The Government Accounting Standards Board (GASB) recently issued an Invitation to Comment (ITC) on the financial reporting model. An ITC is a document issued by GASB staff prior to Preliminary Views or Exposure Drafts to solicit input from stakeholders in the early stages of a project. It provides an opportunity to influence the direction of the Board’s deliberations.
The scope of the financial reporting model project includes a reexamination of GASB Statements 34, 35, 37, 41 and 46 as well as Interpretation 6, and has potential to significantly change the landscape of governmental financial reporting. While this project is expected to continue for many years and consider various topics, this ITC specifically addresses the financial reporting of governmental funds.
The ITC includes the following:
- Three alternative recognition approaches for governmental fund financial statements including:
- The near-term approach is the shortest perspective and includes receivables and payables due within the near term (generally 60 to 90 days).
- The short-term approach, which is also referred to as the working capital approach, focuses on the government’s assets and liabilities that are due within the subsequent one-year operating cycle.
- The long-term approach, also known as the total financial resources approach, recognizes the effects on transactions or events when they take place, regardless of when cash is received or paid (accrual basis). However, capital assets and capital-related debt are not included.
- Potential changes to the reconciliation from the governmental fund financial statements to the government-wide financial statements
- Potential inclusion of a statement of cash flows for governmental funds
The ITC invites readers to respond to various questions on each of these subjects. Due to the significance of this project, GASB is actively encouraging governments to read and consider responding to the ITC. The ITC is located on gasb.org. Comments are due by March 31, 2017.