Spotlight On:
The Financial Reporting Model Proposal

The GASB recently issued two Preliminary Views documents—one proposing improvements to key components of the financial reporting model and a second proposing new concepts intended to guide the Board in developing standards on recognition in financial statements. This article highlights key aspects of both documents and encourages you to read them and share your thoughts with the Board.
 
This article highlights key aspects of both documents and encourages you to read them and share your thoughts with the Board.
 

Financial Reporting Model Improvements

 
The Preliminary Views, Financial Reporting Model Improvements, presents the Board’s current thinking on targeted improvements to the financial reporting model—the blueprint for the annual financial report. The proposals are designed to improve the model’s effectiveness in providing information essential to decision making and assessing a government’s accountability.
 
The document proposes the following:
  • The short-term financial resources measurement focus, which recognizes short-term transactions and other events when incurred and long-term transactions and other events when they are due, will be applied in governmental fund financial statements. 
  • A format for governmental fund financial statements that distinguishes between current and noncurrent resource flows 
  • Specific definitions and descriptions of operating and nonoperating revenues and expenses 
  • An additional subtotal in proprietary fund financial statements for operating income (loss) and noncapital subsidies 
  • Presentation of all budgetary comparison information as required supplementary information and required presentation of two variance columns 
  • Communication of major component unit information in the government-wide statements, if feasible, or in combining financial statements
  • A new schedule of government-wide expenses by natural classification as supplementary information in comprehensive annual financial reports. 

Recognition of Elements of Financial Statements

 
The Preliminary Views, Recognition of Elements of Financial Statements, presents the Board’s current views on concepts related to recognition of elements of financial statements, such as assets and liabilities.
 
The document proposes:
  • That an item being considered for recognition in the financial statements would be evaluated using a hierarchy for recognition of elements. 
  • A recognition framework for both the short-term financial resources measurement focus and the economic resources measurement focus. 
Please let us know what you think about either or both PVs by the February 15, 2019 deadline.
Issuing the two documents at the same time is meant to provide stakeholders with context for seeing how elements of financial statements would be recognized as well as how those elements would be presented within the financial reporting model. The PV documents also contain alternative views for some of the proposals.

Please let us know what you think about either or both PVs by the February 15, 2019 deadline. Additional information about the related March 2019 public hearings and user forums is available in the documents and in the related infographic in this issue.