The Government Accounting Standards Board (GASB) is making changes to the current revenue recognition rules. These changes could bring government organizations in close alignment with how non-governmental entities recognize revenue.
Below, we discuss areas that this new statement would affect and the expected timeline for the updates to be finalized.
Current GASB Standards Do Not Cover All Transaction Types
The current GASB statements about revenue recognition are Statements 33 (Accounting and Financial Reporting for Nonexchange Transactions) and 36 (Recipient Reporting for Certain Shared Nonexchange Revenues). These statements have been in effect for many years, but they do not address all kinds of transactions.
Per GASB Statement 33, a non-exchange transaction occurs when a government entity gives value without directly receiving equal value in return. This differs from an exchange transaction, in which each party receives and gives equal values. Because there are differences between these two exchanges, GASB wants to provide additional guidance on revenue recognition through a principles-based model.
What Revenue Recognition Concerns Does GASB Have?
GASB is attempting to address issues that currently do not have authoritative guidance. One area is whether governments should use the performance obligation approach that is already in place for non-governmental groups (via Financial Accounting Standards Board, or FASB, guidance).
Additionally, there are different practices about when an exchange has taken place. Does it take place when the sale occurs, or when the obligation is fulfilled?
When GASB Changes Go into Effect
GASB has been working on this project for several years, and its current timeline includes further deliberations and commenting periods. Overall, this is a massive undertaking with far-reaching implications to government entities.
Because of the size and scope of these updates, the timeline shows issuance of a new GASB statement in 2027. Between now and then, there are opportunities to comment and help shape the new rules.
Morgan & Associates Can Help with GASB Revenue Recognition
If revenue recognition is a challenging area for your organization under the current statements, Morgan & Associates can assist you. And if you have questions about the upcoming changes and their implications, or if you’d like to voice your opinion during the commenting period, complete the form below.
Our experts will contact you to provide guidance on current and upcoming changes to revenue recognition for your government entity.
Fill in the form below to receive assistance with your revenue recognition questions.