A Conceptual Model and a Model Concept: The GASB recently issued two preliminary views (PV) documents, one on financial reporting model improvements and another that reexamines part of a conceptual framework PV.

Author:Levine, Michele Mark
Position:The Accounting Angle
 
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In September 2018, the Governmental Accounting Standards Board (GASB) issued two preliminary views (PV) documents, Financial Reporting Model Improvements and Recognition of Elements of Financial Statements. The first is a follow-up to the invitation to comment (ITC) on the same project that was issued in 2016. That project grew out of a reexamination of the current financial reporting model, which was put in place by GASB Statement No. 34, Basic Financial Statements--and Management's Discussions and Analysis --for State and Local Governments, issued nearly 20 years ago. The second PV reexamines part of a conceptual framework PV from 2011, the remaining part of which went on to become GASB Concepts Statement No. 6, Measurement of Elements of Financial Statements.

GASB develops concepts statements to guide the Board's future standard-setting activities. (1) In this case, the two PVs --one a proposed standard and the other a proposed concepts statement underpinning the former's most significant proposals--were issued simultaneously. That is because a primary stated purpose of the Reporting Model PV is to provide conceptual consistency within governmental fund financial statements that the GASB believes is lacking in the current reporting model. (2) Thus, the Reporting Model PV (the proposed standard) and the Recognition PV (the proposed concepts statement) are fundamentally intertwined.

The point of overlap between the PVs (3) is a proposed new measurement focus (MF) (4) called the short-term financial resources MF, which would replace the current financial resources MF now in use for governmental fund financial statements. The Short-Term MF would divide transactions and other events (hereafter referred to jointly as transactions) into two types. The first, for transactions normally resulting in flows of cash and other short-term financial resources (hereafter referred to jointly as cash flows) within one year of the transaction's inception, is referred to as a short-term transaction and for fund activity reporting purposes classified as a current activity. The second, for transactions normally resulting in cash flows that extend beyond one year of the transaction's inception, is a long-term transaction and event, and is reported separately as a noncurrent activity. The type of transaction would dictate whether the resulting resource flows (revenues and expenditures, in current terminology) are recognized immediately upon the transaction's...

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