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Revenue and Expense Recognition


Minutes of Meetings, January 29−31, 2019
 
The Board began deliberations with discussions about the expense model. The Board tentatively agreed that model assumption two—the classification of inflows should not determine the classification of outflows—still is valid. The Board tentatively agreed that model assumption one—inflows and outflows, although interrelated through articulation, are of equal importance in the resource flow statement—still is valid. Next, the Board tentatively agreed that a single revenue and expense recognition model should be developed that is applicable to all governments; without explicitly segregating business-type activities governments. Additionally, the Board tentatively agreed to propose that accounting for regulated operations, as described in paragraphs 476—500 of Statement No. 62, Codification of Accounting and financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, be outside the scope of this project. The Board then tentatively agreed to propose a government centric expense model as follows:
 
      Costs incurred by governments by procuring goods and services should first be classified into categories, for example, exchange/nonexchange or performance obligation/non-performance obligation, to facilitate recognition; classification definitions have not been proposed at this time. Once a transaction is properly classified, expense recognition would be proposed if the flow of resources fails the definition of an asset and a deferred outflow of resources. Recognition consideration is based on the flow’s applicability to a reporting period.
      The procurement of goods and services by governments may generate rights, resources, or assets, for which the government directs the use in the provision of services. Consequently, the benefit generated by a government’s procurement of goods and services always should be construed to accrue to the government’s constituency, in the fulfillment of its public purpose mission.

Next, the Board discussed remaining information about grant outflows and other exploratory work. Board members considered observations about the analysis of grant outflows, shared revenue, and PILOT programs. Furthermore, the Board discussed workers compensation, unemployment, and disability benefits. Next, the Board shared additional observations about the analysis of the benefit and specific beneficiary characteristics for exchange outflows. Lastly, the Board discussed information provided about Medicaid.  The discussion of this exploratory work was not intended to result in any tentative Board conclusions.

Minutes of Meetings, December 17−19, 2018

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

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

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

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

Minutes of Meetings, November 14−16, 2018

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

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

Minutes of Meetings, August 22−24, 2018

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

Minutes of Meetings, July 10-12, 2018

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

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

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

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

Minutes of Meetings, October 31−November 2, 2017

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

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

Minutes of Meetings, September 27 and 28, 2017

The Board discussed issues related to the impact of the concept of right of return on the two models to be presented in the Invitation to Comment (ITC): Model 1—the exchange/nonexchange model and Model 2—the performance obligation/no performance obligation model. In the development of the ITC, the Board tentatively agreed that:
  • The definition of a performance obligation should encompass a binding arrangement, specificity of the other party, and a series of goods and services.
  • The performance obligation/no performance obligation model should include the following:
    • Classify a transaction as to whether it contains a performance obligation on the basis of the definition of a performance obligation and a binding arrangement.
    • If there is a performance obligation, recognize the transaction on the basis of the amount of consideration, allocation of consideration, and satisfaction of the performance obligation.
    • If there is no performance obligation, recognize the transaction on the basis of eligibility requirements.
  • The right of refund should be considered a contingency and not a stand-ready-to-perform liability.
  • The right of refund should be considered broadly and be applicable to both goods and services.
  • The right of refund should have limited discussion in the ITC.
  • The earnings recognition approach should not consider the refund period.
  • For exchange transactions containing a performance obligation, an unexercised right of refund held by a government for purchased goods or services should not be recognized as an asset and should follow the contingencies provisions in Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements.
  • For nonexchange transactions, the right of refund should not be considered further.
The Board next discussed the relationship of the performance obligation/no performance obligation model to the Board’s conceptual framework. The Board tentatively decided that the ITC should indicate that an unsatisfied performance obligation meets neither the definition of an asset nor the definition of a liability.
The Board then discussed the organization of the ITC and Chapter 1, the introduction, as well as clarifying edits to Chapter 1.

Minutes of Meetings, August 10–11, 2017

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

Minutes of Task Force Meeting, August 9, 2017

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

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

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

Minutes of Meetings, June 28–29, 2017

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

Minutes of Meetings, May 23–25, 2017

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

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

The Board also reviewed proposed examples to be presented in the Invitation to Comment that illustrate recognition issues for the performance obligation/no performance obligation model and performance obligation approach (items 1–4 below); for the exchange/nonexchange model (items 5 and 6); and for both models (items 7 and 8).
  1. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with identifying a performance obligation.
  2. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with the notion of a group in the definition of a performance obligation.
  3. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with determining when a performance obligation is satisfied.
  4. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with expense recognition using a performance obligation.
  5. The Board tentatively decided that the proposed example sufficiently demonstrates the issues associated with classifying a transaction as exchange or nonexchange.
  6. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with determining when an entity is entitled to revenue or obligated for expense.
  7. The Board tentatively decided that the proposed examples sufficiently demonstrate the issues associated with endowment pledges and beneficial interests in perpetual trusts.
  8. The Board tentatively decided that proposed example sufficiently demonstrates the issues associated with contingencies.
Minutes of Meetings, April 12–14, 2017

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

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

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

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

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

Minutes of Meetings, March 7–9, 2017

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

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

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

Minutes of Meetings, January 17–19, 2017

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

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

Minutes of Meetings, December 5–8, 2016

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

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

Minutes of Meetings, October 25–27, 2016

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

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

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

Minutes of Meetings, September 13–15, 2016

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

Minutes of Meetings, August 10–12, 2016

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

Minutes of Meetings, June 22–23, 2016

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

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

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

For the third element, customer, the Board tentatively agreed to propose to replace that term with a broader term, another party, in the working definition to incorporate arrangements that may have multiple parties and to address a broader range of relationships. The Board also tentatively agreed to propose the following definition of another party:
 
Another party is any legally separate entity or person who takes part in a transaction with a government, such as a customer, a resource provider, a vendor, a resource recipient, or an employee.

The Board then discussed the fourth element of a performance obligation, distinct goods and services. Many transactions of a government may include multiple promises of goods or services; therefore, the Board tentatively agreed to propose the inclusion of the notion of distinct goods and services in the working definition of a performance obligation. Finally, the Board tentatively agreed to propose the following working definition of performance obligation with the understanding that as the project develops it may be revised:
 
A binding promise with another party to provide a distinct good, service, or other resource (or a bundle of goods, services, or other resources).

Minutes of Meetings, May 10–11, 2016

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

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

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