GASB
on Monday issued a Preliminary
Views (PV) document on concepts related to recognition of
elements of financial statements and measurement approaches. The
board said the PV,
Recognition of
Elements of Financial Statements and Measurement Approaches
,
presents its early views on how and when an item should
be reported (recognition) on state and local government financial
statements and how the amount of the item reported on those
statements should be determined (measurement approach).
The board is seeking comments on the PV by Sept. 30 and has
scheduled public hearings on the document for Oct. 4 in New York
City; Oct. 14 in San Francisco; and Oct. 21 in Chicago. Complete
details, including how to participate in the hearings, are available
in the PV.
The
PV says that recognition concepts encompass two aspects of financial
statements—measurement focus and basis of accounting. The
measurement focus of a specific financial statement determines
what
items should be reported as assets, liabilities and
other elements of that financial statement. The related basis of
accounting determines
when
those items should be reported.
The PV proposes a recognition framework for financial
statements prepared using either the “economic resources”
measurement focus or the “near-term financial resources” measurement
focus. The latter would, from a conceptual standpoint, replace the
existing “current financial resources” measurement focus that is
used in governmental fund financial reporting. The proposed
recognition framework also includes proposed concepts related to
recognition of deferred outflows of resources and deferred inflows
of resources that would assist the board in determining when those
elements should be used in the standard-setting process.
The document proposes a framework for when each of two primary
measurement approaches, on a conceptual basis, should be used. The
primary measurement approaches are:
- Initial-transaction-date-based measurement (initial amount) . The transaction price or amount assigned when an asset was acquired or a liability was incurred, including subsequent modifications to that price or amount, such as through amortization or depreciation.
- Current-financial-statement-date-based measurement (remeasured amount) . The amount assigned when an asset or liability is remeasured as of the financial statement date, including fair value; current acquisition, sales and settlement price; replacement cost; and value-in-use.
The PV identifies characteristics of assets or liabilities that would indicate from a conceptual viewpoint when each measurement approach would be appropriately applied in future standard setting.
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