Concepts – Elements

FASAB Contact: FASAB Staff,, 202-512-7350

Project Objective:

To ensure that federal financial accounting standards are based on a sound framework of objectives and concepts regarding the nature of accounting, financial statements, and other communications methods. This phase of the conceptual framework project will define the elements critical to meeting financial reporting objectives.

Ms. Penelope Wardlow is under contract with FASAB and is conducting research to support deliberations. Ms. Loughan, FASAB Assistant Director is the point of contact for any questions.


December 4-5, 2007 Board Meeting
The Statement of Federal Financial Accounting Concepts 5, Definitions of Elements and Basic Recognition Criteria for Accrual-Basis Financial Statements (SFFAC 5) was issued on December 26th. /pdffiles/sffac5.pdf

September 19-20, 2007 Board Meeting
The Board received a ballot draft of Statement of Federal Financial Accounting Concepts 5, Definitions of Elements and Basic Recognition Criteria for Accrual-Basis Financial Statements (SFFAC 5) at the September meeting.  The Board agreed to certain changes to the ballot draft that are detailed in the September Board Meeting minutes at /prior-calendar-years/.  The Board adopted SFFAC 5 by the affirmative votes of eight members.  Mr. Werfel and Mr. Steinberg abstained.  The Statement was forwarded to the Principals the for their 90-day review period on September 26, 2007. Absent an objection from OMB or GAO, the document will be issued on December 26th.

July 25-26, 2007
At the July meeting, the Board received a revised draft final Concepts Statement on Elements showing changes made since the May draft, and a cover memo explaining the changes. A second staff memo discussed the history of paragraph 44 of the draft Statement, which states that Congress’s ability to change the law does not affect the existence or recognition of a liability. The Board first discussed the proposed changes (detail can be found in the July Board Meeting Minutes at /prior-calendar-years/). Staff will prepare a preballot draft of the Elements concepts statement, including the changes agreed to by the Board. The preballot draft will be circulated for Board members’ review in August.

Issue Paper for July 2007

May 23-24, 2007
At the May Board meeting, the Board considered a revised draft final Concepts Statement on Elements, showing changes made since the March draft, and a cover memo explaining the changes.  The modifications to the Elements ED proposed in the March and May draft final statements were not intended to change the substance of the proposed Statement as presented in the ED.  The draft final contains reworded material and clarifications designed to resolve concerns raised by some Board members, including concerns about potential misunderstandings by constituents.  At the meeting the Board continued to deliberate on the proposed changes.  Staff will continue to address Board concerns to reach agreement.  Staff anticipates a pre-ballot draft after the July Board meeting.

Issue Paper for May 2007 – File Elements Memo (PDF)
File Elements Draft (PDF)

March 21-22, 2007
The Board considered the following issues at the March 2007 Meeting:

  1. whether the asset definition should be modified to clarify that the ability of the federal government to assert control over resources in the future does not constitute an asset presently
  2. whether the revenue and expense definitions should be modified in response to concerns raised by a few respondents relating to changes in assets or liabilities arising from borrowing, and
  3. improving the discussion of uncertainty.

Tab A (PDF)
Tab A-1 (PDF)
Tab A-2 (PDF)

January 17-18, 2007
At the January meeting, the Board tentatively agreed to revise the discussion of recognition criteria and uncertainty. The briefing material for the January meeting is presented below.

Issue Paper for January 2007 (PDF)

September 27-28, 2006
The Board held the Public Hearing on Exposure Draft of Proposed Concepts Statement Definition and Recognition of Elements of Accrual-Basis Financial Statements in conjunction with the September Board Meeting. Representatives from the Institute for Truth in Accounting, AGA Financial Management Standards Board, Social Security Administration, Department of Labor OIG, and Department of Interior Office of the Chief Financial Officer (Testimony on behalf of Chief Financial Officers Council’s, Standardization Committee’s FASAB Response Group) provided testimony. Details from the public hearing can be found in the Minutes for the September Board meeting at /prior-calendar-years/.

Issue Paper for September 2006 (PDF)

July 26-27, 2006
The exposure draft entitled Definition and Recognition of Elements of Accrual-Basis Financial Statements was issued on June 7, 2006 . The exposure draft in PDF format and the specific questions raised in Word format are available at the FASAB website (/documents-for-comment/). The exposure draft requests comments by August 5th. Submission of comments by this date will ensure inclusion of your comments in the first staff summary of comments forwarded to the Board in early September. Late submissions are provided to members on a rolling basis. Ultimately, the Board sees all comments submitted and we encourage those unable to meet the deadline to submit comments as soon as possible thereafter.

Note also that the Board plans to hold a public hearing on this proposal on September 27th. Please contact Melissa Loughan at 202 512-5976 if you wish to participate in the public hearing.

Issue Paper for July 2006 (PDF)

May 24-25, 2006
The exposure draft entitled Definition and Recognition of Elements of Accrual-Basis Financial Statements was issued on June 7, 2006 . The exposure draft requests comments by August 5th. The exposure draft in PDF format and the specific questions raised in Word format are available at the FASAB website (/documents-for-comment/). The Board plans to hold a public hearing on the exposure draft at its September 2006 meeting.

Issue Paper for May 2006 (PDF)

March 29-30, 2006
Staff provided clean and marked-up copies of a pre-ballot draft of a proposed concepts statement, together with a transmittal memo that listed the changes made since the January 2006 draft. New items in the clean copy included an executive summary, questions for respondents, and a glossary. The Board discussed how and where the issues of probability and uncertainty are discussed in the pre-ballot draft. The Board agreed on certain changes to the pre-ballot during the meeting.

A ballot draft will be provided to the Board before the May meeting. The draft will incorporate the changes made at the March meeting and will include any alternative views or additional questions for recipients that members provide.

January 11-12, 2006
The Board discussed the revised draft proposed concepts statement on elements and recognition criteria. Additionally, the Board also considered a memo that compared the definitions of revenues and expenses adopted by various standard-setting authorities and recommended definitions of federal government revenues and expenses. The memo recommended that gains and losses should not be treated as separate elements in the concepts statement but should be considered sub-elements or subsets of revenues and expenses. The Board agreed and concluded that whether and under what circumstances certain items should be reported as gains and losses instead of revenues and expenses is a display issue and should be addressed in financial reporting standards.

The Board discussed various issues with the draft proposed concepts statement, including issues related to: appropriations, materiality, qualitative characteristics, probability, and other issues. The Board anticipates discussing a draft pre-ballot concepts statement on elements and recognition criteria at the March 2006 meeting.

October 5-6, 2005
At the October Board meeting, the members reviewed a revised exposure draft including proposed definitions of asset, liability and net position. New language regarding component entities and application of the definition at the component entity level was incorporated based on previous discussions with the Board. The draft also addressed recognition criteria and the role of uncertainty. Members proposed some changes to the draft but overall the draft was acceptable to a majority of the members.

Staff will incorporate definitions for revenue and expense in the draft presented for the January 2006 meeting.

Issue Paper for October 2005 (PDF)

August 17-18, 2005
Staff presented a partial draft of a proposed concepts statement on Definition and Recognition of Elements of the Financial Statements. The draft comprised (a) a brief discussion of the purpose of Statements of Federal Financial Accounting Concepts (SFFAC); (b) an Introduction that explained the purpose of the concepts statement and defined the terms elements, recognition, and recognize; (c) a section that established and discussed recognition criteria and the distinction between meeting the definition of an element and qualifying for recognition in the financial statements; (d) a section on definitions of elements, including definitions of assets and liabilities and discussions of the essential characteristics of each element; the section also indicated where definitions of net position, revenues, and expenses could be placed in a future draft; (e) a section on the effects of uncertainty on definitions of elements, their measurement, and financial reporting in general.

The Board’s discussion of the draft proposed concepts statement focused on responding to fifteen questions that were included in the cover memo and followed the sequence of the draft. (See final Minutes for the August meeting for a detailed discussion of each question and resulting issues.)

Staff will present a revised draft of a proposed concepts exposure draft that incorporates the Board’s comments at the October Board meeting.

Issue Paper for August 2005 (PDF)

June 22-23, 2005
The Board discussed two papers related to the Elements portion of the Concepts Project at the June 2005 meeting. The first paper discussed the recognition criteria adopted, respectively, by the FASB and six other standard-setting authorities for elements of financial statements. The second paper explained amendments made to the March draft of the liabilities section of a possible FASAB document on elements of financial statements. Most of the amendments had been requested by the Board in March. An amended draft was attached to the June paper.

For the August meeting, staff plans to present a section for the draft concepts statement that would discuss the issues of uncertainty and probability, including references to, respectively, definition and recognition. Staff plans to make some changes to the current draft on liabilities along the lines discussed at the meeting. Additionally, staff plans to add the assets draft that the Board previously reviewed to the amended liabilities draft, so that the Board could view them together at the next meeting. The Board also suggested including a discussion of the recognition criteria. The Board also requested staff to reconsider the need for and language concerning an entity’s ability to unilaterally specify or change the settlement date of a liability.

Issue Papers for June 2005 (PDF)

May 4-5, 2005
Staff is proceeding with drafting a white paper based on the outline approved by the Board. With respect to elements, staff plans to present information regarding recognition criteria at the June meeting.

March 2-3, 2005 Meeting:

At its March meeting, the Board considered and approved a draft outline of its white paper on objectives. Staff will proceed with drafting a white paper based on the outline. With respect to elements, the Board considered draft essential characteristics of a liability. The Board discussed the nature of present obligations in the federal environment and how federal entities might be .required to settle. obligations. The Board requested that staff present information regarding recognition criteria for the next meeting.

Issue Paper for March 2005 (PDF)

December 15-16, 2004 Meeting:
The Board considered various aspects of exchange versus nonexchange and legal versus constructive liabilities. Ultimately, the Board agreed to focus on the essential characteristics of a liability. Thus, the project would pursue a single liability definition, identifying characteristics, and how to apply those characteristics in a general or sense. Ms. Wardlow agreed to structure a paper similar to the previous paper on assets and proceed toward a draft definition and supporting explanatory material.

Issue Paper 12/15-16/2004 (PDF)


October 20-21, 2004 Meeting:
The Board continued its discussion of essential characteristics of a liability and began to discuss the distinction between exchange and nonexchange transactions, and whether no liability arises in nonexchange transactions until settlement is due and payable. Staff will present further analysis of the concepts of exchange, nonexchange, and exchange-like transactions, including the reasons for the GASB’s distinctions. Also, the Board expects to consider some criteria that might be used to recognize “constructive” liabilities, but that also would limit the scope of that concept.

Issue Paper 10/20-21/2004 (PDF)


Deliberations prior to August 2004:

In April 2004 the Board continued its discussion with Ms. Wardlow regarding essential characteristics of an asset, and began discussing how to define an asset. In July the Board discussed options about how to proceed in its consideration of “objectives.” Ms. Wardlow led further discussion of the definition and essential characteristics of “assets.”

In March 2004, the Board agreed in general terms on the “essential characteristics” of an asset.

At the December 2003 meeting, the Board began deliberation on “elements of financial reporting,” which is phase II of the concepts project. Penny Wardlow presented information on FASB’s approach to defining elements of financial reporting and led a discussion about the essential characteristics of assets.

In August 2003, Ms. Penelope Wardlow discussed with FASAB the work that the Governmental Accounting Standards Board (GASB) has done on elements of financial reporting for states and local governments.