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Conceptual Framework—Recognition and Measurement Approaches


Minutes of Meetings, May 14–16, 2013


The Board reviewed the preballot draft of an Exposure Draft on concepts related to Measurement of Elements of Financial Statements, tentatively agreeing upon various clarifying changes. The Board then directed the project staff to prepare a ballot draft of the proposed Concepts Statement for consideration at the June teleconference meeting.

Minutes of Meeting, April 2-4, 2013


The Board reviewed the preliminary draft of measurement concepts and made clarifying edits. The next step for the staff is to prepare a preballot draft of the measurement concepts Exposure Draft for the next Board meeting.

Minutes of Meeting, February 19-21, 2013

The Board’s discussion focused on assessing the completeness and potential for overlap of the measurement attributes of historical cost (proceeds), fair value, acquisition value, replacement cost, and settlement amount. The Board tentatively decided that acquisition value should not be presented as a separate measurement attribute. Rather, acquisition value should be identified as a term that refers to either a replacement cost or a settlement amount determined as of the acquisition date of the asset or liability. The Board also tentatively decided that replacement cost should be applicable only to assets.

The Board tentatively decided that with the exception of lower of cost or market measurements, the list of measurement attributes was sufficiently complete based upon the evaluation of the basic characteristics of measurements used in existing standards and that no overlap among the measurement attributes remained to be addressed. With respect to the use of lower of cost or market measurements, the Board determined that it would not be appropriate to include a discussion of this type of measurement in the proposed Concepts Statement because it represents an application of two different measurement attributes, rather than a separate measurement attribute.

Additionally, the Board evaluated the proposed language regarding the definition and discussion of measurement attributes and suggested various edits.

Minutes of Meeting, January 8-9, 2013

The Board discussed which specific measurement attributes should be presented in the forthcoming Exposure Draft on measurement concepts. The Board tentatively decided that the term measurement attribute would be used within the Exposure Draft and that a footnote indicating that certain other standards boards have used the term measurement basis to refer to the same aspect of measurement.

Subsequently, the Board tentatively decided to include the following five measurement attributes in the proposed Concepts Statement: historical cost, fair value, acquisition value, settlement amount, and replacement cost. These measurement attributes were tentatively defined as follows:

  1. Historical Cost (Proceeds)—The amount paid to acquire an asset or the amount received pursuant to the incurrence of a liability in an actual exchange transaction.
  2. Fair Value—The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
  3. Acquisition Value—The price that would be paid to acquire the service potential the entity will obtain from an asset in an orderly market transaction at the acquisition date.
  4. Settlement Amount—The amount at which an asset could be realized or a liability could be liquidated with the counterparty, rather than through an active market.
  5. Replacement Cost—The price that would be paid to acquire the service potential the entity will obtain from an asset in an orderly market transaction at the measurement date.

The Board noted that some measurement attributes may be inherently associated with one measurement approach and other measurement attributes may be appropriate for use under both measurement approaches. For example, historical cost could be used only as an initial amount, and settlement amount could be used under either the initial amount or remeasurement amount measurement approaches.

The Board requested the project staff to continue evaluating these measurement attributes and to develop a discussion of benefits and drawbacks to the use of these measurement attributes for consideration at the next meeting.

Minutes of Meeting, November 28-30, 2012


The Board continued its discussion of concepts for recognition of elements of financial statements and measurement approaches. The Board tentatively affirmed that the concept of a significant external barrier to realization of a remeasured amount is consistent with the proposed concept that initial amounts are most appropriate for assets that are used directly in providing services. The Board also tentatively agreed that the concept of significant external barriers to realization also should be extended to assets that will be converted to cash. The Board acknowledged that in some circumstances, a significant external barrier to realization of a remeasured amount could be reflected in the determination of a remeasured amount, rather than considered to be the reason why a remeasured amount would not be appropriate. The Board requested that the project staff further evaluate this issue.

The Board also tentatively agreed that the timing of the issuance of an Exposure Draft from the measurement approach portion of this conceptual framework project should be linked to the timing of the issuance of the project on the application of fair value. The Board requested that the project staff develop and evaluate technical agenda alternatives that would maintain the linkage between the issuance of the Exposure Drafts in both projects.

As a result of its discussion of the draft language for the measurement approaches section, the Board decided that it should reconsider the objectives of the measurement approaches section. The options could include limiting the objectives to be more consistent with that of other standards setters or expanding the conceptual guidance on when either initial amounts or remeasured amounts are more applicable to all types of assets and liabilities, possibly acknowledging for some types of assets or liabilities that this determination only should be made in setting standards.The Board requested that the project staff further evaluate these options for discussion at the January 2013 Board meeting.

Minutes of Meeting, October 2-4, 2012


The Board continued its discussion of concepts for recognition of elements of financial statements and measurement approaches. This meeting’s discussion focused on measurement concepts associated with liabilities, specifically concepts related to liabilities for which the amount and timing of future payments are known. The Board tentatively decided that the draft Concepts Statement should include the concept that initial amounts are more appropriate when there are significant external barriers to realization of a remeasured amount, citing noncallable long-term debt as a clear example of a liability for which there is a significant barrier to realization of a remeasured amount. The Board also instructed the staff to explore the potential application of the existence of significant external barriers to realization of a remeasured amount concept to the measurement of asset.

Minutes of Meeting, August 22-24, 2012


The Board continued the evaluation of feedback received pursuant to the proposed measurement concepts in the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches.

The Board tentatively agreed that the approach to measurement concepts should continue to reflect the following major features:

  1. The objective of measurement concepts is to establish a framework for when each of the two primary measurement approaches (initial amounts and remeasured amounts) should be used.
  2. A single measurement approach need not be applied to all assets and liabilities.
  3. The overriding criterion in evaluating the measurement approaches is which one best promotes achievement of the applicable objectives of financial reporting, with consideration of the qualitative characteristics of information in financial reporting.

After consideration of respondent feedback on various aspects of the proposals, the Board also tentatively affirmed its proposed preliminary views that (1) initial amounts are more appropriate for assets that are used directly in providing services, (2) remeasured amounts are more appropriate for assets that will be converted to cash (for example, financial assets), and (3) remeasured amounts are more appropriate for variable-payment liabilities, such as compensated absences or pollution remediation obligations, without modification.

Also based upon respondent comments, the Board directed the staff to make various editorial changes to the discussion of measurement concepts to make the language more clear and complete.

The Board also reconsidered the completeness and appropriateness of the proposed measurement concepts on an overall basis and tentatively decided to reexamine the issue of whether either of the principal measurement attributes is more appropriate for use in reporting fixed-payment liabilities.

Minutes of Meeting, July 10-11, 2012

The Board began its deliberations of comments and other feedback received on the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches, focusing on the feedback related to the proposals related to the economic resources measurement focus.

The Board tentatively agreed to propose that the economic resources measurement focus be defined as follows:

The economic resources measurement focus incorporates all outflows of resources and inflows of resources and all assets, liabilities, deferred outflows of resources, and deferred inflows of resources.

The Board tentatively agreed to propose that the recognition criteria for financial statements prepared using the economic resources measurement focus would continue to include the first criterion proposed in the Preliminary Views—that of meeting the definition of an element of the financial statements—and that the second criterion would be modified to indicate that measurement of the item sufficiently reflects the qualitative characteristics described in Concepts Statement No. 1, Objectives of Financial Statements. The Board believes that emphasis on or reference to only one or some of the qualitative characteristics would inappropriately imply a hierarchy among the qualitative characteristics.

The Board also tentatively agreed to propose a three-step hierarchy for recognition concepts for financial statements prepared using the economic resource measurement focus, which is consistent with the approach used by the Board in deliberating issues resulting in the issuance of Statement No. 65, Items Previously Reported as Assets and Liabilities. In this three-step hierarchy, an item is first evaluated to determine whether it meets the definition of an asset or liability. If the item does not meet the definition of an asset or liability, the item is evaluated to determine whether it meets the definition of a deferred outflow of resources or deferred inflow of resources. If the item does not meet the definition of a deferred outflow of resources or deferred inflow of resources, the item would be evaluated to determine whether it meets the definition of an outflow of resources or inflow of resources.


Minutes of Meeting, April 18-20, 2012


The staff presented the Board with the results of interviews conducted with users of governmental financial statements at the request of the Board at the November meeting to gather feedback on the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches. The Board discussed the responses collected in the interview process and decided that it had received sufficient feedback on the Preliminary Views to continue project deliberations. Project deliberations will continue at the July 2012 meeting.

Minutes of Meeting, December 13-15, 2011

In response to the Board’s request at the November meeting, the staff presented the Board with questions to be asked of users during interviews designed to gather feedback from users of governmental fund financial statements in regard to the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches. The questions were submitted for feedback from the Board on whether they were likely to elicit the information sought by the Board.

The Board agreed with the overall approach that the project staff will take to elicit user response to the Preliminary Views. The Board ultimately decided that the questions related to the Preliminary Views appeared to be sufficient to supply the Board with the feedback it needs to continue project deliberations. The Board further directed the staff to review the 2005 User Needs Study with the goal of identifying user feedback that relates to this subject. The project staff will present the results of the user interviews and the review of the 2005 Study to the Board at the March meeting. The Board tentatively decided that any further research on the use of governmental fund financial statements would be determined after reviewing the results of the Preliminary Views user interviews and the analysis of the User Needs Study.

Minutes of Meeting, November 8-10, 2011


The staff provided the Board with comments received on the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches. The comments presented to the Board related to the overall project, to the economic resources measurement focus and the related recognition concepts for deferred outflows of resources and deferred inflows of resources, and to measurement approaches.

Noting a low volume of responses for proposed recognition concepts, the Board considered several options for proceeding with the project: to move the entire Preliminary Views forward to an Exposure Draft, to separate recognition and measurement concepts and continue with only measurement concepts, or to delay the entire project to allow for further research on recognition concepts. The Board tentatively decided not to split the recognition and measurement concepts into separate projects at this time. The Board further tentatively concluded that it had not received sufficient feedback, particularly from financial statement users, to move the project forward. The Board requested that the staff draft questions seeking additional user feedback on the Preliminary Views for consideration at the December meeting.

Minutes of Teleconference, June 14, 2011

The Board reviewed the revised preballot draft of the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches. The Board offered various clarifying suggestions and requested that the staff prepare a ballot draft of the Preliminary Views for review at the June Board meeting.

Minutes of Meeting, April 12-14, 2011


The Board reviewed the preballot draft of the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches. The Board offered various suggestions to improve the document and requested that the staff prepare a revised preballot draft of the Preliminary Views for review at the June teleconference meeting.

Minutes of Meeting, March 1-3, 2011


The Board reviewed an initial draft of the Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches. After offering various suggestions to improve the document, the Board requested that the staff prepare a preballot draft of the Preliminary Views for review at the April meeting.

Minutes of Meeting, October 25, 26, and 28, 2010

The Board continued to discuss recognition concepts for financial statements prepared using the current financial resources (CFR) measurement focus and confirmed its intent to include the concepts underlying the near-term model in a Preliminary Views. The Board reviewed the measurement concepts draft and provided suggestions to further clarify the draft material for inclusion in the Preliminary Views. The Board reviewed its tentative decision on the circumstances that may give rise to deferred inflows and outflows of resources. The Board tentatively revised the description of the circumstances that may give rise to deferred inflows and outflows in financial statements prepared using the economic resources measurement focus to the following:  

  • Outflows of resources that do not meet the definition of an asset but are intrinsically related to a future period(s)
     
  • Inflows of resources that do not meet the definition of a liability but are restricted or limited for use in a future period(s)
     
  • Sale of resources that were not previously recognized in the financial statements (future resources)
     
  • Inflows and outflows of resources related to changes in the fair value of recognized assets and liabilities when the item is related to an inflow or outflow of resources that will occur in the future  

Also, the Board tentatively agreed that the following circumstances may give rise to deferred inflows or outflows in financial statements prepared using the CFR measurement focus:  

  • Outflows of resources that do not meet the definition of an asset but are intrinsically related to a future period(s)
     
  • Inflows of resources that do not meet the definition of a liability but are restricted or limited for spending in a future period(s)  

The Board requested that the staff prepare a draft of the Preliminary Views.

Minutes of Meeting, September 14-16, 2010

The Board continued to discuss recognition concepts for financial statements prepared using the current financial resources (CFR) measurement focus. The Board considered options for CFR models that focus on presenting near-term information, and it tentatively concluded that the model based on the definition that assets are resources that are receivable and due to be received within the near-term as well as cash and resources that are available to be converted to cash within the near-term is most conceptually consistent because it maintains symmetry with the definition of liabilities, which includes those normally payable and due to be paid within the near-term. In applying these concepts for purposes of testing its tentative conclusions, the Board noted that in this model, acquisition of inventory is considered spending in the period and would not be recognized as an asset for CFR financial statements. The Board also noted that at year-end, principal on long-term debt due in the near-term is not payable until the specified due date, and therefore principal on long-term debt does not meet the definition of the liability for CFR financial statements; conversely, interest on long-term debt due in the near-term is payable and therefore meets the definition of a liability for CFR financial statements.

Minutes of Meeting, August 3-5, 2010


The Board discussed recognition concepts for financial statements prepared using the current financial resources (CFR) measurement focus. The Board tentatively decided that the CFR measurement focus conveys information about near-term spendable resources. The near-term focus is based on a period of less than 12 months. The Board tentatively decided that it is not appropriate to specify the time frame for the near-term focus in this Concepts Statement. Based on the decision to concentrate on a near-term focus, the Board requested that the staff draft two new potential CFR models for further discussion. One model would report only assets that are cash or that are expected to or are available to convert to cash within a near-term period. The other model would report assets that are cash or that are due or scheduled to be available to convert to cash within a near-term period with deferrals reported for the portion of assets, such as receivables, that are not expected to convert to cash in the near-term according to a specified payment schedule.

The Board reviewed draft measurement concepts that included certain terminology changes to promote consistency with the terminology in the Federal Accounting Standards Advisory Board’s draft measurement concepts, a conceptual discussion of fair value and an alternative to fair value in the section on remeasured amounts, as well as additional detail in the summary of Board discussions section.

Minutes of Meeting, June 22-24, 2010

The Board continued its discussion of a potential section of the draft concepts on measurement discussing specific measurement methods. The Board tentatively decided that a separate section discussing specific measurement methods should not be included in the draft Concepts Statement; rather, descriptions of some measurement methods in the existing sections on initial and remeasured amounts would be more appropriate. The Board tentatively concluded that the existing discussion of settlement value in the initial amounts section was sufficient. The Board also tentatively concluded that the remeasured amounts section would include an expanded description of fair value and the concept of entity-specific value. Due to potential for misunderstanding, the Board requested that the staff explore alternative terminology for the entity-specific value concept.

The Board met with the Federal Accounting Standards Advisory Board to discuss common issues regarding measurement concepts. The Boards tentatively agreed to harmonize terminology so that the terms used—measurement approach, measurement attribute, and measurement method—are used consistently by both Boards in developing their respective measurement concepts statements.

The Boards also discussed differences in the measurement attributes selected for discussion in the drafts and their definitions. The Boards expressed a commitment to continue to monitor the progress of the other Board and to continue to work toward consistency in definitions and descriptions when possible.

Minutes of Meeting, May 11-13, 2010


The Board continued its discussion of the GASB’s and the Financial Accounting Standards Advisory Board’s (FASAB) drafts on measurement concepts, specifically on whether a section discussing specific measurement methods, similar to a section in FASAB’s draft, should be added to the GASB’s draft measurement concepts. After discussing the draft of the potential measurement methods section, the Board tentatively decided that fair value, settlement amount, and entity-specific value would be the measurement methods discussed in the body of the Concepts Statement. The section would be expanded to include the circumstances in which each method may be most appropriate. In addition, the Board tentatively concluded that the definition of fair value should be more closely aligned with the definition of fair value in FASB ASC subparagraph 820-10-35-2 and that the definition of settlement amount also would be amended to clarify that this is a nondiscounted amount. The Board also tentatively decided that replacement cost and value-in-use, the measurement methods discussed in the FASAB’s draft that generally are not applicable to state and local governments, as well as the concept of constant-dollar accounting would briefly be discussed in the summary of Board discussions section.

Minutes of Meeting, March 29-31, 2010

The Board continued its discussion of the GASB and the Financial Accounting Standards Advisory Board’s (FASAB) drafts on measurement concepts, specifically on whether a section discussing specific measurement methods, as is included in the FASAB’s draft, should be added to the GASB’s draft measurement concepts. For purposes of informing the decision, the Board requested that the staff draft a section describing measurement methods currently used in GASB literature as well as measurement methods that could be applicable to governments. This section also would include a description of the circumstances surrounding when it may be best to use each measurement method. In addition, the Board reaffirmed its interest in harmonizing terminology so that the same term is used in both documents when it has the same meaning and in continuing to coordinate with the FASAB on this project.

Minutes of Meeting, February 16-18, 2010

The Board and FASAB staff discussed the principal differences between the GASB and FASAB's drafts on measurement concepts in relation to the underlying differences in objectives of financial reporting, users of financial information, and purposes of Concepts Statements of the two Boards. The Board expressed an interest in harmonizing terminology so that the same term is used in both documents when it has the same meaning and in continuing to coordinate with the FASAB on this project. The Board tentatively decided to replace the terms initial values and remeasured values with initial amounts and remeasurement amounts, as used in the FASAB's draft, when referring to the two primary measurement attributes. The Board will continue its discussion of harmonizing the GASB and FASAB drafts on measurement concepts at the March Board meeting.

Minutes of Meeting, October 6-8, 2009

The Board considered issues associated with interperiod equity to serve as a basis for developing recognition concepts for deferred inflows and outflows of resources. The Board tentatively decided that the following circumstances may give rise to deferred inflows or outflows:

  • Outflows of resources that are intrinsically related to future services
     
  • Time restrictions on inflows of resources when the transaction does not meet the definition of a liability
     
  • A sale of resources that were not previously recognized in the financial statements (future resources)
     
  • Changes in the fair value of recognized assets when conditions exist such that there is little likelihood of realization of the gain or loss.

Minutes of Meeting, August 26-28, 2009

The Board reviewed a revised draft section on measurement attributes in financial statements prepared using the economic resources measurement focus. The Board’s review focused on revising specific language to more precisely describe the Board’s tentative conclusions, including eliminating references that could be considered too specific for a Concepts Statement and more appropriate for standards setting.

Minutes of Meeting, July 14-16, 2009

The Board reviewed a draft section on measurement attributes in financial statements prepared using the economic resources measurement focus generally agreeing with format and content of the draft. The Board also requested that various edits be made to the draft including revising certain language, adding an appendix to describe certain alternatives and issues the Board considered in developing these concepts, and adding a table presenting the relationship between the qualitative characteristics and the measurement attributes of initial value and remeasured value.

Minutes of Meeting, April 21-23, 2009

The Board considered the scope of the project with respect to recognition in financial statements prepared using the economic resources measurement focus. The Board tentatively decided that the basic recognition criteria of other standards setters—that of meeting the definition of an element and of being measurable with a sufficient degree of reliability—were appropriate but not sufficient for the GASB’s conceptual framework. Because the GASB’s elements of financial statements include deferred inflows and outflows of resources, the Board tentatively decided that specific recognition concepts for these elements, especially a more complete exploration of the concept of interperiod equity, should be included in the scope of this project.

Minutes of Meeting, March 10-12, 2009

The Board discussed the characteristic of implied intent in relation to the categories of assets to assess whether this characteristic influences the determination of which measurement attribute is most appropriate. For assets used in providing services, the Board tentatively concluded that the implied intent for these assets is consistent with use of the initial value measurement attribute. For assets not used in providing services, the Board concluded that the implied intent characteristic is not influential in determining the most appropriate measurement attribute. The Board confirmed its tentative conclusion that the most appropriate measurement attribute for assets not used in providing services is remeasured values. The Board also acknowledged that this conclusion generally applies to assets not used in providing services, however, there may be exceptions for individual assets depending upon whether the asset will be realized through exchange (which suggests use of remeasured values) or through use (which suggests use of initial values).

The Board reviewed a summary of its tentative conclusions regarding measurement attributes in financial statements prepared on the economic resources measurement focus and directed the staff to draft concepts that will provide guidance in selecting the most appropriate measurement attribute.

Minutes of Meeting, January 27-29, 2009

The Board continued its discussion of measurement attributes for liabilities and the characteristics that influence when initial values or remeasured values are more appropriate. In evaluating the characteristic of whether or not the government can fully participate in a remeasured value change, the Board tentatively concluded that it was not a definitive characteristic but rather one to be considered along with others when assessing the relevance of a measurement attribute. When a government can readily participate in a remeasured value change, the relevance of that measure increases. When there are difficulties, barriers, or risks to participating in a remeasured value change, the relevance of the measure decreases. The Board tentatively concluded that implied intent with respect to the use of an asset or settlement of a liability also should be a characteristic to be evaluated when assessing the relevance of measurement attributes. Implied intent may be inferred from the nature of a transaction. For example, when a government acquires a capital asset, the implied intent is to use the capital asset to provide services. When a government issues debt with stated principal and interest payments, the implied intent is to settle the obligation according to its stated terms.

Based on the assessment of the characteristics of implied intent and ability to participate, the Board tentatively confirmed its prior tentative decision that long-term, fixed-rate debt should be reported at initial values. Both the implied intent when issuing the debt to settle it according to the stated payment terms and the relative obstacles to participating in a remeasured value change indicate that the relevance of a remeasured value is low.

The Board discussed and confirmed its original approach to evaluating measurement attributes that the objective is to determine the single measurement attribute—initial value or remeasured value—that is most appropriate for both the statement of financial position and the resources flows statement.

The Board continued discussing other categories of liabilities and tentatively concluded that liabilities that are obligations to pay specified amounts of money at specified times should be reported at initial values, which are more relevant due to the implied intention to settle them in accordance with their stated terms. For liabilities involving estimates, whether that be the amounts of payments or the timing of the payments, the Board tentatively concluded that remeasured values are more appropriate. Updated estimates, which are reflected in remeasured values, are a more faithful representation of the actual amounts that will be paid to settle the liabilities, and it is not possible to distinguish the updating of estimates from the act of remeasurement.

Minutes of Meeting, December 16–18, 2008

The Board continued its discussion of measurement attributes for assets and liabilities. In reconsidering the measurement attributes to be used for assets not used in providing services (for example, receivables and investments), the Board did not change its tentative conclusion that remeasured values are most appropriate, but it tentatively concluded that a reference to considering an exception for assets that will be held to maturity should not be part of the Concepts Statement. Any consideration of deviations from the guidance provided by the Concepts Statement would be part of the standards-setting process and generally would be based on circumstances for individual transactions that are different than those understood as the basis for the Board’s conceptual decisions. The Board evaluated the appropriate measurement attribute for capital assets held for sale and not used in the provision of services and tentatively concluded that a remeasured value is more relevant to the objectives of financial reporting and that any resulting gain or loss would be reported as a deferred inflow or outflow. The Board noted that these assets were similar to investments in that their utility to the government is through its conversion to cash.

The Board also discussed the categories of (1) capital assets held for sale that are being used in the provision of services and (2) business enterprise assets, but it determined that inclusion of an evaluation of measurement attributes for these categories would add an inappropriate level of detail to a Concepts Statement.

The Board then turned to a discussion of measurement attributes for liabilities, specifically long-term, fixed-rate debt. The conclusions regarding this basic liability may guide future evaluations of more complex liabilities at future meetings. The Board tentatively concluded that long-term, fixed-rate debt should be reported at initial values. The Board noted that this is a different conclusion from assets that are investments in long-term, fixed-rate debt. Although investments in and obligations for long-term, fixed-rate debt appear to be symmetrical, the Board noted these assets and liabilities are not symmetrical in the ability of the government to fully participate in the gain or loss upon remeasurement. The Board asked the staff to “stress test” this tentative conclusion for consideration at the next Board meeting.

Minutes of Meeting, November 4–6, 2008

The Board continued its discussion of measurement concepts tentatively concluding on the terminology for the two primary measurement attributes. The complete terms are initial transaction date-based measurements and current financial statement date-based measurements, with “short-hand” terms of initial values and remeasured values. The Board also decided that for the purposes of the approach to discussing measurement attributes, a mixed-attribute model will not be excluded.

The Board then began considering the most appropriate measurement attribute for various categories of assets in economic resources measurement focus financial statements. The Board tentatively concluded that initial values are most appropriate for assets used in providing services, which generally include capital assets, inventories, and prepaid assets. For purposes of determining cost of services in the resource flows statement, initial value measurements are also generally most relevant. For purposes of assessing service potential in the statement of financial position, a remeasured value generally is more relevant than an initial value; however, other considerations reduce the usefulness of remeasured values. Governments sometimes own assets with historical or other public benefit significance that generally would not be reflected in remeasured values. Even for assets used in providing service whose remeasured values do reflect their service potential, concerns arise about the reliability of the information and understandability of the results in the financial statements. The issue of understandability arises due to the need to address holding gains and losses. The Board also considered that the cost of applying remeasured values may be high in relation to the relevance of the resulting information. The Board also tentatively decided that capital assets held for sale and assets of certain business enterprises of governments may not be considered as assets used in providing services and requested that the staff present an analysis of these asset categories at a future meeting.

The Board then considered measurement attributes for assets not used in providing services—principally receivables and investments. The Board tentatively agreed that generally a remeasured value is more relevant to reporting financial position and that generally the cost of remeasurements for these assets are minimal; however, the Board acknowledged that an exception should be considered for assets that will be held to maturity and collected within the normal course of business. The Board explored several options for determining when an asset should be considered to be held to maturity but did not agree on the underlying concept.

Minutes of Meeting, September 24–26, 2008

The Board discussed and approved the materials for research on the current financial resources measurement focus, noting that information regarding the duration of the period considered to be “near-term” also should be obtained as part of this research effort. The Board then discussed issues related to how measurement attributes will be addressed in the Concepts Statement. The Board tentatively confirmed that the principal issue of measurement attributes is determining when items should be reported at the value assigned at the original date the asset was acquired or the liability incurred, adjusted for amortization or depreciation, as appropriate, and when items should be reported at a value as of the date of the financial statements. The Board did not reach any tentative conclusions regarding the specific terms that should be proposed to identify these two principal measurement attributes but, rather, requested that the staff consider the Board’s comments and present a recommendation at the next meeting. In discussing the value as of the date of the financial statements, the Board acknowledged that fair value is one way of measuring this value but that others methods, such as value-in-use and replacement cost, for example, also represent a value as of the date of the financial statements.

Minutes of Meeting, August 19–21, 2008

The Board met jointly with the Federal Accounting Standards Advisory Board to discuss measurement concepts appropriate to governmental financial reporting objectives. All Board members were given an opportunity to express their views as to how historical cost and fair values, broadly defined, may promote achieving the objectives of financial reporting related to information about cost of services and about reporting changes in financial position. The objective of the discussion was to express views rather than to reach a consensus position. All Board members noted that in some situations, historical cost is preferred and in some situations fair value is preferred, tentatively confirming that a mixed-attribute model is consistent with the noted objectives of financial reporting for governments.

Minutes of Meeting, July 8–10, 2008

The Board discussed measurement attribute issues in general. In addition, an overview of the joint FASB/IASB conceptual framework project on measurement issues was provided by the staff in preparation for the August 2008 meeting, which will be conducted jointly with the Federal Accounting Standards Advisory Board. The Board agreed to approach this joint discussion of measurement attributes by considering potential measurement objectives and how they relate to the objectives of financial reporting.

Minutes of Meeting, June 12, 2008 Teleconference

The Board discussed potential options for current financial resources measurement focus financial statements for the purpose of determining which options should be used in research with users and preparers of financial statements. The Board did not reach any tentative decisions on this issue but will continue the discussion of additional research efforts related to this topic at a future meeting.

Minutes of Meeting, May 21–23, 2008

The Board evaluated draft materials, including draft financial statements, for use in conducting research on the current financial resources measurement focus with users and preparers of financial statements. The Board would like to consider other options for current financial resources models and directed the staff to develop financial statements using the following models for further consideration for inclusion in the research materials:

  • Cash basis
     
  • Current financial resources measurement focus using a payment cycle criterion for assets and liabilities
     
  • Current resources measurement focus using a payment cycle criterion for assets and liabilities and include nonfinancial assets (inventories and prepaids)
     
  • Current financial resources measurement focus using an operating cycle criterion for assets and liabilities
     
  • Current resources measurement focus using an operating cycle criterion for assets and liabilities and include nonfinancial assets (inventories and prepaids)
     
  • Economic resources measurement focus.

A further refined draft of the materials will be discussed at the June teleconference.

Minutes of Meeting, April 15–17, 2008

The Board’s discussion focused on identifying specific messages conveyed by financial statements prepared on the current financial resources measurement focus (CFR financial statements) and determining the items that would need to be reported in order to convey the specific messages. The Board tentatively agreed that CFR financial statements should convey information about the amount available for spending. This amount is (1) a residual of the amount of resources in spendable form at year-end and remaining obligations associated with spending of the period being reported on and (2) the amount that was available for spending in the period being reported on and that was left unspent at year-end. The Board discussed, in a general manner, other items that may be reported in CFR financial statements and what messages would be conveyed by reporting such items; however, the Board did not reach any tentative conclusions in this area. The Board believes that additional information about how information in CFR financial statements is used is needed before the Board makes further decisions. Consequently, additional research with users and preparers of financial statements will be conducted to identify specifically what information is sought from CFR financial statements, distinguishing it from information obtained from government-wide financial statements overall and from disaggregations that are provided by fund financial statements without regard to the measurement focus used.

Minutes of Meeting, March 4–6, 2008

The Board’s discussion focused on the specific meaning of the term current financial resources for the purpose of explaining with greater specificity the messages conveyed by financial statements prepared using the current financial resources measurement focus. The Board evaluated whether the overall message of current financial resources financial statements is associated with providing information about service capacity in the short term or providing information about liquidity and solvency, and tentatively concluded that the principal overall message relates to liquidity and solvency. The Board considered whether items that generally are consumed in lieu of future spending, such as inventory and prepaid items, are considered current financial resources, and tentatively agreed that those items are current financial resources. The Board also considered whether the period of time that is considered to be current is a typical payment cycle or an operating cycle, or another cycle, but did not reach a tentative conclusion.

Minutes of Meeting, January 22–24, 2008

The Board’s discussion focused on the messages conveyed in financial statements prepared using the current financial resources measurement focus. Through the discussion, the Board noted that some of the messages conveyed by financial statements are communicated through the classification and presentation of the elements in addition to the messages communicated due to the measurement focus employed. Although no decision was intended to be reached, the Board’s discussion included some of the options for how current financial resources may be defined. These options included notions of liquidity, marketability of financial resources, and working capital. The Board tentatively concluded that financial statements prepared using the current financial resources measurement focus (CFR financial statements) convey the following messages at a minimum:

  • What were the current financial resources and claims against current financial resources of the entity at the reporting date?
     
  • What was the balance of current financial resources at the reporting date that is available for spending in future periods?
     
  • What were the amounts and sources of inflows and outflows of current financial resources during the reporting period?

The Board then discussed how budgetary information and the current financial resources measurement focus are related. The Board acknowledged that information in budgetary-basis schedules and statements will be compared with and reconciled to information in CFR financial statements, and that these comparisons and reconciliations provide information that is useful for understanding a government’s methods of budgeting and comparing it to methods used by other governments. However, the Board tentatively concluded that budgeting principles (which vary widely in practice) should not influence recognition and measurement concepts for CFR financial statements.

The Board noted that enhancement of the ability to assess interperiod equity is a consideration in determining when items meet definitions of elements of financial statements prepared using the economic resources measurement focus in Concepts Statement No. 4, Elements of Financial Statements, and considered whether the notion of interperiod equity also would assist in developing recognition and measurement concepts for CFR financial statements. The Board also noted that economic resources-based financial statements will be able to provide a greater ability to assess interperiod equity’; however, CFR financial statements are not devoid of information that may be helpful in assessing interperiod equity. In addition, the Board tentatively agreed that recognition and measurement concepts for CFR financial statements may be influenced by the notion that some transactions inherently may be associated with a specific period.

Minutes of Meeting, December 11–13, 2007

The Board began its deliberations on the conceptual framework—recognition and measurement project by considering several overarching issues. First, the Board considered the scope of the financial statements for which recognition and measurement concepts are to be established. The Board recognized that projects currently on the technical agenda and contemplated for addition to the technical agenda could result in financial statements that may not be historically based. However, the Board tentatively concluded that, this conceptual framework project would be limited to recognition and measurement concepts for historically based financial statements—a statement of financial position and a statement of resource flows. The Board evaluated whether other terms best described this group of financial statements and tentatively decided not to use the term basic financial statements, because it often refers to that set of statements that is required for a GAAP presentation which is established through accounting standards and is subject to change, and not to use the term traditional financial statements, because it is nonspecific and does not have a generally agreed-to meaning.

Second, the Board considered whether or not a financial statement (and its related articulating financial statement) should employ a single measurement focus. The Board tentatively concluded that from a conceptual standpoint, only a single consistent measurement focus is appropriate because it presents a clearer message and provides better accountability.

Third, the Board discussed which measurement focuses would be considered part of this project and tentatively decided that only economic resources, current financial resources, and cash measurement focuses would be evaluated. The Board did not at this time explore specific definitions for these measurement focuses.

Finally, the Board started a discussion of the objectives of financial statements, messages conveyed by different measurement focuses and financial statements, and users’ needs for information in financial statements. The Board did not limit the discussion solely to information associated with specific measurement focuses, but it also explored issues of presenting information in an aggregated form for the entire entity contrasted with information presented for individual funds as well as of presenting information on an entity’s budgetary basis of accounting. The Board reached no tentative decisions in this area, and it directed the staff to focus on identifying potential objectives of financial statements prepared on the current financial resources measurement focus as well as exploring existing research that may identify what information users of financial statements extract from current governmental fund financial statements and how it may be used to assess accountability and inform decision making.