Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of 

Operations

Amendment of SFFAS 7, Accounting for Revenue and Other Financing Sources

Statement of Federal Financial Accounting Standards No. 22

October 2001
THE FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD

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

by the Secretary of the Treasury, the Director of the Office of Management and Budget 

(OMB), and the Comptroller General in October 1990. It is responsible for promulgating 

accounting standards for the United States Government.

An accounting standard is typically formulated initially as a proposal after considering the 

financial and budgetary information needs of citizens (including the news media, state and 

local legislators, analysts from private firms, academe, and elsewhere), Congress, Federal 

executives, Federal program managers, and other users of Federal financial information. The 

proposed standard is published in an Exposure Draft for public comment. A public hearing is 

sometimes held to receive oral comments in addition to written comments. The Board 

considers comments and decides whether to adopt the proposed standard with or without 

modification. The Board publishes adopted standards in a Statement of Federal Financial 

Accounting Standards.

Additional background information is 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," Amended October 1, 1999.

• "Mission Statement: Federal Accounting Standards Advisory Board"

Federal Accounting Standards Advisory Board

441 G Street, NW, Suite 6814

Mailstop 6K17V

Washington, DC 20548

Telephone (202) 512-7350

Fax (202) 512-7366

www.financenet.gov/fasab.htm
EXECUTIVE SUMMARY i

Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

EXECUTIVE SUMMARY

a. Statement of Federal Financial Accounting Standards (SFFAS 7) 7, 

Accounting for Revenue and Other Financing Sources, requires a reconciliation of 

budgetary and financial accounting information. The reconciliation explains the 

relationship between budgetary resources obligated by the entity during the period 

and the net cost of operations as derived from the entity’s proprietary accounting 

system. 

b. This standard amends SFFAS 7 by deleting a requirement regarding an 

element of the reconciliation. SFFAS 7, paragraph 80, requires increases and 

decreases in receivables from the public related to exchange revenue to be 

reported as a nonbudgetary resource. This standard deletes this requirement and 

makes other necessary conforming changes. 

c. The effect of this change is that the location of this reconciling item is no longer 

specified by the standard. 
TABLE OF CONTENTS ii

Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

Section Page No.

Executive Summary i

Introduction 1

Accounting Standards 2

Appendix A: Basis for Conclusions 3

Appendix B: SFFAS 7, Paragraphs 80 and 97 5
INTRODUCTION 1

Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

INTRODUCTION

1. Statement of Federal Financial Accounting Standards (SFFAS 7) 7, 

Accounting for Revenue and Other Financing Sources, paragraphs 80-82, 

requires a reconciliation explaining the relationship between budgetary obligations 

incurred by the entity during the period and the net cost of operations. 

Paragraphs 95-102 in the concepts section of SFFAS 7 presents the statement of 

financing (SOF) as the vehicle for reporting the reconciliation. 

2. Paragraph 80, SFFAS 7, requires, among other things, increases and 

decreases in receivables from the public related to exchange revenue to be 

reported as nonbudgetary resources. The Board is deleting, by means of this 

amendment, the sentence in paragraph 80 that requires such reporting, and 

making other conforming changes.

3. The effect of this change is that the location of this reconciling item in the 

statement of financing is no longer specified by the standard. 

Materiality

4. The provisions of this accounting standard need not be applied to immaterial 

items.

Effective Date

5. This amendment is effective for periods beginning after September 30, 2000.
ACCOUNTING STANDARD 2

Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

ACCOUNTING STANDARD

Changes for SFFAS 7

6. SFFAS 7 is amended as follows:

Delete the following sentence from paragraph 80:

Further, it should include decreases (increases) in receivables from the public 

related to exchange revenue when only the cash amount is included in budgetary 

resources.

Other conforming changes: 

• Delete the following sentence from paragraph 97:

This amount would also include decreases (increases) in receivables related 

to revenue accrued from the public because, while the cash collected for 

exchange revenue is a budgetary resource, the accrual amount is not.

• Delete the following line item from Appendix 1-G, Example Financial 

Statements Formats, Statement of Financing

Exchange revenue not in the budget
APPENDIX A: BASIS FOR CONCLUSIONS 3

Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

APPENDIX A: BASIS FOR CONCLUSIONS

7. This appendix summarizes some of the considerations deemed significant by the 

Board in reaching the conclusions in this Statement. It includes the reasons for 

accepting certain approaches and rejecting others. Individual members gave greater 

weight to some factors than to others.

8. As stated in previous sections, the Statement of Federal Financial Accounting 

Standards (SFFAS 7) 7, Accounting for Revenue and other Financing Sources, 

requires budgetary obligations incurred by the entity to be reconciled with the entity’s 

net cost of operations.1 The concept section of SFFAS 7 presents the statement of 

financing (SOF) as the vehicle for reporting the reconciliation.2 A primary objective of 

the Board in creating the SOF is that readers of the financial statements are able to 

understand the difference between obligations, as reported in the budget, and the net 

cost of operations as reported in the statement of net cost.3

9. The Board issued an exposure draft in April 2001 proposing to delete the 

requirement in SFFAS 7, paragraph 80, that “decreases (increases) in receivables from 

the public related to exchange revenue” be reported as a nonbudgetary resource on the 

SOF. There are instances where reporting the change in “receivables from the public 

related to exchange revenue” as a resource, as is currently required by SFFAS 7, may 

be inappropriate. This amended standard would permit flexibility.

10. The effect of this change is that the location of this reconciling item in the 

statement of financing is no longer specified by the standard. 

Respondents’ Comments

11. The respondents’ comments are summarized below. The Board does not rely on 

the number of respondents in favor of or opposed to a given position. Information about 

the respondents’ majority view is provided only as a means of summarizing the 

comments. The Board considers the arguments in each response and weighs the 

merits of the points raised.

 

1

 SFFAS 7, paragraphs 80-82.

2

 SFFAS 7, paragraphs 95-102. See the Implementation Guide to Statement of Federal Financial Accounting Standards No. 7, 

Accounting for Revenue and Other Financing Sources, pars. 72-95 for a discussion and illustrations of the statement of financing.

3

Implementation Guide for SFFAS 7, par. 72.
APPENDIX A: BASIS FOR CONCLUSIONS 4

Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

Federal Non-federal

Users, academics, 

others

1 3

Auditors 2 1

Preparers and 

financial managers 7

12. Nine respondents either said they agreed with or had no objection to the 

amendment. One respondent agreed with the change but disagreed with the 

decision to issue the standard allowing flexibility. Four respondents reviewed the 

exposure draft but chose not to comment or offered a comment beyond the scope of 

the issue addressed by the exposure draft. Respondents made the following individual 

comments:

a) placement of the line item should be made mandatory now, rather than allowing 

flexibility 

b) optional presentations reduce understandability

c) adding a brief discussion of the alternative presentations to the basis for 

conclusions would make the amendment more understandable

d) a reference to the discussion of the SOF in the FASAB’s Implementation Guide 

to SFFAS 7 (April 1996) would be helpful

e) the SOF is useful; encourage further improvements 

f) the title of the SOF should include the word “reconciliation”

g) consider making the SOF supplementary information

h) users would use either budgetary or accrual information, not both, so a 

reconciliation of obligations and net costs as in the SOF is not useful 

Conclusion

13. In light of the comments received from respondents, the Board believes there is 

support for proceeding with this amendment. The Board considered the comments 

from several respondents that the basis for conclusions contain a brief discussion of 

alternative SOF presentations, but continues to believe that such a discussion must be 

postponed until a fuller review of the statement of financing is undertaken. The SOF is 

complex, and the narrative and illustrations necessary to present a full discussion of 

and rationale for the alternatives should be undertaken during a comprehensive 

updating of the implementation guidance. 

Vote for Approval

14. All members of the Board approved this statement. 
APPENDIX B: PARAGRAPHS 80 and 97 5

Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

APPENDIX B: Paragraphs 80 and 97 of SFFAS 7

The current paragraphs are as follows:

80. Budgetary and financial accounting information are complementary, but both the 

types of information and the timing of their recognition are different, causing differences 

in the basis of accounting. To better understand these differences, a reconciliation 

should explain the relationship between budgetary resources obligated by the entity 

during the period and the net cost of operations. It should reference the reported 

“obligations incurred” and related adjustments as defined by OMB Circular A-34. It 

also should include other financing sources not included in “obligations incurred” such 

as imputed financing, transfers of assets, and donations of assets not included in 

budget receipts. Further, it should include decreases (increases) in receivables from 

the public related to exchange revenue when only the cash amount is included in 

budgetary resources. The total of these items comprises obligations and nonbudgetary 

resources.

97. Nonbudgetary resources represent the net amount of resources received by 

the entity that are not included in budgetary resources. These items could include 

donations of assets, transfers of assets from (to) other federal entities, and financing 

imputed for cost subsidies. This amount would also include decreases (increases) in 

receivables related to revenue accrued from the public because, while the cash 

collected for exchange revenue is a budgetary resource, the accrual amount is not.
Federal Accounting Standards Advisory Board

Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations

October 2001

FASAB Board Members

David Mosso, Chairman

Barry Anderson

Philip T. Calder

John A. Farrell

Joseph L. Kull

James M. Patton

Robert N. Reid

Nelson Toye

Kenneth J. Winter

FASAB Staff

Wendy M. Comes, Executive Director

Project Staff:

Richard Fontenrose

____________________________________________________

Federal Accounting Standards Advisory Board

441 G Street NW

Suite 6814

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Washington, DC 20548

Telephone (202) 512-7350

FAX (202) 512-7366


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