associated with an obligation, or when resources are received prior to performance. The Board also tentatively decided that guidance should not be proposed on the issue of distinguishing between contract assets and receivables, nor should guidance be proposed regarding the recognition of an asset solely based on the payment terms of the binding arrangement. For expenditure-driven grants, the Board tentatively decided to propose that a receivable be recognized when the government has incurred allowable costs pursuant to all applicable compliance requirements established by an executed grant agreement, and no additional consideration be given to the grantor’s resource appropriation.
 
The Board then deliberated asset recognition in Category B revenue transactions. The Board tentatively agreed generally that asset recognition provisions in Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, should be proposed to be retained for derived Category B revenues, based on the existence of a legally enforceable claim, with an expanded rationale for the existence of an asset. That is, assets should be proposed to be recognized for derived Category B revenues when the underlying transaction or activity on which the tax or fee is imposed occurs or when the resources are received, whichever occurs first. The Board tentatively decided that the derived tax revenues subcategory should be proposed to be modified as derived Category B revenues to incorporate capital fees.
 
The Board tentatively agreed to propose that asset recognition provisions in Statement 33 be retained for imposed Category B revenues and to expand the rationale for the asset recognition of those transactions. However, the issue of when certain imposed Category B revenues should be recognized (lien date or levy date) will be discussed at a future meeting. In addition, the Board tentatively decided to propose that regulatory fees be considered imposed Category B revenue transactions. The Board also tentatively decided that an asset should be recognized for imposed Category B revenues when the individual or entity engages in, or applies for a permit to engage in, the activity upon which the government has imposed a fee.
 
Deliberations then focused on the four types of eligibility requirements in Statement 33. The Board tentatively decided that required characteristics of recipients should not be considered for the proposed recognition guidance. Furthermore, the Board tentatively agreed that time requirements should not be proposed as asset recognition criteria but should be considered at a later date. Reimbursements, the third type of eligibility requirement, are not applicable to Category B transactions, as expenditure-driven grants have been tentatively identified as Category A transactions. The Board tentatively decided to retain contingencies, the fourth type of eligibility requirement, as a recognition criterion for voluntary Category B revenue transactions.
 
For government-mandated Category B revenue transactions, the Board tentatively agreed to propose that asset recognition occur when the resource provider has appropriated the resources and the corresponding fiscal period has begun. Additionally, the Board tentatively decided to propose that asset recognition for voluntary Category B revenue transactions occur either when the government receives the resources or when a promise is made that is verifiable, measurable, and probable of collection, whichever occurs first; a promise that is probable of collection should have to comply with any pre-established conditions.
 
Next, the Board deliberated recognition for right of return and of liabilities in revenue transactions. The Board tentatively decided to propose guidance for the right of return applicable to both goods and services and that this event be referred to as right of refund. In addition, the Board tentatively agreed that right of refund should be treated in a different manner than the concepts of contravention of purpose restrictions or grant compliance requirements and should not be considered in the proposed categorization step of the model. Furthermore, the Board tentatively decided to propose that right of refund be accounted for as a contingent liability for Category A revenue and should not impact the timing of revenue recognition.
 
Deliberations then moved to whether an increase in net assets should involve recognition of a liability in revenue transactions. Category A revenues were discussed first. The Board tentatively decided that a liability should not be recognized in a wholly unperformed binding arrangement; that is, the Board tentatively agreed to propose that a performance obligation is not always a present obligation. In addition, the Board tentatively agreed that a liability should be recognized for resources received by the government prior to satisfying its performance obligation in a binding arrangement and for refundable and nonrefundable advances provided prior to the government’s entitlement to the resources. The Board tentatively agreed not to propose guidance to identify contract assets and contract liabilities in this project because both items are display issues. For Category A revenue transactions, the Board tentatively agreed not to propose guidance that permits the netting of assets and liabilities in Category A binding arrangements for transactions and other events in the scope of this project. Additionally, the Board concluded that guidance related to agency relationships is provided in Statement No. 84, Fiduciary Activities, and, therefore, should not be considered within the scope of this project. Consequently, the Board tentatively agreed not to propose permitting the netting of revenues and expenses.
 
Next, the Board discussed liability recognition in Category B revenue transactions. The Board tentatively decided to propose that liability recognition provisions in Statement 33 be retained for resources provided in advance for derived Category B revenue transactions, with expanded rationale for the existence of a liability. That is, a liability should be recognized in derived Category B revenue transactions when resources are provided to a government before the underlying transaction occurs, which is the point when the government is entitled and has a legally enforceable claim to them. For imposed Category B revenues, the Board also tentatively agreed to propose that recognition provisions in Statement 33 be expanded to address recognition of advances as liabilities for resources received before the date on which the government imposes the tax or fee and has a legally enforceable claim to them.
 
Furthermore, the Board tentatively decided to propose that a liability be recognized for assets received as advances in voluntary Category B revenue transactions. For government-mandated and voluntary Category B revenue transactions, the Board tentatively decided to propose that a liability not be recognized for purpose restrictions placed on assets received to which the government already has established a legally enforceable claim; that is, assets recognized by the government as a receivable that are purpose-restricted should not be recognized as a liability. Additionally, the Board tentatively agreed to propose that the provisions in Statement 33 be modified to acknowledge the existence of unrestricted government-mandated revenue transactions. The Board also tentatively decided to propose that a liability not be recognized for assets that have time requirements (after a legally enforceable claim to the resources has been raised). Regarding advances, the Board also tentatively decided that a definition should be developed and proposed that describes the circumstance in which a government receives resources before it has a legally enforceable claim, with the intent to clarify that those resources should always be recognized as liabilities.
 
Finally, the Board discussed recognition unit of account, which informs the level of aggregation or disaggregation at which rights and obligations would be identified for Category A recognition. The Board tentatively decided to propose that the recognition unit of account in Category A binding arrangements be a performance obligation.

Minutes of Meetings, August 27–28, 2019
 
The Board began deliberations by evaluating the application of the categorization component of the proposed model to three revenue and expense transactions. The Board discussed observations on the categorization of various government-mandated transactions and requested additional research. The Board tentatively decided that payment in lieu of taxes (PILOT) programs generally should be identified as Category B transactions, although each PILOT program should be assessed independently because certain PILOT programs can be more representational of a fee-for-service-type arrangement. The Board also tentatively agreed that escheat revenues should be identified as Category B transactions.
 
The Board then discussed moral and constructive obligations and their relationship to the categorization component of a revenue and expense recognition model. The Board tentatively decided that both the rebuttable presumption of enforceability and recourse available for enforceability mechanisms beyond a court of law allow sufficient flexibility to include moral and constructive obligations within the scope of the project, such that the current model proposal does not require modification to encompass these transactions.
 
Finally, the Board deliberated the level at which the categorization component of the model should be applied. The Board tentatively agreed that the categorization assessment should be made at the binding arrangement level, except for circumstances in which there is potential for multiple transactions within the binding arrangement to be assessed in different categories. In addition, the Board tentatively decided that categorization should be reassessed only when the terms and conditions of a binding arrangement have significantly changed. The Board also tentatively agreed that categorization may be applied to a portfolio of binding arrangements with similar characteristics, if a government reasonably expects that the effects of the portfolio assessment would not differ from those of the categorization application to the individual binding arrangements.

Minutes of Meetings, July 16–18, 2019
 
The Board began deliberations by further defining concepts in the categorization component of the revenue and expense recognition model. The Board tentatively decided not to include the characteristic of voluntary in the proposed categorization methodology. Additionally, the Board tentatively agreed not to include collectibility or the type of remedy available for the breach of an agreement proposal in the categorization component of the model. In addition, the Board tentatively agreed to rely on the general terms government and counterparty in the proposal to identify parties to a transaction, rather than developing terms to specifically identify parties to transactions.
 
The Board tentatively decided that forbearance, as an obligation to perform, should be proposed to be described as a promise to forgo exercising a right in exchange for consideration, such that a dependent relationship exists between the forbearance and the consideration, and remedies exist in the case of breach.

The Board also tentatively decided that economic substance should be proposed to be described as an expected change in the risk, amount, or timing of the government’s cash flows or an impact on the government’s service potential. To describe arrangements in the scope of this project, the Board tentatively agreed to retain the term binding arrangement in the proposal and not rely on the term valid.

The proposed structure for the categorization component of the model was tentatively agreed to by the Board as having four operable steps: identification of a binding arrangement, mutual assent between the parties of capacity, identification of the parties’ substantive rights and obligations, and interdependency between those rights and obligations.
 
Next, the Board discussed an application of the proposed categorization component to a variety of revenue and expense transactions. The Board tentatively agreed that the following transactions should be identified as Category A: eligibility-driven grants, research grants, revolving loans, Medicaid fee-for-service programs, fees for specific services, labor costs, and purchase orders and contracts; and the following transactions should be identified as Category B: taxes, special assessments, regulatory fees, punitive fees, donations, purpose-restricted grants, Medicaid supplementary payments, capital fees, and individual assistance.
 
The Board then reviewed various topics to be included in the measurement component of the proposed model. The Board tentatively agreed to a base measurement proposal wherein revenues and expenses are measured indirectly through the more liquid item, such as cash, payables, and receivables.
 
The Board tentatively decided to remove from the scope of the project all capital asset transactions, including purchases, sales, donations, and nonmonetary exchanges of capital assets. Additionally, the Board tentatively agreed to remove guidance for in-kind contributions, contributed services, and nonmonetary interlocal agreements (or services for services) from the scope of the project.  Those topics will be considered in potential future projects of the Board.
 
Finally, the Board deliberated the topics of contract incentives and collectibility within the measurement component of the revenue and expense recognition model. The Board tentatively decided to propose defining contract incentives in the same manner as lease incentives and to measure variable or contingent contract incentives in the same manner as other variable or contingent consideration, for which measurement will be discussed at a subsequent meeting. From the perspectives of either a government recognizing revenue or incurring expense in a transaction as a whole, the Board tentatively agreed to propose that fixed (or fixed in substance) contract incentives be included in the transaction amount. Regarding the topic of collectibility, the Board tentatively decided to propose that existing collectibility guidance in Statements No. 33, Accounting and Financial Reporting for Nonexchange Transactions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which requires revenue to be recorded net of estimated uncollectible amounts, be carried forward for both Category A and Category B transactions. The Board also tentatively concluded that collectibility guidance similar to the Financial Accounting Standards Board guidance on current expected credit losses should not be developed in this project.

Minutes of Meetings, June 5–6, 2019
 
The Board began deliberations by reviewing feedback provided at the May meeting of the Revenue and Expense Recognition Task Force. The Board discussed feedback from task force members related to the project objective and scope, the ITC models, the proposed AB Model, interperiod equity and deferred inflows and outflows of resources, and stakeholder communications.
 
Next, the Board discussed the continued development of the categorization component of the proposed AB Model. The Board tentatively decided to propose that all binding arrangements in the scope of the project be valid by meeting two requirements. To be valid, a binding arrangement should (a) contain a rebuttable presumption of enforceability and (b) have economic substance. In addition, the Board tentatively decided to propose that Category A binding arrangements be further evidenced by mutual assent to the transaction between the parties of the transaction and a requirement that the parties can identify their rights and obligations, which are substantive. The Board tentatively decided to propose that Category A transactions be required to have rights and obligations that are interrelated in such a manner that each is dependent on the existence of the other. Additionally, a remedy should exist for circumstances in which either party fails to meet the terms of the binding arrangement. That proposed requirement would clarify the previously used phrase “rights and obligations that articulate in equivalent terms.”
 
The Board tentatively agreed to propose that Category B binding arrangements are those that meet the requirements for validity but fail to meet any of the additional Category A characteristics.
 
The Board continued deliberations by further refining the proposed characteristic of rights and obligations in Category A transactions.

Minutes of Task Force Meeting, May 15, 2019
 
The task force provided feedback on the topics that the Board is considering for the development of a revenue and expense recognition model. The task force first discussed the project objectives and scope. Some task force members suggested improving stakeholder communications by more clearly explaining the project objectives, the scope exclusions, and the reasoning for those exclusions.

The task force then discussed the three models in the Invitation to Comment, Revenue and Expense Recognition: (1) the exchange/nonexchange model, (2) the performance obligation/no performance obligation model, and (3) the hybrid model. Some task force members expressed agreement that a comprehensive model would provide clearer recognition guidance. Some members suggested clarifying what inconsistencies exist in the current guidance. Still others raised concerns about value and the challenges associated with communicating the subjectivity of that topic.

Next, the task force members discussed the proposed AB Model and the five model assumptions. Some members provided suggestions on how to improve the model assumptions.

The task force members discussed the basic concepts proposed for the AB Model, such as the classification of Category A transactions as those having an acquisition coupled with a sacrifice. Some task force members agreed with the basic concepts and recommended clarification in various aspects of the model. Some task force members agreed that the amount of consideration in a transaction would be assessed as a measurement issue, rather than a categorization concept. In addition, some task force members recognized that challenges would arise for transactions that are near the boundaries between categorization of Category A transactions and Category B transactions.

The task force discussed the concepts of interperiod equity and deferred inflows and outflows as they relate to a revenue and expense recognition model. Some task force members offered suggestions about education initiatives to communicate those concepts to stakeholders.

Finally, the task force members discussed stakeholder communications related to the ongoing project. Suggestions were offered about topics to address as well as format.

Minutes of Meetings, April 22−24, 2019

The Board began deliberations with a discussion of a refinement to the Revenue and Expense Recognition project scope. The Board tentatively agreed that interfund activity, including transactions between the primary government and its blended component unit, as provided in paragraph 112 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, would not be included in the scope of the project. Additionally, intra-entity transactions in the scope of Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, would not be included in the scope of the project.
 
Next, the Board discussed four characteristics identified in the exploratory work as related to the performance obligation/no performance obligation model. The Board tentatively decided not to rely on service relatable or distinct goods or services, and specific beneficiary, in any categorization definitions. Additionally, the Board tentatively decided to rely on binding arrangements and rights and obligations that articulate in equivalent terms as characteristics useful for any categorization definitions; however, the Board acknowledged that these characteristics require further refinement.
 
The Board then discussed three characteristics related to the exchange/nonexchange model, two of which were identified in the exploratory work. The Board tentatively agreed not to rely on the characteristics of cost recovery and benefit as distinguishing characteristics of revenue and expense transactions. In addition, the Board considered the concept of value, the central characteristic in current literature used to distinguish between exchange and nonexchange transactions, and tentatively agreed not to rely on value to develop any categorization definitions.
 
Next, the Board discussed whether the amount of consideration is representational of the type of transaction and tentatively agreed not to rely on the amount of consideration as a means to categorize revenue and expense transactions because it produces conceptually incongruent results.
 
As a result of previous tentative decisions, the Board tentatively agreed to develop a revenue and expense recognition model that would classify transactions into two categories: Category A transactions and Category B transactions (the AB Model). The Board considered various concepts as the foundational model proposal and tentatively agreed that Category A transactions would be considered as comprised of two flows, an acquisition coupled with a sacrifice (or a sacrifice coupled with an acquisition). The Board tentatively agreed that the acquisition coupled with the sacrifice can be identified as rights and obligations that articulate in equivalent terms. While the right represents the right to receive consideration in a transaction, the obligation represents the requirement to perform via action or inaction. The Board also tentatively agreed that Category A transactions may include reciprocal and nonreciprocal transactions and include binding arrangements such as contracts, grant agreements, memorandum of understanding, interlocal agreements, and legally enforceable purchase orders.
 
Conversely, the Board tentatively agreed that Category B transactions would be considered as comprised of a single flow—that is, an acquisition without a sacrifice or a sacrifice without an acquisition; whereas the obligation is to transfer resources, the right is to receive or collect resources. The Board tentatively agreed that the types of binding arrangements included in Category B transactions include enabling legislation and purpose-restricted grant agreements. The Board considered those basic concepts and tentatively agreed to continue refining the categories. Lastly, the Board tentatively agreed that based on the current proposal, the earnings recognition approach should no longer be considered in this project.

Minutes of Meetings, January 29−31, 2019
 
The Board began deliberations with discussions about the expense model. The Board tentatively agreed that model assumption two—the classification of inflows should not determine the classification of outflows—still is valid. The Board tentatively agreed that model assumption one—inflows and outflows, although interrelated through articulation, are of equal importance in the resource flow statement—still is valid. Next, the Board tentatively agreed that a single revenue and expense recognition model should be developed that is applicable to all governments; without explicitly segregating business-type activities governments. Additionally, the Board tentatively agreed to propose that accounting for regulated operations, as described in paragraphs 476—500 of Statement No. 62, Codification of Accounting and financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, be outside the scope of this project. The Board then tentatively agreed to propose a government centric expense model as follows:
 
Next, the Board discussed remaining information about grant outflows and other exploratory work. Board members considered observations about the analysis of grant outflows, shared revenue, and PILOT programs. Furthermore, the Board discussed workers compensation, unemployment, and disability benefits. Next, the Board shared additional observations about the analysis of the benefit and specific beneficiary characteristics for exchange outflows. Lastly, the Board discussed information provided about Medicaid.  The discussion of this exploratory work was not intended to result in any tentative Board conclusions.

Minutes of Meetings, December 17−19, 2018

The Board began by discussing basic assumptions that are necessary to build the revenue and expense recognition model. The first assumption tentatively agreed upon is that inflows and outflows are of equal importance. The second assumption tentatively agreed upon is that the classification of outflows should be considered independently from the classification of inflows. The third assumption tentatively agreed upon is that for accounting and financial reporting purposes, a government is an economic entity in providing public services, and it is not acting as an agent for the citizenry. The fourth assumption tentatively agreed upon is to include a symmetry assumption, to the extent possible. The Board tentatively decided to include a symmetry assumption in the development of a proposed revenue and expense recognition model, acknowledging that there may be circumstances in which symmetry may not be feasible. The fifth assumption tentatively agreed upon is the inclusion of a consistent view—that is, from the resource provider perspective—in the analysis of distinct goods and services. The Board then discussed the need to develop additional assumptions as the project develops, as well as the possibility of adjusting the five assumptions considered in this meeting. The Board noted that based on the overall relevancy of the going concern assumption, there was not a need to identify it as a specific assumption to be applied in this project.

Next, the Board re-deliberated scope issues. First, the Board tentatively decided to retain the exclusionary approach (that is, to identify transactions and other events that are not included in the scope of the project) with periodic discussions to ensure that the clarity of the topics is maintained. The Board then tentatively agreed that the scope of the project should be limited to the first communication method identified in paragraph 29 of Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements: recognition in basic financial statements (with limited disclosure requirements [if applicable]). Next, the Board tentatively agreed to exclude from the scope of this project any display requirements for revenues or expenses. Furthermore, the Board tentatively decided to recommend that this project not include any proposal related to the classification of revenues and expenses as operating or nonoperating. The Board also tentatively agreed to exclude from the scope requirements for required supplementary information or supplementary information. Next, the Board tentatively agreed to base all measurement guidance on Concepts Statement No. 6, Measurement of Elements of Financial Statements. Additionally, the Board tentatively agreed to include collectability, right of return, and warranties as measurement topics in the scope of the project. Next, the Board tentatively agreed that modifications for guidance for contingencies would not be included in the scope of this project, noting that conclusions in existing literature—Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements—may be relied upon. The Board then tentatively agreed that development of the subsequent due process document in this project would be based only on the economic resources measurement focus and accrual basis of accounting.

Next, the Board considered the three exclusion principles included in the Invitation to Comment, Revenue and Expense Recognition. The Board tentatively agreed to propose an exclusion principle that would remove from the scope of the project items related to capital assets and long-term debt, such as depreciation expense, interest income and expense, inventory remeasurement, as well as gains and losses from the impairment or remeasurement of capital assets, inventory, and long-term debt. The Board tentatively agreed to propose a second exclusion principle that would remove from the scope of the project: (1) investments, (2) financial guarantees, (3) derivative instruments, (4) financings such as leases, and (5) insurance. Next, the Board tentatively agreed to propose a third exclusionary principle that would remove from scope of the project all postemployment benefit topics, including current effective pronouncements as well as the current projects undertaken related to postemployment benefits. Next, the Board tentatively agreed to propose a narrative paragraph in the scope description that would discuss scope exclusions of “current guidance (existing pronouncements and projects the Board is currently addressing in other projects)” from the scope of this project.

Next, the Board tentatively agreed to include in the scope of this project the following current guidance:

• NCGA Statement 1, Governmental Accounting and Financial Reporting Principles, as follows:
  • Revenue recognition:  paragraphs 62–69
  • Expenditure recognition: paragraphs 70–73
• Statement No. 6, Accounting and Financial Reporting for Special Assessments—revenue and expense recognition provisions would be included. Provisions related to capital assets, long-term debt, or fund financial reporting issues included in Statement 6 would not be included in the scope of this project.
• Statement No. 21, Accounting for Escheat Property, paragraph 5, provides recognition guidance for escheat revenue. Topics related to recognition of a liability or fund financial reporting would not be included in the scope of this project.
• Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments—paragraph 16, which provides recognition provisions for revenues and expenses.
• Statement 62—the topics proposed for inclusion in the scope of this project are listed below. Those topics would be included to the extent that revenue or expense recognition is involved; other accounting and financial reporting issues related to those topics would not be considered included in the scope of this project.
  • Revenue Recognition for Exchange Transactions, paragraph 23
  • Revenue Recognition When Right of Return Exists, paragraphs 24–28
  • Construction-Type Contracts—Long-Term, paragraphs 114–123
  • Nonmonetary Transactions, paragraphs 272–281
  • Sales of Real Estate, paragraphs 282–349
  • Broadcasters, paragraphs 385–388
  • Cable Television Systems, paragraphs 389–399

Lastly, the Board discussed the overall scope description and tentatively agreed to recommend a description, based on the tentative decisions previously noted, as a first step, acknowledging that additional modifications may be needed depending on the development of the project.

Minutes of Meetings, November 14−16, 2018

The Board continued its discussion of expenses, focusing on the general characteristics of transactions identified during the August 2018 Board meeting. The Board also discussed donations, endowments, and escheat property in relation to the same general characteristics. No tentative conclusions were reached.

Minutes of Meetings, October 2−4, 2018
 
The Board discussed different types of primarily federal government grants and the challenges grants present from a classification perspective.  The Board also discussed how grants could fit into the general characteristics of revenue transactions discussed during the August 2018 Board meeting. The Board then considered a project staff analysis related to using a specific beneficiary and that rights and obligations articulate in equivalent terms as characteristics of revenue transactions. No tentative conclusions were reached.

Minutes of Meetings, August 22−24, 2018

The Board discussed the conceptual importance of recognition and the challenges associated with the scope and definitions in the Revenue and Expense project that may need to be addressed differently than in other GASB projects. The Board also discussed stakeholder feedback regarding exchange-like transactions. Next, the Board discussed general characteristics of different revenue transactions, including exchange, exchange-like, and nonexchange transactions. This discussion covered existing literature, research, and definitions proposed in the Invitation to Comment, Revenue and Expense Recognition. The Board considered analysis related to cost-recovery, a characteristic of revenue transactions mentioned during public hearings. Finally, the Board considered the rationale for conducting exploratory work about the characteristics of certain grants, a topic that will be addressed in the next Board meeting. No tentative decisions were reached.

Minutes of Meetings, July 10-12, 2018

The Board discussed the development of the project approach and decided to refine the definitions included in each model presented in the Invitation to Comment (ITC), Revenue and Expense Recognition, as a preparatory step for model selection. The Board also discussed stakeholder feedback received in public hearings related to the ITC. No tentative decisions were reached.

Minutes of Teleconference, June 18, 2018
 
The Board discussed stakeholder feedback received in comment letters related to the Invitation to Comment, Revenue and Expense Recognition. No tentative decisions were reached.

Minutes of Meetings, January 23−24, 2018
 
The Board reviewed a ballot draft of the Invitation to Comment, Revenue and Expense Recognition, and provided clarifying edits. After reviewing the Invitation to Comment and providing clarifying edits, the Board did not object to the issuance of the Invitation to Comment.

Minutes of Meetings, December 12−14, 2017
 
The Board discussed the characteristics of the financial information to be presented in the Invitation to Comment. The Board tentatively decided that issues associated with the recognition of revenues and expenses, as well as the revenue and expense recognition models to be presented in the Invitation to Comment, would produce financial information that meets the needs of users; results from economic or financial events affecting the assessment of the governmental reporting entity; is relevant to reporting objectives; and falls within an appropriate information category for general purpose external financial reports. Thus, the Board tentatively concluded that the information in the proposals that the Invitation to Comment would include clearly is within the scope of the GASB’s authority.
 
Next, the Board tentatively decided a 90-day comment period is appropriate for the Invitation to Comment.
 
The Board then reviewed a preballot draft of the Invitation to Comment, Revenue and Expense Recognition, and did not object to clarifying edits. The Board did not object to moving forward with a ballot draft of an Invitation to Comment for discussion at the January 2018 meeting.

Minutes of Meetings, October 31−November 2, 2017

The Board continued its review of a proposed definition of a performance obligation. The Board did not object to including the concept of a relationship between the rights and obligations in a binding arrangement in the Invitation to Comment.

The Board next discussed Chapter 2, the exchange/nonexchange model, Chapter 3, the performance obligation/no performance obligation model, and Chapter 4, additional topics. The Board also discussed clarifying edits to Chapters 2, 3, and 4.

Minutes of Meetings, September 27 and 28, 2017

The Board discussed issues related to the impact of the concept of right of return on the two models to be presented in the Invitation to Comment (ITC): Model 1—the exchange/nonexchange model and Model 2—the performance obligation/no performance obligation model. In the development of the ITC, the Board tentatively agreed that:

• The definition of a performance obligation should encompass a binding arrangement, specificity of the other party, and a series of goods and services.
• The performance obligation/no performance obligation model should include the following:
  • Classify a transaction as to whether it contains a performance obligation on the basis of the definition of a performance obligation and a binding arrangement.
  • If there is a performance obligation, recognize the transaction on the basis of the amount of consideration, allocation of consideration, and satisfaction of the performance obligation.
  • If there is no performance obligation, recognize the transaction on the basis of eligibility requirements.
• The right of refund should be considered a contingency and not a stand-ready-to-perform liability.
• The right of refund should be considered broadly and be applicable to both goods and services.
• The right of refund should have limited discussion in the ITC.
• The earnings recognition approach should not consider the refund period.
• For exchange transactions containing a performance obligation, an unexercised right of refund held by a government for purchased goods or services should not be recognized as an asset and should follow the contingencies provisions in Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements.
• For nonexchange transactions, the right of refund should not be considered further.

The Board next discussed the relationship of the performance obligation/no performance obligation model to the Board’s conceptual framework. The Board tentatively decided that the ITC should indicate that an unsatisfied performance obligation meets neither the definition of an asset nor the definition of a liability.
The Board then discussed the organization of the ITC and Chapter 1, the introduction, as well as clarifying edits to Chapter 1.

Minutes of Meetings, August 10–11, 2017

The Board discussed feedback from the task force and the crafting of the Invitation to Comment. The Board tentatively agreed that the Invitation to Comment should discuss two models: (1) the performance/no performance obligation model and (2) the exchange/nonexchange model. The Board also tentatively agreed that the exchange/nonexchange model should include the eligibility requirements and the earnings based recognition approaches.

Minutes of Task Force Meeting, August 9, 2017

The task force provided feedback on the topics that the Board is considering for inclusion in an Invitation to Comment, which will be issued for public comment. The task force provided comments on how the discussions in each section of the Invitation to Comment can be made more clear and complete.

The task force first discussed the Background section of the Invitation to Comment. Suggested topics that could be included in this section included the objective of the project, history of previous GASB guidance related to revenue and expense transactions, a reference to guidance issued by other standards setters, results of previous project stages, reasons GASB added the project to its agenda, and the project scope. Some task force members also suggested further clarification on the reasons behind the project and the benefits and challenges of the models.

The task force then discussed three potential models: (1) the exchange/nonexchange model, (2) the performance/no performance obligation model, and (3) the exchange/nonexchange model with performance obligation elements. For each model, the task force members provided feedback on the explanations of the application of the different models. Some task force members suggested further clarification of how each model would impact their individual governments, such as business-type activities. In addition, some task force members recommended further examples to highlight the diversity in practice. Some task force members also suggested that issues applicable to exchange-like and right-of-return practice issues be addressed. Regarding performance obligations, some task force members expressed interest in the Invitation to Comment addressing how the performance obligation definition would impact purpose restrictions.

Minutes of Meetings, June 28–29, 2017

The Board considered the project staff’s research regarding when an enforceable legal claim is established. That term comes from existing guidance that applies to imposed nonexchange transactions—primarily property taxes. The research surveyed state statutes that address when levies, liens, and assessments are established. The Board tentatively agreed that the Invitation to Comment should describe the diversity in statutory provisions and practice. Modifications to the existing nonexchange literature, however, will not be proposed and no questions will be presented. The discussion will indicate that the Board is expected to address this issue in a future due process document as part of this project.

Minutes of Meetings, May 23–25, 2017

The Board tentatively decided that the obligation for expense notion should be further developed within the earnings-based approach for expense recognition of exchange transactions in the Invitation to Comment.

The Board reviewed a narrative discussion and illustrative graphic of the exchange/nonexchange model to be presented in the Invitation to Comment. The Board tentatively decided that both the narrative discussion and illustration depict the tentative decisions made thus far in the development of the exchange/nonexchange model.

The Board also reviewed proposed examples to be presented in the Invitation to Comment that illustrate recognition issues for the performance obligation/no performance obligation model and performance obligation approach (items 1–4 below); for the exchange/nonexchange model (items 5 and 6); and for both models (items 7 and 8).

1. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with identifying a performance obligation.
2. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with the notion of a group in the definition of a performance obligation.
3. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with determining when a performance obligation is satisfied.
4. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with expense recognition using a performance obligation.
5. The Board tentatively decided that the proposed example sufficiently demonstrates the issues associated with classifying a transaction as exchange or nonexchange.
6. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with determining when an entity is entitled to revenue or obligated for expense.
7. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with endowment pledges and beneficial interests in perpetual trusts.
8. The Board tentatively decided that proposed example sufficiently demonstrates the issues associated with contingencies.

Minutes of Meetings, April 12–14, 2017

The Board continued to discuss issues related to the performance obligation/no-performance obligation model to be presented in the Invitation to Comment (ITC). The Board tentatively decided that the ITC should present two alternatives for the definition of a performance obligation: the first including the notion of “groups of individuals” as resource providers or resource recipients and the second excluding the notion of “groups of individuals.”

The Board next discussed issues related to revenue recognition of endowment pledges and beneficial interests in perpetual trusts. The Board tentatively decided that the time requirement to recognize assets and revenue associated with endowment pledges and beneficial interests in perpetual trusts is not consistent with the conceptual framework. The Board tentatively decided that the ITC should identify these potential issues as items that will require resolution at a later stage of the project but not present potential modifications.

The Board also discussed alternatives for the ongoing development of an earnings-based approach for the recognition of exchange revenues. The Board tentatively decided to develop an earnings-based alternative concentrating on revenue recognition as it relates to when the government is entitled to the benefits represented by the revenue from the transaction.

The Board then discussed issues related to expense recognition for nonexchange transactions. The Board tentatively decided that the ITC should indicate that potential guidance for governmental entities that provide resources through imposed nonexchange transactions and derived tax transactions will be considered at a later stage of the project. The Board tentatively decided that recognition of expenses from government-mandated and voluntary nonexchange transactions when eligibility requirements are satisfied is consistent with the conceptual framework and that the ITC should not present potential modifications to the general guidance regarding eligibility.

The Board tentatively decided that the expense recognition based on satisfaction of the eligibility requirements—a required characteristic of recipient, a time requirement, and a reimbursement requirement—is consistent with the conceptual framework and that the ITC should not present potential modifications to these requirements. The Board also tentatively decided that the liability recognition requirement that a transaction have a time requirement is consistent with the conceptual framework, and there should not be potential modifications presented in the ITC. The Board tentatively decided that satisfaction of the contingency eligibility requirement for expense recognition is consistent with the conceptual framework. The Board tentatively decided that the ITC should indicate that potential modifications regarding the application of the contingency requirement will be considered at a later stage in the project.

Minutes of Meetings, March 7–9, 2017

The Board discussed the current alternatives being developed for the exchange/nonexchange model for presentation in the Invitation to Comment and tentatively concluded that the summary presented accurately depicted the alternatives. The Board then discussed the working definition of a performance obligation and instructed the project staff to analyze a potential amendment to the working definition to include the concept of groups of individuals as another party. The Board also reviewed other tentative Board decisions related to the performance obligation/no performance obligation model and tentatively reaffirmed those decisions.

The Board next discussed the recognition of revenue for the four types of nonexchange transactions described in Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. The Board tentatively decided that the asset and revenue recognition provisions for derived taxes and imposed nonexchange, voluntary nonexchange, and government-mandated nonexchange transactions in Statement 33 are consistent with the conceptual framework. The Board also tentatively decided that the exchange/nonexchange model being developed for presentation in the Invitation to Comment will not present modifications to the provisions for asset and revenue recognition for derived tax revenue transactions.

The Board instructed the project staff to conduct additional research related to asset and revenue recognition provisions for imposed nonexchange transactions, specifically addressing the application of lien and levy date requirements and how the dates are described in enabling legislation. The Board discussed eligibility requirements for government-mandated and voluntary nonexchange transactions and tentatively decided that the four eligibility requirements in Statement 33 are consistent with the conceptual framework. The Board tentatively decided that the Invitation to Comment should not present modifications to three of the eligibility requirements: required characteristics of recipients, reimbursements, and contingencies. With respect to time requirements for voluntary nonexchange transactions, the Board instructed the project staff to conduct additional research regarding the recognition of pledges and beneficial interests in perpetual trusts reported by endowments.

Minutes of Meetings, January 17–19, 2017

The Board discussed the development of the exchange/nonexchange model for presentation in the Invitation to Comment. The Board tentatively decided to pursue presenting clarifying guidance for the current definitions of exchange and nonexchange.

The Board next discussed alternatives for recognition of revenue from exchange transactions that could be presented in the Invitation to Comment. The Board tentatively decided to develop alternatives for revenue from exchange transactions based on a conceptual foundation. For recognition of revenue from nonexchange transactions, the Board tentatively decided to pursue the development of two alternatives in the Invitation to Comment. The first alternative will explore the application of a performance obligation model to nonexchange transactions. The second alternative will explore potential modifications to existing requirements, specifically considering the conceptual framework.

Minutes of Meetings, December 5–8, 2016

The Board discussed the recognition of expenses using the performance obligation model. For transactions with performance obligations, the Board tentatively agreed to propose that expenses be recognized as the performance obligation is satisfied, either over time or at a point in time. Example transactions discussed by the Board included audit services, fuel purchases, payroll and compensated absences, and a government-mandated education program.

For transactions without performance obligations, the Board tentatively agreed to propose that expenses be recognized with respect to key characteristics of those transactions. Example transactions discussed by the Board included shared revenue, a government-mandated education program, and an equalization grant.

Minutes of Meetings, October 25–27, 2016

The Board discussed revenue recognition alternatives for example transactions with and without performance obligations. For transactions that have performance obligations, the Board tentatively decided that revenue should be recognized as the performance obligation is satisfied, either over time or at a point in time. Transactions of the nature discussed included parking permits, electric utility charges, tuition, building permits, and government-mandated educational programs (with a performance obligation).

For transactions that do not have performance obligations, the Board tentatively decided that revenue should be recognized with respect to the key characteristics identified for the specific transaction. Examples discussed by the Board included taxes on retail sales of goods, personnel income taxes, property taxes, and government-mandated educational programs (without a performance obligation).

The Board also discussed and tentatively agreed that transactions without performance obligations have a key characteristic that can be used to determine the timing of revenue recognition.

Minutes of Meetings, September 13–15, 2016

The Board continued deliberations by exploring the application of the working definition of a performance obligation to example transactions that are currently classified as exchange revenue, exchange expense, and nonexchange expense transactions. The Board tentatively agreed that the working definition of a performance obligation, with potential amendments to consider whether the transaction involves a specific resource beneficiary or a specific resource provider and, sufficiently allows for the assessment of whether transactions include a performance obligation.

Minutes of Meetings, August 10–12, 2016

The Board continued deliberations by exploring the application of the working definition of a performance obligation to revenue transactions that are currently classified as nonexchange transactions. The Board tentatively agreed that the working definition of a performance obligation is not sufficiently discriminating to allow for the assessment of whether transactions with purpose restrictions include a performance obligation; therefore, the definition should be expanded to make it more flexible. The Board also tentatively agreed that the ITC should present both of the following alternatives for applying the performance obligation definition to transactions with purpose restrictions: (1) consider whether the transaction involves a specific individual or entity as the resource beneficiary or (2) consider whether the transaction involves a specific individual or entity as the resource provider.

Minutes of Meetings, June 22–23, 2016

The Board continued deliberations for the Revenue and Expense Recognition project by discussing a working definition of the term performance obligation.

Four elements were considered for the working definition of performance obligation: (1) promise, (2) contract, (3) customer, and (4) distinct goods and services.

In regard to the first two elements, promise and contract, the Board tentatively agreed that the term contract is not needed because contracts are not the most prevalent means of raising revenue for governments. Therefore, the Board tentatively agreed to propose the use of the term binding promise in the working definition of a performance obligation to encompass a broader range of performance obligations.

For the third element, customer, the Board tentatively agreed to propose to replace that term with a broader term, another party, in the working definition to incorporate arrangements that may have multiple parties and to address a broader range of relationships. The Board also tentatively agreed to propose the following definition of another party:
 
The Board then discussed the fourth element of a performance obligation, distinct goods and services. Many transactions of a government may include multiple promises of goods or services; therefore, the Board tentatively agreed to propose the inclusion of the notion of distinct goods and services in the working definition of a performance obligation. Finally, the Board tentatively agreed to propose the following working definition of performance obligation with the understanding that as the project develops it may be revised:
 
Minutes of Meetings, May 10–11, 2016

The Board began deliberations for the Revenue and Expense Recognition project by discussing the scope of the project and related scope issues. Due to the broad scope of this project, the Board tentatively decided to exclude some topics from deliberations associated with the project based on three guiding principles, with the understanding that as the project develops most transactions will be tested for potential application. The first principle is to exclude topics within the scope of current guidance that were developed considering the current conceptual framework. The second principle is to exclude financial transactions, such as investments, derivatives, leases and insurance, that require specialized guidance. The third and last principle is to exclude transactions arising from the recognition of capital assets and certain liabilities, such as depreciation, impairment expenses, and expenses related to the recognition of asset retirement obligations. The Board also tentatively agreed to keep certain topics in a to-be-determined category and decide at a later stage whether those topics should be included in this project. The criteria used to determine what topics to revisit later were topics for which current guidance exists but was developed before the conceptual framework and potential standards-setting topics. Examples of topics in the to-be-determined category are inventory, termination benefits, and compensated absences. The Board tentatively agreed to broadly describe the types of transactions that are included in the scope of this project rather than list all the transactions that may be included in the project to reduce the risk of inadvertently omitting topics.

Among the related scope issues that also were discussed at the meeting was the classification and presentation of revenue and expenses, which is being considered in the financial reporting model reexamination; therefore, the Board tentatively decided to not consider this issue as part of the scope of the revenue and expense recognition project. The Board also tentatively decided to include the issue of measurement of revenue and expense within the scope of this project and to initially develop a comprehensive revenue and expense recognition model based on the economic resource measurement focus and the full accrual basis of accounting. The Board tentatively decided that the revenue and expense recognition model for the governmental funds will be considered after the Board proposes a specific measurement focus and basis of accounting for governmental funds in the financial reporting model reexamination project.

The discussion ended with consideration of issues specific to small governments. The Board is aware that users of small governments’ financial information may have different needs; therefore, those needs will be considered while developing alternatives. The Board did not make any tentative decisions on this part of the discussion.