FASAB Federal Accounting Standards Advisory Board

Amendments to Accounting for

Property, Plant, and Equipment

Measurement and Reporting

for

Multi-Use Heritage Assets

Amending SFFAS No. 6 and SFFAS No. 8

 Accounting for Property, Plant, and Equipment

and

Supplementary Stewardship Reporting

Statement of Recommended Accounting Standards No. 16

July 1999

[NOTE: This document must undergo a 45 day review by Congress before

it can be issued by OMB as a Statement of Federal Financial

Accounting Standards. For further information, contact Rick

Wascak, 202-512-7363, or email, wascakr.fasab@gao.gov.]

THE FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD

 The Federal Accounting Standards Advisory Board (FASAB or "the Board") was

established in October 1990 by the Secretary of the Treasury, the Director of the Office of

Management and Budget (OMB), and the Comptroller General. The nine-member Board

was created to consider and recommend accounting principles for the Federal Government.

 The Board communicates its recommendations by publishing recommended accounting

standards after considering the financial and budgetary information needs of congressional

oversight groups, executive agencies, and other users of Federal financial information. The

Board also considers comments from the public on its proposed recommendations, which are

published for comments as "exposure drafts." The Board's sponsors then decide whether to

adopt the recommendations. If they do, the standard is published by OMB and GAO and

then becomes effective.

 The following documents related to the establishment and mission of the Board are

available from the FASAB:

• "Memorandum of Understanding among the General Accounting Office, the

Department of the Treasury, and the Office of Management and Budget, on Federal

Government Accounting Standards and a Federal Accounting Standards Advisory

Board"

• "Mission Statement: Federal Accounting Standards Advisory Board"

Executive Summary i

Federal Accounting Standards Advisory Board

Amendments to Accounting for PP&E

July 1999

EXECUTIVE SUMMARY

a The purpose of this Statement is to amend certain standards for

heritage assets in Statement of Federal Financial Accounting

Standards No. 6, Accounting for Property, Plant, and Equipment,

(SFFAS No. 6), which was issued in November 1995; and,

Statement of Federal Financial Accounting Standards No. 8,

Supplementary Stewardship Reporting, (SFFAS No. 8), which was

issued in June 1996. Specifically, the amendments affect

accounting and reporting standards for heritage assets that serve

a dual purpose; that is, heritage assets that 1) have a heritage

characteristic, and 2) are used in general government operations.

b In SFFAS No. 6 and SFFAS No. 8, these heritage assets were

referred to as "multi-use heritage assets." To clarify the meaning

of the term "multi-use heritage assets," the amendments define

"multi-use heritage assets" as being heritage assets whose

predominant use is general government operations. Heritage

assets having incidental use in general government operations are

not referred to as "multi-use heritage assets.' Rather, they are

simply "heritage assets."

c In addition, the original standards required the cost of multi-use

heritage assets that did not directly relate to operations be

accounted for as an expense, while costs that directly support

operations be accounted for as general property, plant, and

equipment (PP&E). This treatment would have resulted in

inconsistent cost measures between agencies using heritage office

buildings and those using non-heritage office buildings.

d To alleviate this inconsistency, the Board decided that the all

acquisition, reconstruction, and betterment costs of multi-use

heritage assets (i.e., heritage assets whose predominant use is

general government operations) be capitalized as general PP&E

and depreciated over their service life. This amendment should

result in consistent accounting for the cost of PP&E predominantly

used in general government operations.
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Table of Contents iii

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TABLE OF CONTENTS

EXECUTIVE SUMMARY............................................................................................................................ i

INTRODUCTION........................................................................................................................................ 1

Purpose ....................................................................................................................................................... 1

Scope ............................................................................................................................................................ 1

Effective Date .......................................................................................................................................... 1

AMENDMENTS TO SFFAS No. 6 ......................................................................................................... 3

Introduction ............................................................................................................................................. 3

Heritage Assets........................................................................................................................................ 3

AMENDMENTS TO SFFAS No. 8 .......................................................................................................... 7

Introduction.................................................................................................................................................7

Heritage Assets........................................................................................................................................ 7

APPENDIX A: BASIS FOR CONCLUSIONS........................................................................................ 9

APPENDIX B: CROSS REFERENCES.............................................................. 13

APPENDIX C: GLOSSARY....................................................................................................................... 15
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Introduction 1

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INTRODUCTION

Purpose

1The purpose of this Statement is to amend certain standards contained

in Statement of Federal Financial Accounting Standards Number 6

(SFFAS No. 6), Accounting for Property, Plant, and Equipment,

and Statement of Federal Financial Accounting Standards Number

8 (SFFAS No. 8), Supplementary Stewardship Reporting.

Scope

2This Statement specifically affects the accounting standards for heritage

assets in SFFAS No. 6, paragraphs 59 and 60 through 63, and

SFFAS No. 8, paragraphs 48 through 50.

Effective date

3The amending accounting standards in this statement are effective for

periods beginning after September 30, 1999, with earlier

implementation encouraged.
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Amendments to SFFAS No. 6 3

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AMENDMENTS TO SFFAS No. 6

Introduction

4Accounting standards for multi-use heritage assets are presented in

paragraphs 5 through 15 that follow. The standards presented in

these paragraphs supersede designated paragraphs in SFFAS No.

6 as they relate to multi-use heritage assets. Other paragraphs in

SFFAS No. 6, which are not amended by this document or by

Statement 11, remain in effect.

Heritage Assets

5Heritage assets are defined in paragraphs 57 and 58 in SFFAS No. 6. 

Those paragraphs are not changed. However, accounting for

"multi-use heritage assets" is changed. The new provision is

provided in paragraph 6 below, which replaces paragraph 59 of

SFFAS No. 6.

6Heritage assets may in some cases be used to serve two purposes--a

heritage function and general government operations. In cases

where a heritage asset serves two purposes, the heritage asset

shall be considered a multi-use heritage asset if the predominant

use of the asset is in general government operations (e.g., the

main Treasury building which is a heritage asset used as an office

building). The cost of acquisition, betterment, or reconstruction of

all multi-use heritage assets shall be capitalized as general PP&E

and depreciated.

RECOGNITION AND MEASUREMENT

7Paragraphs 8 through 12 below replace paragraphs 60 through 62 of

SFFAS No. 6.

8The cost of acquiring, improving, reconstructing, or renovating heritage

assets, other than multi-use heritage assets, shall be recognized

on the statement of net cost for the period in which the cost is
4 Amendments to SFFAS No. 6

Federal Accounting Standards Advisory Board

Amendments to Accounting for PP&E

July 1999

incurred. The cost1 shall include all costs incurred during the

period to bring the item to its current condition at its initial location

(See paragraph 26 of SFFAS No. 6 for examples of the costs to be

considered).

9The cost of acquisition, betterment, or reconstruction of multi-use

heritage assets shall be capitalized as general PP&E and

depreciated, with an appropriate footnote disclosure explaining

that "physical quantity" information for the multi-use heritage

assets is included in supplemental stewardship reporting for

heritage assets. The multi-use heritage assets shall be

depreciated over their useful life.

10 With the exception of multi-use heritage assets, as stated in

paragraph 11 below, no amounts for heritage assets acquired

through donation or devise2 shall be recognized in the cost of

heritage assets. The assets' fair value, if known and material, shall

be disclosed in notes to the financial statements in the year

received. If fair value is not known or reasonably estimable,

information related to the type and quantity of heritage assets

received shall be disclosed. 

11 Multi-use heritage assets acquired through donation or devise

shall be recognized as general PP&E at the assets' fair value, and

the amount shall also be recognized as "nonexchange revenues"

as defined in SFFAS No. 7, Accounting for Revenue and Other

Financing Sources.

 

 

1

For a full discussion of cost, including full cost, direct cost and indirect cost, see SFFAS No. 4, Managerial Cost Accounting

Concepts and Standards for the Federal Government (June 1995). Also, see pars. 94-95, Statement of Federal Financial Accounting

Concepts No. 2, Entity and Display.

 

2

A will or clause of a will disposing of property.
Amendments to SFFAS No. 6 5

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12 Additional reporting requirements are provided in SFFAS No. 8,

Supplementary Stewardship Reporting.

IMPLEMENTATION GUIDANCE

13 Paragraph 14 below replaces paragraph 63 of SFFAS No. 6. 

Paragraph 15 provides additional guidance on multi-use heritage

assets. (Paragraphs 64 and 65 of SFFAS No. 6 remain in effect.)

14 Heritage assets (excluding multi-use heritage assets) previously

recognized as assets for balance sheet reporting and their related

contra amounts (e.g. accumulated depreciation) shall be removed

from the balance sheet and charged to the net position of the

entity. The amount of the adjustment shall be reported as a "prior

period adjustment" in the statement of changes in net position.

15 Implementation guidance for general PP&E, in paragraph 40

through 44, SFFAS No. 6, is applicable to multi-use heritage

assets. Entities that implemented the multi-use heritage asset

standard in SFFAS No. 8 in prior years for stewardship assets, will

need to capitalize those amounts upon implementation of this

amendment. That amount shall be added to the balance sheet

and reported as a "prior period adjustment" in the statement of

changes in net position.3

 

 

3

SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial

Accounting, paragraph 76.
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Amendments to SFFAS No. 8 7

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AMENDMENTS TO SFFAS No. 8

Introduction

16 Accounting standards for multi-use heritage assets are presented

in paragraphs 17 and 18 that follow. The standards presented in

these paragraphs supersede designated paragraphs in SFFAS No.

8 as they relate to multi-use heritage assets. Other paragraphs in

SFFAS No. 8, which are not amended by this document, remain in

effect.

Heritage Assets

17 Paragraphs 48 and 49 in SFFAS No. 8 are rescinded. The

reader should refer to paragraphs 6 through 15 in this document

for guidance on multi-use heritage assets. Paragraph 18, which is

presented below, is added as a reporting requirement in paragraph

50 of the Heritage Assets Minimum Reporting requirements in

SFFAS No. 8. Other paragraphs on heritage assets in SFFAS No.

8 remain in effect.

18 A footnote shall explain that financial information for multi-use

heritage assets is presented in the principal statements.

The provisions of this statement need

not be applied to immaterial items.
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Appendix A: Basis for Conclusions 9

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APPENDIX A: BASIS FOR CONCLUSIONS

19 This appendix summarizes the Board's considerations in

recommending modifications to amend SFFAS No. 6, Accounting

for Property, Plant, and Equipment, and SFFAS No. 8,

Supplementary Stewardship Reporting, as they relate to heritage

assets.

MULTI-USE

HERITAGE ASSETS

Background

20 In the original PP&E Exposure Draft (February 1995), renovation,

improvements, restoration or reconstruction costs for that portion

of the heritage asset used in general government operations were

to be capitalized and depreciated. Meanwhile, the costs that

primarily related to the preservation of the asset for a heritage

purpose (e.g., excess cost of maintaining original design and

construction materials) rather than general government operations

were to be excluded from general PP&E (i.e., expensed in the

period incurred). The response to this proposal contained in the

ED was that costs could not be divided between heritage and

general PP&E in this manner.

21 In the existing standards (SFFAS No. 6 and No. 8), costs of

renovation, improvement, restoration, or reconstruction that can be

directly related to government operations (e.g., modification or

improvement of office space, upgrading of electrical or

communication equipment/wiring) are to be capitalized and

depreciated. Meanwhile, the costs to renovate, restore, or

reconstruct the heritage asset itself (the shell) were to be excluded

from general PP&E (i.e., expensed in the period incurred). Again,

comments the Board received pertaining to implementing this

requirement were that the distinction for the costs cannot be made

and that it produces inconsistent results.
10 Appendix A: Basis for Conclusions

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July 1999

Exposure Draft

22 In February 1998, the Board issued an exposure draft (ED),

Amendments to Accounting for Property, Plant, and Equipment,

proposing amendments to SFFAS No. 6 and No. 8. In the

proposed amendments, the costs of acquisition, betterment, or

reconstruction of multi-use heritage assets (i.e., heritage assets

used in general government operations) were to be treated as

general PP&E and depreciated. The Board believes that this

treatment would be consistent with the full cost standards,

eliminate the need to adjust cost amounts presented in the

government-wide consolidated financial statements, and be

consistent with the predominant use notion.

23 The proposed modification for multi-use heritage assets is based

on various entities' accounting for and reporting on multi-use

heritage assets. The current accounting standards created

inconsistent treatment of assets that were ultimately used in the

same ways. For example, because the general PP&E category

includes all PP&E used in a business-type activity, the General

Services Administration (GSA) will capitalize the full cost of its

buildings because they are used in business. Meanwhile, entities

performing non-business-type entities (i.e., providing a service

without receiving value in return) will not show the full costs of their

building because of its multi-use heritage asset status. This is

inconsistent accounting that is not justified by the uses of the

assets.

24 The Board found that consolidation of entities accounting for

similar assets differently also could add unnecessary complexity to

the consolidation process. Since a monumental office building

accounted for by GSA as general PP&E and entirely capitalized by

GSA becomes a multi-use heritage asset at the government-wide

level the asset, cost of heritage assets, and depreciation expense

amounts would have to be adjusted on consolidation (subject to

materiality limitations). The Board believes that this change to the

accounting for multi-use heritage assets will also correct this

unnecessary complexity.
Appendix A: Basis for Conclusions 11

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July 1999

Responses to ED

25 Thirty written responses were received in regard to the ED. Of

the thirty responses received, fifteen respondents commented on

the proposed amendments for multi-use heritage assets. Thirteen

of the respondents who commented on the proposed amendments

for multi-use heritage assets agreed with the proposed

amendments, while the other 2 respondents who commented on

them disagreed.

Board Decisions

26 To allow for full costing on assets used in general government

operations, the Board believes that the costs of acquisition,

betterment, or reconstruction of multi-use heritage assets should

be capitalized and depreciated to allow for full costing in

accordance with SFFAS No. 4, Managerial Cost Accounting

Concepts and Standards for the Federal Government. Thus, the

Board decided to capitalize and depreciate multi-use heritage

assets and allocate the depreciation based on function. 

27 Some respondents to the ED asked if multi-use heritage assets

reported as general PP&E on the balance sheet should also be

reported in supplemental stewardship reporting, in order to

recognize them as heritage assets. It was observed by the Board

that it would be desirable to report all material heritage assets in

stewardship reporting, including those multi-use heritage assets

reported on the balance sheet, to show a complete picture for

stewardship purposes of all material assets classified as heritage

assets. This is consistent with the Board’s decision in SFFAS No.

8 to specifically note that some land might be included in heritage

assets and in stewardship land. Different information is captured

under the reporting for each category.

28 This dual reporting of multi-use heritage assets is highlighted

through note disclosures directing readers from the balance sheet

to the stewardship reports and vice versa. The amended

standards require balance sheets to have a note disclosure which
12 Appendix A: Basis for Conclusions

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explains that "physical quantity" information for the multi-use

heritage assets is included in supplemental stewardship reporting

for heritage assets. In addition, for multi-use heritage assets

reported in stewardship reporting, an appropriate note disclosure is

required to explain that financial information for multi-use heritage

assets is presented in the principal statements.

29 The ED also added the predominant use notion for multi-use

heritage assets because the Board agreed that incidental office

use should not determine the accounting treatment; that the

predominant use should prevail. An example of incidental office

use would be administrative offices or shop space in the Jefferson

Memorial. In this case both uses are incidental and the Jefferson

Memorial should be treated as a heritage asset and not be

capitalized and depreciated.

30 One respondent to the ED suggested that "predominant use" be

defined in the standard. During its deliberations, however, the

Board noted that the terminology "predominant use" is already

used in SFFAS No. 8 without any questions or problems being

raised about its definition. Therefore, the Board believed that if it

did define the term, that action may create a problem where no

problem exists.

Board Approval

31 The Board approved this recommendation by a vote of 8

members approving its issuance and 0 member(s) opposing its

issuance. Although the Board is comprised of 9 members, only 8

members cast a vote on SRAS 16. This is because the term of

one Board member had expired and the appointment of a

successor had not been finalized.
Appendix B: Cross References 13

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July 1999

APPENDIX B: CROSS REFERENCES

FROM PARAGRAPHS IN SFFAS NO. 6 AND NO. 8

TO PARAGRAPHS IN THESE AMENDMENTS

Table I: References Related to Standards in SFFAS No. 6

PAR. NUMBERS IN SFFAS NO 6 STATUS AND REFERENCE TO

PARAGRAPHS IN THESE AMENDMENTS

Multi-use heritage assets, par. 59 Par. 6

Heritage assets measurement and

recognition, par. 60 through 62

Par. 8 through par. 12

Heritage assets implementation, par. 63 Par. 14

Table II: References Related to Standards in SFFAS No. 8

PAR. NUMBERS IN SFFAS NO 8 STATUS AND REFERENCE TO

PARAGRAPHS IN THESE AMENDMENTS

Multi-use heritage assets par. 48 and 49 Par. 6 through 15

Heritage Assets Minimum Reporting

Requirements, par. 50

Add par. 18
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Appendix C: Glossary 15

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APPENDIX C: GLOSSARY

BETTERMENT - An expenditure having the effect of extending the useful life of an existing

asset, increasing its normal rate of output, lowering its operating cost, increasing rather than

merely maintaining its efficiency or otherwise adding to the worth of benefits it can yield. A

betterment is distinguished from repair or maintenance in that the latter have the effect of

merely keeping the asset in its customary state of operating efficiency without the expectation

of added future benefits. (Kohler's Dictionary for Accountants.)

CAPITALIZE - To record and carry forward into one or more future periods any expenditure

the benefits or process from which will then be realized. (Kohler's Dictionary for Accountants) 

CONDITION - The physical state of an asset. The condition of an asset is based on an

evaluation of the physical status/state of an asset, its ability to perform as planned, and its

continued usefulness. Evaluating an asset's condition requires knowledge of the asset, its

performance capacity and its actual ability to perform, and expectations for its continued

performance. The condition of a long-lived asset is affected by its durability, the quality of its

design and construction, its use, the adequacy of maintenance that has been performed, and

many other factors, including: accidents (an unforeseen and unplanned or unexpected event

or circumstance), catastrophes (a momentous tragic event ranging from extreme misfortune to

utter ruin), disasters (a sudden calamitous event bringing great damage, loss, or destruction),

and obsolescence. 

COST - Defined in SFFAC No. 1, Objectives of Federal Financial Reporting as the monetary

value of resources used (para. 195). Defined more specifically in SFFAS No. 4, Managerial

Cost Accounting Concepts and Standards for the Federal Government, as the monetary value

of resources used or sacrificed or liabilities incurred to achieve an objective, such as to acquire

or produce a good or to perform an activity or service (page 105). Depending on the nature of

the transaction, cost may be charged to operations immediately, i.e., recognized as an

expense of the period, or to an asset account for recognition as an expense of subsequent

periods. In most contexts within Accounting for Revenue and Other Financing Sources, "cost"

is used synonymously with expense. See also "Full Cost." 

DIRECT COST - The cost of resources directly consumed by an activity, and is specifically

identified with a cost object. Direct costs are assigned to activities by direct tracing of units of

resources consumed by individual activities.
16 Appendix C: Glossary

Federal Accounting Standards Advisory Board

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July 1999

EXPENDITURE - With respect to provisions of the Antideficiency Act (31 U.S.C. 1513-1514)

and the Congressional Budget and Impoundment Control Act of 1974 (2 U.S.C.622(i)), a term

that has the same definition as outlay. (GAO Budget Glossary)

FAIR VALUE (Or fair market value) - Value determined by bona fide bargain between wellinformed buyers and sellers, usually over a period of time; the price for which an PP&E item

can be bought or sold in an arm's length transaction between unrelated parties; value in a sale

between a willing buyer and a willing seller, other than in a forced or liquidation sale; an

estimate of such value in the absence of sales or quotations. (Kohler's Dictionary for

Accountants)

FULL COST - The total amount of resources used to produce the output. More specifically,

the full cost of an output produced by a responsibility segment is the sum of (1) the costs of

resources consumed by the responsibility segment that directly or indirectly contribute to the

output, and (2) the costs of identifiable supporting services provided by other responsibility

segments within the reporting entity and by other reporting entities. (SFFAS No. 4, Managerial

Cost Accounting Concepts and Standards for the Federal Government, para. 89) All direct

and indirect costs to any part of the Federal Government of providing goods, resources, or

services. (OMB Circular A-25).

GENERAL PROPERTY, PLANT, AND EQUIPMENT (PP&E) - PP&E used to provide

government services or goods. The cost of general PP&E is capitalized, i. e. recorded as an

asset on the balance sheet. For detailed characteristics of and accounting for general PP&E,

see paragraphs 23 through 34, SFFAS No. 6.

HERITAGE ASSETS - Property, plant, and equipment that are unique for one or more of the

following reasons: historical or natural significance; cultural, educational or artistic (e.g.,

aesthetic) importance; or, significant architectural characteristics. 

INDIRECT COST - A cost that cannot be identified specifically with or traced to a given cost

object in an economically feasible way.

MULTI-USE HERITAGE ASSETS - Heritage assets whose predominant use is general

government operations.
Appendix C: Glossary 17

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July 1999

RECOGNITION (OR RECOGNIZE) - The term recognition, as used in this Statement, bears

the same meaning as used by the Financial Accounting Standards Board in its conceptual

statements. Recognition is the process of formally recording or incorporating an item into the

financial statements of an entity as an asset, liability, revenue, expense, or the like. A

recognized item is depicted in both words and numbers, with the amount included in the

statement totals. Recognition comprehends both initial recognition of an item and recognition

of subsequent changes in or removal of a previously recognized item. (Financial Accounting

Standards Board, Statement of Financial Accounting Concepts No. 5, A Replacement of FASB

Concepts Statement No. 3, para. 6.)

STEWARDSHIP - The Federal Government's responsibility for the general welfare of the

nation in perpetuity.

USEFUL LIFE - The normal operating life in terms of utility to the owner.
FASAB Board Members

David Mosso, Chairman

Dr. Linda J. Blessing, through February 1999

James L. Blum, through December 1998

Barry B. Anderson, from February 1999

Philip T. Calder

Donald H. Chapin

Norwood J. Jackson

Gerald Murphy, through September 1998

Donald V. Hammond, from October 1998 through June 1999

Robert N. Reid, from July 1999

James E. Reid, through December 1998

Kenneth J. Winter, from February 1999

Nelson E. Toye

Wendy M. Comes, Executive Director

Project Staff:

Rick Wascak

Richard Mayo

Andrea Palmer

Federal Accounting Standards Advisory Board

441 G Street N.W.

Suite 3B18

Washington, DC 20548

Telephone (202) 512-7350

FAX (202) 512-7366
www.financenet.gov/fasab.htm