Barbacane, Thornton & Company LLP
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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