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Financial Reporting Model—Reexamination of Statements 34, 35, 37, 41, and 46 and Interpretation 6


Minutes of Meetings, January 29–31, 2019
 
The Board considered amendments to paragraphs 8–11 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, based on the tentative decisions reached at the December 2018 meeting and tentatively agreed to propose various edits.  The Board tentatively decided that the illustration of management’s discussion and analysis (MD&A) in Appendix C of Statement 34 should be replaced using financial statements that reflect current circumstances. The Board also tentatively decided that the MD&A illustration should include figures such as charts, graphs, and tables when they can be used to meet an MD&A requirement.
 
Additionally, the Board considered changes to the current requirements for the separate presentation of special and extraordinary items. The Board tentatively decided to propose replacing the current guidance with a requirement to separately present at the bottom of resources flows statements inflows of resources and outflows of resources that are either unusual in nature or infrequent in occurrence or both. Additionally, the Board tentatively decided to propose that additional information about these items, including the program or function or identifiable activity to which it is related and whether the item is within the control of management, be disclosed.

Minutes of Meetings, December 17–19, 2018
 
The Board considered amendments to paragraphs 8–11 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, based on the tentative decisions reached at the November 2018 meeting. The Board also discussed whether current financial reporting requirements should be proposed to be changed to provide additional information about debt service funds.  The Board tentatively decided not to pursue any changes with regard to information about debt service funds because the expected benefits do not justify the perceived costs of providing and auditing the information.

Minutes of Meetings, November 14–16, 2018

The Board began initial deliberations on topics in addition to those presented in the Preliminary Views, Financial Reporting Model Improvements, that may be included in the upcoming Exposure Draft on the project, beginning with a discussion on management’s discussion and analysis (MD&A) requirements. The Board first discussed the target audience for the MD&A and tentatively decided that the users of MD&A are the broad types of users discussed in paragraph 63 of Concepts Statement No. 1, Objectives of Financial Reporting. The Board also tentatively decided that the requirement to present a brief discussion of the basic financial statements, including the relationships of the statements to each other and the significant differences in the information they provide, should continue to be required to be included as part of MD&A with the proposal to be presented in a way that adds more structure and clarity to the requirement.

Additionally, the Board tentatively decided to address concerns regarding the thoroughness of the analysis of year-to year changes through a combination of proposed amendments to the current guidance, further consideration of modifications to implementation guidance, and educational efforts. The Board then tentatively decided that amended guidance for the MD&A should be proposed to indicate that the analysis should be presented in a manner that avoids unnecessary duplication. The Board next considered the location of the discussion of significant variations between the original and final budget amounts and between the final budget amounts and actual results for the general fund. The Board tentatively decided that to assist users in locating the information, the Exposure Draft should include a proposal that such information should be located as notes to budgetary comparison information, which is proposed to be presented as required supplementary information. The Board also tentatively decided to propose removing the requirement to present information about infrastructure assets accounted for using the modified approach.

Next, the Board discussed the requirement to include in MD&A a description of currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations. The Board tentatively decided to propose that the description of the requirement include examples of specific types of information. The Board tentatively decided that the following examples should be proposed:
  • Economic data, including population growth and unemployment rates
  • Details of the subsequent year’s adopted or approved budget, including
    (1) the change in total amount available for appropriation with reference narratively to the types of revenues (taxes and fees) and changes in rates and bases; (2) the changes in planned spending with reference to sources such as inflation, labor contracts with unions, adjustments, and whether new programs were added; and (3) expected changes in fund balance
  • Information related to actions the government has taken related to postemployment benefit plans, capital improvement plans, and long-term debt
  • Information related to actions other parties have taken that affect the government, such as legislative changes, litigation, and new regulations or standards imposed on the government.
Minutes of Teleconference, September 12, 2018
 
The Board reviewed and provided suggested edits to a ballot draft of the Preliminary Views, Financial Reporting Model Improvements, which included the alternative views of two Board members. The Board approved the issuance of the Preliminary Views in a four to three vote.

Minutes of Meetings, August 22–24, 2018

The Board reviewed and provided clarifying edits to a preballot draft of the Preliminary Views, Financial Reporting Model Improvements. The Board then agreed that the project staff should present a ballot draft for consideration at the September 2018 teleconference meeting.

Minutes of Meetings, July 10–12, 2018

The Board reviewed and discussed the alternative views of two Board members and the position of another Board member related to the draft Preliminary Views, Financial Reporting Model Improvements.  The Board then tentatively decided that the comment deadline for the Preliminary Views will be February 15, 2019. The Board reviewed the draft Preliminary Views, discussed clarifying edits, and agreed to consider a preballot draft of the Preliminary Views, including the alternative views of the two Board members, for discussion at the August 2018 meeting.

Minutes of Teleconference, June 18, 2018
 
The Board continued deliberations on topics to be presented in the Preliminary Views. The Board discussed possible communication methods for information about major component units. The Board tentatively decided that when it is not feasible to present major component unit financial statements in a separate column in the reporting entity’s statements of net position and activities, the financial statements of the major component units should be presented as combining financial statements after the fund financial statements.

Minutes of Meetings, May 29–31, 2018
 
The Board continued deliberations on topics to be presented in the Preliminary Views. The Board first discussed possible communication methods for information about noncash investing, capital, and financing activities. The Board tentatively decided to propose that the information continue to be communicated as a schedule to the statement of cash flows.
 
The Board next considered the feedback received on the Invitation to Comment (ITC), Financial Reporting Model Improvements—Governmental Funds, regarding topics that have not been previously addressed. The Board tentatively decided to propose that governmental fund statements present financial information of nonmajor funds, as currently required.
 
The Board then considered whether there is an opportunity to develop governmental fund recognition guidance specific to small governments and whether there is an opportunity to provide a small government concession related to the reconciliation between governmental fund financial statements and government-wide financial statements. The Board tentatively decided that the Preliminary Views should not propose a concession for small governments to exclude the reconciliation between governmental fund financial statements and government-wide financial statements.

The Board also considered the ITC feedback related to small government concerns and discussed potential small government concessions. The Board tentatively decided that the tentative Board decisions reached to date do not provide opportunities to develop specific recognition-approach-related proposals for small governments. Additionally, the Board tentatively decided based on the additional feedback to the ITC that no tentative decisions for the Preliminary Views should be reconsidered for potential small government exceptions.
 
The Board also tentatively decided that the Preliminary Views should not propose a concession for small governments to allow the use of (1) a natural classification of expenditures in the governmental fund financial statements, (2) a natural classification of expenses in the government-wide statement of activities, and (3) a revenue/expense format in the statement of activities.
 
The Board then reviewed draft sections of the Preliminary Views and discussed clarifying edits.

Minutes of Meetings, April 17–18, 2018
 
The Board continued deliberations on topics to be presented in the Preliminary Views on the Financial Reporting Model. The Board first discussed the appropriate communication method for the reconciliations of information in governmental fund financial statements to information in the government-wide financial statements. The Board tentatively decided that those reconciliations should continue to be presented as part of the governmental fund financial statements. The Board also tentatively decided that the proprietary fund reconciliation of operating income to net cash flows from operating activities should continue to be presented as part of the proprietary statement of cash flows. Additionally, the Board tentatively decided that a notice should not be included at the bottom of the governmental and proprietary fund financial statements to alert readers to the location of the reconciliations. The Board then tentatively decided that the Preliminary Views would not propose a requirement to use standardized terminology for the reconciling items.
 
The Board next considered the feedback received on the Invitation to Comment, Financial Reporting Model Improvements—Governmental Funds, as well as the feedback received from task force and Governmental Accounting Standards Advisory Council (GASAC) members regarding a statement of cash flows for governmental funds. Based on the feedback, the Board tentatively decided that the Preliminary Views should not include a proposal that a statement of cash flows for governmental funds be required.
 
The Board then considered the effect of its tentative decisions in relation to the short-term financial resources recognition approach for governmental funds on the reporting of permanent funds. The Board tentatively decided that the Board’s tentative decisions in relation to the short-term financial resources recognition approach applied by governmental funds should not change the classification of permanent funds.

The Board also tentatively decided that the notice at the top of the Short-Term Financial Resource Balance Sheet should be shortened to include only the first sentence: “This financial statement presents a short-term view of the governmental fund activities and excludes items of a long-term nature.”
 
The Board then provided editorial clarifications to the draft regarding (a) recognition concepts for governmental funds, (b) application of the recognition concepts to selected transactions and other events, and (c) illustrations of the recognition concepts.

Minutes of Meetings, March 7–8, 2018
 
The Board continued deliberations on topics to be presented in the Preliminary Views. The Board first considered feedback received on the Invitation to Comment (ITC), Financial Reporting Model Improvements—Governmental Funds, as well as feedback received from task force and Governmental Accounting Standards Advisory Council members regarding (a) the reconciliation of information in the governmental fund financial statements to information in the government-wide financial statements and (b) the terminology used in the governmental fund financial statements. The Board tentatively decided that the Preliminary Views should not propose that the reconciliation between information in governmental fund statements and government-wide information be presented on the same page. The Board also tentatively agreed that the communication method of the reconciliation should be evaluated before the Board makes any further tentative decisions on the presentation of the reconciliation.
Regarding the terminology used in the governmental fund financial statements, the Board tentatively decided that (a) the additional explanations after the governmental fund financial statement titles proposed in the ITC should be carried forward to the Preliminary Views, (b) the additional explanation after the governmental fund balance sheet should exclude the language referring to nonfinancial resources such as capital assets and long-term debt related to capital assets when carried forward to the Preliminary Views, (c) the element titles and line item descriptions proposed for the short-term approach in the ITC should be carried forward to the Preliminary Views, and (d) the governmental fund financial statement titles proposed for the short-term approach in the ITC should be carried forward to the Preliminary Views. The Board then discussed the feedback received to the ITC regarding the format of the governmental funds resource flows statement. The Board tentatively decided that the current and noncurrent (long-term) activity format should be proposed in the Preliminary Views and that the potential inconsistency in the usage of the term long-term should be resolved by describing the capital assets and long-term debt activity as noncurrent, rather than long-term, activity. The Board also tentatively decided that a practical expedient for small governments to report governmental funds resource flows information using the existing format instead of the current and noncurrent activity format should not be proposed.

Minutes of Meetings, January 23−24, 2018
 
The Board continued deliberations on topics to be presented in the Preliminary Views. The Board first considered proposed language that describes the messages conveyed by the recognition approach, the recognition concepts, features of the recognition approach, and the approach’s relationship with the objectives of financial reporting and a table that applies the recognition concepts to selected transactions, providing suggestions for clarifying the language. The Board tentatively decided that the recognition approach proposed in the Preliminary Views be should be referred to as short-term financial resources.
 
The Board then discussed tentative Board decisions reached to date on
(1) budgetary comparison information, (2) the format of proprietary fund financial statements, and (3) the format of the statement of activities and supplementary schedule of natural classifications for consideration of the financial reporting model within the context of small governments. The Board tentatively decided that these tentative Board decisions reached to date do not provide opportunities to develop specific proposals for small governments.
 
The Board next discussed the differences between the recognition concepts in the 2011 Preliminary Views, Recognition of Elements of Financial Statements and Measurement Approaches, and the recognition approach that the Board has tentatively agreed to propose in the financial reporting model reexamination Preliminary Views. The Board tentatively decided that the differences are sufficiently significant to reissue a Preliminary Views related to recognition concepts for governmental funds. The Board also tentatively decided that the Preliminary Views on recognition concepts should be issued as a separate document.

Minutes of Meetings, December 12−14, 2017
 
The Board continued deliberations on topics to be presented in the Preliminary Views. The Board first considered feedback received on the Invitation to Comment, Financial Reporting Model Improvements—Governmental Funds, relating to the overall focus of governmental fund financial statements. The Board tentatively decided to propose that governmental fund financial statements present information that reflects a shorter time perspective than information in the government-wide financial statements and that facilitates comparison with a government’s budgetary information.
 
The Board then discussed the feedback received relating to the recognition approaches presented in the Invitation to Comment. The Board tentatively decided that the long-term financial resources approach neither as proposed in the Invitation to Comment nor with the columnar presentation of capital assets and debt or other alternatives should be pursued further in developing a Preliminary Views. The Board then tentatively decided that the near-term and short-term financial resources recognition approaches as proposed in the Invitation to Comment should not be pursued further.
 
The Board next discussed suggested modifications to the near-term and short-term approaches. The Board tentatively decided that the recognition approach for governmental funds presented in the Preliminary Views should be based on a combination of the near-term and short-term recognition approaches with the following characteristics:
  • One-year (operating cycle) period of availability
  • Accrued interest will be recognized when payable and normally due within one year, which may not necessarily align with the recognition of principal payments on the related debt
  • Recognition of tax and revenue anticipation notes as liabilities
  • Exclusion of the recognition of the current portion of long-term assets and liabilities.
Minutes of Meetings, October 31−November 2, 2017

The Board continued deliberations on topics to be presented in the Preliminary Views (PV). The Board considered feedback received on the Invitation to Comment (ITC), Financial Reporting Model ImprovementsGovernmental Funds, regarding recognition approaches for governmental funds other than the three proposed in the ITC (near-term financial resources, short-term financial resources, and long-term financial resources) or modifications to any of those three approaches. The Board discussed whether the current financial resources recognition approach with modifications, the economic resources recognition approach, or presentation outside of the basic financial statements should be pursued further in developing the PV. The Board tentatively decided that none of those alternatives should be pursued during the development of the next due process document.

The Board then deliberated the definition of financial resources that should be presented in the PV. The Board tentatively decided to propose the following definition of financial resources— “cash, resources that are expected to be converted to cash, and resources that are consumable in lieu of cash.”

 Minutes of Meetings, September 27 and 28, 2017

The Board continued deliberations on topics to be presented in the Preliminary Views, specifically the proposals related to the format of the government-wide statement of activities and presentation of information about natural classification of expenses. The Board discussed four alternatives and tentatively decided to propose that the existing format of the government-wide statement of activities be presented with a schedule of natural classification of expenses by function or program. The Board then tentatively decided to propose that the information conveyed in a schedule of natural classification of expenses be presented in general purpose external financial reports as supplementary information.

Minutes of Task Force Meeting, September 26, 2017

The task force discussed feedback received on the Invitation to Comment (ITC), Financial Reporting Model Improvements—Governmental Funds, and provided input to the Board on developing preliminary views on the major issues in the ITC.

The task force first discussed the feedback related to the shorter term and budgetary perspective that has been the focus of governmental funds. Many task force members supported governmental fund financial statements continuing to present information that (1) reflects a shorter time perspective than the information presented in the government-wide financial statements; (2) focuses on financial, rather than economic resources; and (3) facilitates comparisons with a government’s budgetary information.

The task force then discussed the feedback on the definition of financial resources, specifically with respect to inventory and prepaid items. Some task force members expressed that this discussion would be more appropriate after the Board selects one of the three recognition approaches.

The task force also discussed the common recognition suggestions in the feedback to the ITC focusing on identifying fatal flaws in the approaches and which one(s) they would suggest the Board consider for the Preliminary Views (PV). The commonly suggested approaches included:
  • Near-term financial resources as presented in the ITC
  • Near-term financial resources with changes to accrued interest and tax and revenue anticipation notes
  • Short-term financial resources as presented in the ITC
  • Short-term financial resources without certain liabilities (capital debt and postemployment benefits, for example)
  • Long-term financial resources as presented in the ITC
  • Long-term financial resources with columnar presentation of capital assets and debt
  • Current financial resources with modifications
  • Economic resources.
Many task force members were not in support of the Board further considering:
  • Near-term financial resources as presented in the ITC
  • Short-term financial resources as presented in the ITC
  • Long-term financial resources as presented in the ITC
  • Long-term financial resources with columnar presentation of capital assets and debt
  • Economic resources.
Support was expressed by those task force members for the Board further considering (1) near-term financial resources with modifications, (2) short-term financial resources with modifications, or (3) current financial resources with modifications. Some task force members believe that there is not a persuasive argument to abandon the current financial resources measurement focus and that, instead, the GASB should be focusing on fixing the conceptual inconsistencies within the existing measurement focus. It is important to note that (1) and (3) are similar because the near-term financial resources approach was the closest to the current financial resources approach and included modifications to increase the conceptual consistency. Additional modifications to the current financial resources approach suggested by task force members included:
  • Specifying a single period of availability
  • Recognition of prepaid items and inventory (as discussed above)
  • Recognition of debt principal payments or just short-term debt principal payments
  • Recognition of long-term receivables.
The task force members then discussed the feedback on a same-page reconciliation of the governmental fund financial statements to the government-wide financial statements. Although many task force members were supportive of a reconciliation between the government-wide financial statements and the governmental fund financial statements, those task force members were not supportive of it being on the same page.

The task force members next discussed the feedback received on a statement of cash flows for governmental funds. Many task force members stated that a statement of cash flows for governmental funds would not be necessary if the funds retain a shorter term focus (for example, the near-term or current financial resources recognition approach) in the PV. Some task force members stated that the cost of preparing the statement of cash flows would exceed the benefits of the information conveyed in the statement. If a statement of cash flows is to be presented in the PV, some task force members expressed that the statement should be prepared only for certain governmental funds or for all governmental funds in the aggregate.

The task force members also discussed the appropriateness of the four categories of cash flows currently used in the statement of cash flows for proprietary funds (operating activities, noncapital financing activities, capital and related financing activities, and investing activities). Some task force members believed that the four categories would be appropriate for governmental fund cash. Other task force members stated that three categories (operating, investing, financing) should be used to classify governmental fund cash flows. However, some task force members stated that if the classifications were changed, they should be changed for proprietary funds and business-type activities as well, to provide consistency.

Minutes of Meetings, June 28–29, 2017

The Board continued deliberating a topic to be presented in the upcoming Preliminary Views—the classification of operating and nonoperating revenues and expenses in proprietary fund and business-type activity financial statements. The Board tentatively decided to propose a direct definition of nonoperating revenues and expenses and to derive the definition for operating revenues and expenses from the definition of nonoperating revenues and expenses. The Board tentatively decided to propose that the definition of nonoperating revenues and expenses include subsidies received and provided, revenues and expenses of financing, resources from the disposal of capital assets and inventory, and investment income and expenses. Sale of inventory held for resale in the ordinary course of operations is not considered a disposal of inventory for purposes of this definition. In addition, the Board tentatively agreed with the proposed schedule of discussing feedback from the Invitation to Comment, Financial Reporting Model Improvements—Governmental Funds, and developing a Preliminary Views.

Minutes of Meetings, May 23–25, 2017

The Board continued deliberations on topics to be presented in the Preliminary Views, specifically the industry outreach conducted by the project staff regarding the high-level alternatives for defining operating and nonoperating activities in proprietary fund and business-type activity financial statements.

The Board tentatively decided that the self-sustaining or subsidized alternative, with modifications, should be developed at a high level for the purposes of defining operating and nonoperating revenues and expenses. Specifically, the potential modifications include (1) whether additional subtotals should be required or allowed; (2) whether the definition of nonoperating activities should include financial, investing, and ancillary activities in addition to subsidies; and (3) whether operating activities should include certain taxes and grants that are closely associated with operating activities.

Minutes of Meetings, January 17-19, 2017

The Board continued deliberations on topics to be presented in the Preliminary Views, specifically the high-level alternatives for defining operating and nonoperating activities in proprietary fund and business-type activity financial statements. The general themes of the alternatives included (a) self-sustaining or subsidized, (b) financial performance, (c) recurring or nonrecurring, and (d) debt covenant compliance. The Board will not make a tentative decision on the approach to defining operating activities until additional outreach efforts with industry groups to gather feedback regarding the proposed alternatives has been completed.

Minutes of Meetings, December 5-8, 2016

The Board reviewed a ballot draft of the Invitation to Comment, Financial Reporting Model Improvements—Governmental Funds, 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.

The Board then began deliberations of additional topics to be presented in the Preliminary Views. Two topics were introduced: (1) budgetary comparison reporting and (2) presentation and classification of operating and nonoperating revenues and expenses in proprietary fund and business-type activity financial statements.

First, the Board discussed the communication method for budgetary comparison information. Following discussion of alternatives, the Board tentatively agreed that budgetary comparison information should be proposed to be presented using a single primary method of communication and tentatively agreed that budgetary comparison information should be proposed to be presented in RSI.

The Board then discussed presentation of budget variances as part of budgetary comparison information. The Board tentatively agreed to propose that governments present specific budget variances and that governments should report the variance between:
  • Final budget and actual amounts
  • Original budget and final budget amounts.
Finally, the Board discussed presentation and classification of operating and nonoperating revenues and expenses for proprietary fund and business-type activity financial statements. The Board tentatively decided to propose that financial statements for business-type entities continue to distinguish between operating and nonoperating revenues and expenses. Additionally, the Board tentatively agreed to propose that both the resource flows statement and the statement of cash flows be presented using the same definition of operating activities and to develop a new definition for operating activities.

Minutes of Meetings, October 25-27, 2016

The Board reviewed the preballot draft of the Invitation to Comment, Financial Reporting Model Improvements—Governmental Funds. In conjunction with this review, the Board tentatively decided that it is not necessary for the Invitation to Comment to present a single definition of financial resources consistently applied to all recognition approaches. Rather, the Invitation to Comment will be used to solicit feedback on the definitions of financial resources and the issues related to assessing whether prepaid items and inventory are considered financial resources. Additional language explaining this issue will be added to the end of Chapter 2.

In conjunction with reviewing the illustrations in Appendix D and the discussion of selected transactions in Appendix E, the Board tentatively decided to remove the service concession arrangement transaction from the illustrations.

Additionally, the Board proposed various clarifying edits throughout the document.

The Board did not object to moving forward with a ballot draft of an Invitation to Comment for discussion at the December 2016 meeting.

Minutes of Meetings, September 13-15, 2016

The Board discussed a proposal to change the name of the working capital recognition approach to the short-term financial resources recognition approach. In addition to tentatively deciding to use the term short-term financial resources in the forthcoming Invitation to Comment, the Board also tentatively decided to rename the total financial resources recognition approach as the long-term financial resources recognition approach to more clearly convey the differences in the recognition approaches.

The Board then discussed whether to reaffirm its previous tentative decision that governmental fund financial statements should present a short-term view of a government’s financial position and flows of resources. The Board tentatively decided to describe the information in governmental fund financial statements as having a shorter duration than information in the government-wide financial statements.

The Board also tentatively decided to remove from the Invitation to Comment the materials related to the government-wide statement of activities to focus the feedback on governmental funds. The proposed title of the Invitation to Comment was tentatively changed to Financial Reporting Model Improvements—Governmental Funds. The potential improvements to the government-wide statement of activities will be included in the Preliminary Views phase.

Additionally, the Board discussed the first full draft of the Invitation to Comment and proposed various clarifying edits.

The Board did not object to moving forward with a preballot draft of an Invitation to Comment.

Minutes of Meetings, August 10-12, 2016

The Board discussed feedback received on the draft Invitation to Comment from task force members at the June 2016 task force meeting held in New York City. The Board discussed issues raised at the meeting related to the three governmental funds recognition approaches, the format of the governmental funds resource flows statement, the proposed governmental funds statement of cash flows, and the format of the government-wide statement of activities.

The Board tentatively agreed not to object to the addition in Appendix B of more detail about the development of the three recognition approaches. The Board also tentatively agreed with the addition of the explanation of what is meant by the term normally as used in the context of the near-term recognition approach.

The Board tentatively agreed with relocating the presentation of the common benefits and challenges collectively in paragraphs before the introduction of the individual recognition approaches as presented in the draft ITC. The Board also tentatively agreed with the addition of examples of items both recognized and not recognized as assets and liabilities in the near-term and working capital approaches. The Board tentatively agreed with the modifications to common benefits and challenges to further explain fund balance and its usefulness in assessing the amount available for spending in the subsequent period for each recognition approach.

The Board tentatively agreed not to include examples related to permanent funds in Chapter 2 of the ITC that is being developed.

The Board tentatively agreed with retaining the elements terminology currently being used in the draft ITC and with the addition of a paragraph in the introduction of Chapter 2 to explain the meaning of and rationale for using those terms in the document and illustrations. The Board also tentatively agreed that the illustrations should continue to be presented as an appendix at the end of the draft ITC and that the illustrations will be referenced in the introduction to Chapter 2.

The Board tentatively agreed that a comparison schedule of the statements of net position and resources flows statement for each of the recognition approaches and additional illustrations of other types of governments should not be provided.

The Board tentatively agreed that the draft ITC should note that a specified single period of time following the end of the reporting period will be selected as part of development of the near-term recognition approach, if such an approach were further developed. The Board also tentatively agreed that the near-term approach should not be modified at this time to recognize certain anticipation notes (for example, TANs) as fund liabilities.

The Board tentatively agreed that the length of the discussion and number of challenges related to the working capital recognition approach should not be modified for comparability to the other two recognition approaches; however, the Board did agree that work on simplifying language to enhance the understandability of the working capital recognition approach section should continue.

The Board tentatively agreed that the classification of current and long-term activities should be clarified in Chapter 3, paragraph 4 of the draft ITC. The Board also tentatively agreed that additional language should be added to Chapter 3, paragraph 4, of the draft ITC to clarify the distinction between current and long-term transfers.

The Board tentatively agreed that a question should be included in the draft ITC that addresses the classification of cash inflows and cash outflows. The Board also reaffirmed that a statement of cash flows should not be included for the near-term recognition approach in the draft ITC; however, the Board tentatively agreed that the explanation of this position should be further clarified in Chapter 3, paragraph 7, of the draft ITC.

The Board tentatively agreed that in developing a statement of cash flows for the general fund under the working capital and total financial resources recognition approaches, the separation of restricted and unrestricted cash flows should not be explored further at this time. The Board also tentatively agreed that a discussion of the purpose of a cash flows statement should be added to Chapter 3, paragraph 8, of the ITC.

The Board tentatively agreed that clarifications are necessary in Chapter 4, paragraph 5, regarding the benefits of the presentation of a total revenues amount in the statement of activities. The Board also tentatively agreed with the inclusion of a revised schedule of business-type activities expenses by function and natural classification in the draft ITC.

The Board tentatively agreed that discretely presented component units should not be included in the illustrations presented in the draft ITC.

Minutes of Task Force Meeting, June 23, 2016

The task force provided feedback on the Board’s tentative decisions to date for the Financial Reporting Model Reexamination project, which were presented in a draft Invitation to Comment (ITC). The task force provided comments on how the discussion and illustrations in each section of the ITC can be made more clear and complete.

The task force first discussed the three general approaches to the recognition of elements of financial statements and presentation for the governmental fund financial statements that would be proposed in the ITC. These approaches are: total financial resources, working capital, and near-term financial resources. For each approach, the task force members provided feedback on the explanation of the recognition concepts, potential benefits and challenges, illustrations, and explanations of the application of the recognition approach to certain transactions. Some task force members recommended that the ITC provide additional discussion around how these three approaches were developed and selected for inclusion in the ITC and how they differ from the existing model. In addition, some task force members suggested that the discussion of each recognition model explain which assets and liabilities will not be recognized in addition to the existing discussion of which assets and liabilities are included for each recognition model. Some task force members also expressed concern about changing terms and definitions used in the models due to the uncertainty and confusion that it may cause in practice.

The task force members also provided feedback on the discussion of the two alternatives for the format of the governmental funds resource flows statement. Some task force members suggested that a definition for and additional explanation of current activity and long-term activity be provided. Some task force members also asked that variations in this section be highlighted to better identify differences between the two formats.

The task force members also expressed their thoughts on how the sections discussing and illustrating the statement of cash flows for governmental funds can be made more clear and complete. Some task force members expressed support for a governmental funds statement of cash flows, while others questioned its utility.

The task force then provided feedback on the two alternatives for the format of the government-wide statement of activities. Some task force members expressed their support for the existing statement of activities format, and other task force members favored the traditional format with the presentation of a total for all revenues. Some task force members also supported presenting information about program expenses by function and by natural classification.

Minutes of Meetings, May 10-11, 2016

The Board discussed three general approaches to the recognition of elements of financial statements and presentation for governmental fund financial statements: near-term financial resources, working capital, and total financial resources. For each approach, the Board discussed messages conveyed by financial statements, recognition concepts, potential benefits and challenges, and illustrative financial statements.

The Board also reviewed initial sections of a draft Invitation to Comment that describe alternatives pursuant to the format of the resources flows statement for governmental funds, a statement of cash flows for governmental funds, and the format of the government-wide statement of activities. After the discussion, the Board tentatively decided to obtain feedback on all three recognition approaches and the related issues tentatively presented in the draft Invitation to Comment from the task force at the June 2016 meeting.

Minutes of Meetings, March 29-31, 2016

The Board discussed three general approaches to the recognition of elements of financial statements and presentation for governmental fund financial statements: near-term financial resources, working capital, and total financial resources. For each approach, the Board discussed the relationship with the objectives of financial reporting, messages conveyed by financial statements, recognition concepts, potential benefits and challenges, recognition of specific transactions, and pre-agenda research. After the discussion, the Board tentatively decided to further develop all three approaches.

The Board also discussed two alternatives for the presentation of the governmental funds resource flows statement: the existing format of the statement of revenues, expenditures, and changes in fund balances and a format that separates short-term (or current) activities from long-term activities. The Board tentatively decided to present both alternatives in an Invitation to Comment.

The Board considered three alternatives related to the appropriateness of a reconciliation between the statements of cash flows and the resource flows statements of governmental fund financial statements. The three alternatives discussed were (1) reconciliation of net change in net position to net change in cash, (2) no reconciliation, and (3) reconsideration of the cash flows classifications for governmental funds. The Board tentatively decided that a reconciliation should not be presented in an Invitation to Comment.

The Board then discussed the appropriate presentation for cash flows from purchases and sales of investments of an internal investment pool if a statement of cash flows for governmental funds were to be required. The four options considered were (1) designation to a single fund, (2) allocation to each participating fund, (3) disclosure of the amounts in the notes, and (4) retention of the existing guidance. The Board tentatively decided to retain the existing guidance that cash flows from purchases and sales of pooled investments should be neither reported in statements of cash flows for individual funds nor disclosed.

The Board continued by deliberating whether fiduciary activities should be reported in the government-wide financial statements and tentatively decided that they should continue to be reported only as fund financial statements in the basic financial statements.

Finally, the Board discussed issues related to presenting functional or programmatic expenses by natural classification, tentatively agreeing to use the Invitation to Comment to gather additional feedback on whether certain natural classifications should be required to be presented.

Minutes of Meetings, February 16-18, 2016

The Board continued discussion of two general approaches to the recognition of elements of financial statements and presentation for governmental fund financial statements. The two approaches discussed by the Board include: near-term financial resources and working capital. The working capital approach included two different versions: working capital with past-due compensation liabilities and working capital with current shortfall in compensation liabilities. For each approach, the Board discussed the relationship with the objectives of financial reporting, messages conveyed by financial statements, recognition concepts, potential benefits and challenges, recognition of specific transactions, and pre-agenda research. After the discussion, the Board tentatively decided to further develop the near-term financial resources approach and the version of the working capital approach with past-due compensation liabilities. In addition, the Board tentatively agreed to develop a total financial resources approach.
The Board discussed four alternatives for the presentation of the governmental funds resource flows statement and tentatively decided to further explore the existing format of the statement of revenues, expenditures, and changes in fund balances and a format that separates short-term (or current) activities from long-term activities (for example, capital outlays).

In addition, the Board considered three alternatives for the presentation of the government-wide statement of activities and tentatively decided to further explore the existing format for the statement of activities and a traditional format with expenses presented by function or program. The Board directed the staff to further consider communication methods for presenting functional expenses by natural classification.

Finally, the Board considered issues related to presenting statements of cash flows and tentatively decided to further develop a statement of cash flows for governmental funds that could be presented as part of the working capital approach or the total financial resources approach.

Minutes of Meetings, January 5-6, 2016

The Board continued discussion of three general approaches to the recognition of elements of financial statements and presentation for governmental fund financial statements. The three approaches discussed by the Board include near-term financial resources, near-term financial resources with current-period operating liabilities, and working capital (formerly referred to as short-term accrual). For each approach, the Board discussed the relationship with the objectives of financial reporting, messages conveyed by financial statements, recognition concepts, potential benefits and challenges, recognition of specific transactions, and pre-agenda research. After the discussion, the Board tentatively decided to further develop the near-term financial resources approach, working capital approach, and a working capital approach with a variation to recognition of post-employment benefits and compensated absences. The Board also tentatively decided to further explore the following four presentation alternatives for resources flows: statement of revenues, expenditures, and changes in fund balances (current format); cash flows statement categories; recurring transactions separated from one-time and limited-time transactions; and short-term (or current) activities separated from long-term activities.

Minutes of Meetings, November 18-20, 2015

The Board considered five general approaches to the recognition of elements of financial statements and presentation for governmental fund financial statements. The five potential approaches discussed by the Board include near-term financial resources, near-term financial resources with current-period operating liabilities, working capital (formerly referred to as short-term accrual), cash basis, and multiple measurement focuses/bases of accounting. The Board discussed the general features of each approach as well as the potential benefits and challenges that are associated with each approach. After the discussion, the Board tentatively decided to further develop the near-term financial resources, near-term financial resources with current-period operating liabilities, and working capital approaches.

Minutes of Meetings, October 6-8, 2015

In its initial deliberations of the project, the Board discussed the conclusions related to users of financial statements and the objectives of financial reporting that serve as the foundation of the financial reporting model introduced by Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. The Board generally agreed that these foundational viewpoints remain valid, although details about the meaning of certain language, such as current financial resources and short-term, may be reconsidered during the course of the project. The Board also generally reconfirmed its previous tentative decision that the messages that should be conveyed in current financial resources financial statements should at a minimum include:
  • The current financial resources and claims against current financial resources of the entity at the reporting date
  • The balance of current financial resources at the reporting date that is available for spending in future periods
  • The amounts and sources of inflows and outflows of current financial resources during the reporting period.
Minutes of Meetings, July 21-23, 2015

The staff presented a capstone report on the five phases of the financial reporting model reexamination research. The research activities include a literature review, archival research, stakeholder roundtables, stakeholder surveys, and individual stakeholder interviews. The Board will consider whether a project should be added to the current technical agenda at the September meeting.