Key Implications of Recent GASB Deliberations

The Governmental Accounting Standards Board (GASB) engaged in several key projects during recent meetings. These discussions have significant implications for the accounting and auditing community, particularly in the areas of:

• Revenue and expense recognition
• Infrastructure assets
• Going concern uncertainties and severe financial stress
• Subsequent events and the classification of nonfinancial assets

Revenue and Expense Recognition

Discussions on revenue and expense recognition centered on Category B revenue transactions, including imposed transactions, shared revenues, and forgivable loans.

For Category B imposed transactions, governments should recognize receivables when an individual or entity commits or omits an action that triggers the provision of resources to the government. This standard seeks to ensure consistency across various situations and jurisdictions.

The GASB identified three categories of imposed transactions:

• Imposed on underlying transactions (formally derived, such as sales and income taxes)
• Imposed on actions committed or omitted (regulatory and punitive fees)
• Imposed on property ownership (property taxes and special assessments)

Shared revenues — e.g., transactions supported through a periodic or continuing appropriation, such as K-12 aid or shared motor fuel tax — should be identified as two separate transactions to enhance accountability of total revenue generated:

1. The imposition of resources.
2. The sharing of those resources with another government.

Regarding forgivable loans, the Board decided to exclude these transactions from the project due to difficulties in applying the performance obligation model.

Infrastructure Assets

The Board’s discussions on infrastructure assets included user outreach to evaluate the importance of note disclosures. Key topics included:

• Capitalization
• Changes in policy
• The modified approach
• Retroactive reporting
• Maintenance and monitoring
• Additional disclosures

The Board tentatively decided to maintain the requirement for note disclosures on capitalization and changes in policy. However, they deemed retroactive reporting and the description of the modified approach unnecessary.

Additionally, the Board addressed the disclosure of maintenance and preservation expenses, the basis for condition assessments, and the intended condition level for infrastructure assets. They emphasized the need for disaggregation by major classes of infrastructure assets and the separation between governmental and business-type activities.

Going Concern Uncertainties and Severe Financial Stress

The need for note disclosures regarding going concern uncertainties (GCU) and severe financial stress (SFS) was assessed. Disclosures about relevant factors, evaluations of those factors, actions taken, and asset recoverability are now required.

The Board also stressed the importance of providing more detailed disclosures as new information becomes available and maintaining continuity in explaining changes between reporting periods.

Subsequent Events and Classification of Nonfinancial Assets

The transition and effective date for proposed requirements related to subsequent events were discussed, with a decision on a prospective application effective for fiscal years beginning after June 15, 2026.

Regarding the classification of nonfinancial assets, the Board focused on disclosing liens and liabilities associated with capital assets held for sale, particularly those funded through grants or pledged as collateral.

Next Steps for Governmental Entities

The GASB’s recent deliberations reflect their commitment to enhancing transparency and accountability in governmental financial reporting. These decisions will profoundly impact accounting and auditing practices, helping financial statements provide a clear and comprehensive view of a government’s financial position and activities.

Our government professionals are well-versed in GASB standards and can assist you with increasingly complex pronouncements.