Spring has finally arrived both within and beyond the borders of our firm. Internally, we marked the passing of another Department of Community and Economic Development (DCED) deadline for audit reports as well as the three month mark of the implementation of new audit software. Our team reports that our new software is a welcome addition to our arsenal of audit tools and even though implementation added additional strain during an already busy time, everyone looks forward to further integration of the new product.

We now are turning our sights to the next audit season – for entities with years ending June 30. For our government clients this will mean the first year of implementation of the Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Similar to GASB Statement No. 68 for pensions, this new standard establishes standards for recognizing and measuring liabilities and related financial statement elements of the actuarially determined value of other post- employment benefits offered to employees. Our team of professionals have been evaluating the impact of this new standard since its release and are ready to assist our clients in facilitating a smooth implementation. On the horizon is a GASB project designed to develop eventual new standards regarding revenue and expense recognition. We are involved with that discussion and encourage you to visit our blog for our letter of comment to the GASB Board.

For our nonprofit clients, no changes for this year – but big changes on the horizon. We have been discussing the effects of new Financial Accounting Standards Board (FASB) rules that affect not-for-profit presentation of financial statements, revenue recognition, and reporting of leases. Those conversations will continue and for some of our clients, we will begin the process of preparing pro forma financial statements under the new requirements.

Spring is also a time to get outdoors and be active! Several of our staff have begun participating in community activities on behalf of our nonprofit clients. These are great outings to bring friends and family to. Eliza Kowalczyk, our Partner Jeff’s daughter loves participating in 5k events – she is a young philanthropist in training!

On Wednesday, May 9, we will be celebrating the retirement of our Founding Partner, Robert Barbacane. Rob has touched many lives through the past FORTY years since he began our firm. His passion and commitment to the accounting profession, the development of the next generation of CPA’s, the public sector and the mission of so many nonprofits has been felt by many. We will forever be grateful for his visionary leadership.

Barbacane, Thornton & Company LLP
200 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810

T 302.478.8940
F 302.468.4001
www.btcpa.com

April 24, 2018

Via electronic mail
Governmental Accounting Standards Board 401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116

RE: Revenue and Expense Recognition, Project No 4-6I

Thank you for the opportunity to comment on the Governmental Accounting Standards Board’s (GASB) Revenue and Expense Recognition Project, No. 4-6I. In our capacity as a public accounting firm specializing in providing accounting and auditing services to the government sector, we appreciate the GASB involvement of preparers and other stakeholders in order to enhance and promote consistent application of accounting principles in financial reporting.

Our firm works primarily with small to mid-size governments, many who do not have complex transactions, but do struggle with sometimes defining revenue and expense recognition principles. Therefore, we encourage the GASB to continue to pursue this project through to standards implementation. We offer the comments below in response to the questions posed in the above referenced project, not with the intention of selecting the “best” approach, but rather to offer insight from a user’s perspective.

Regarding the exchange/nonexchange model. Continuing to build on the existing guidance of exchange vs. nonexchange could prove effective if clarity is provided to further explore and explain the criteria for defining exchange transactions. Specifically, in paragraph 11 of chapter 2, “substantially accomplished” might result in different conclusions by different users. The two criteria offered in the same paragraph make sense and would provide a better foundation for determining recognition – we would suggest not using terms like “substantially accomplished” which lead to ambiguity. Specific criteria are much more effective. Current GASB guidance for nonexchange transactions is an area that many of our governments struggle with. Therefore, for this model to be effective, examples will need to be incorporated either as Appendices to the standard or through a dedicated implementation guide.

Regarding the performance obligation/nonperformance obligation model. This model, by taking a fresh approach in terms of terminology, might be more effective at gaining attention of governments in applying a new standard. The term “performance” seems to be more indicative of a principles-based approach as opposed to a “rules” based approach. Historically, based on application of gaap that we have seen, “exchange” vs. “nonexchange” can cause confusion in establishing correct accounting for certain transactions. Performance obligation also mirrors the FASB revenue recognition standard thereby increasing understandability for financial statement users of governmental entities who have a for-profit background.

We did not find the alternative models helpful or complete enough to be useful for this project and would recommend pursuing either the standards described in Chapter 2 or 3.

Additionally, we would recommend that, at the point in time that this becomes a GASB standard, that a specific implementation guide be completed in order to enhance interpretation of the standard.

On behalf of our firm and our clients we would like to thank the GASB for its efforts in putting together this project and for providing a forum for feedback. Please feel free to contact us if you have any questions.

Respectfully submitted,
Pamela W. Baker,CPA,CGFM Managing Partner
Barbacane, Thornton & Company LLP

Cc: Kristopher Knight

/tac

The auditing profession has gotten used to the need to adjust due to rapidly changing regulations and standards. One factor, though, that may not immediately jump to mind as an issue to monitor is the impact of local politics.

In a preview of her presentation at the May 31 PICPA Pennsylvania School District Conference, Pamela Baker, Managing Partner of Barbacane Thornton & Company LLP in Wilmington, Del., joins us to explore why auditors must keep local politics in mind when performing their role.

Listen to the podcast.