Inter-Entity Cost Implementation 

Amending SFFAS 4, Managerial Cost Accounting 

Standards and Concepts

Federal Accounting Standards Advisory Board

Statement of Federal Financial Accounting Standards 30 

August 15, 2005 

____________________________________________________________________ 
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 

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generally accepted accounting principles (GAAP) for the Federal Government. 

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Summary 

_____________________________________________________________________________ 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

i

Summary 

This standard requires full implementation of the inter-entity cost provision in Statement of 

Federal Financial Accounting Standards (SFFAS) 4, Managerial Cost Accounting Standards 

and Concepts. By fully implementing the provisions in SFFAS 4 (issued in July 1995) this 

standard will require the following for inter-entity cost: 

Each entity’s full cost should incorporate the full cost of goods and services that it 

receives from other entities. The entity providing the goods or services has the 

responsibility to provide the receiving entity with information on the full cost of 

such goods or services either through billing or other advice. 

Recognition of inter-entity costs that are not fully reimbursed is limited to material 

items that (1) are significant to the receiving entity, (2) form an integral or 

necessary part of the receiving entity’s output, and (3) can be identified or 

matched to the receiving entity with reasonable precision. Broad and general 

support services provided by an entity to all or most other entities should not be 

recognized unless such services form a vital and integral part of the operations or 

output of the receiving entity. (Text preceding paragraph 105 of SFFAS 4) 

This standard requires full implementation for reporting periods beginning after September 30, 

2008. 
Table of Contents 

_____________________________________________________________________________ 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Inter-Entity Cost Implementation 

Table of Contents 

Summary......................................................................................................................................................................i

Introduction................................................................................................................................................................1

Standards of Federal Financial Accounting ......................................................................................................3

Amendments to SFFAS 4 ...................................................................................................... 3

Effective Date ......................................................................................................................... 3

Appendix A: Basis for Conclusions.....................................................................................................................4

Introduction............................................................................................................................ 4

Amendments to Standards ..................................................................................................... 6

Exposure Draft....................................................................................................................... 7

Responses to the ED............................................................................................................... 7

Board Consideration of Comments ....................................................................................... 8

Additional Guidance .............................................................................................................. 9

Effective Date ......................................................................................................................... 9

Board Approval and Dissent................................................................................................ 10

Appendix B: List of Abbreviations.....................................................................................................................12
Introduction 1 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Statement of Federal Financial Accounting Standards 

Inter-Entity Cost Implementation 

 

Introduction 

1. The inter-entity cost provision in SFFAS 4 provided that each entity’s full cost should 

incorporate the full cost of goods and services that it receives from other entities. 

SFFAS 4 provided for gradual implementation because recognition of the full cost of 

goods and services provided by one federal entity (the providing entity) to another 

federal entity (the receiving entity) (1) required adequate cost accounting systems and 

(2) engaged all federal agencies in identifying the costs of under-reimbursed goods and 

services. 

2. Thus, an orderly means for consistently implementing the standard was viewed 

as necessary. The Board’s implementation guidance provided “the Office of 

Management and Budget [OMB], with assistance from the FASAB staff, should 

identify the specific inter-entity costs for entities to begin recognizing. OMB 

should then issue guidance identifying these costs.”1

 The inter-entity costs were 

to be specified in accordance with SFFAS 4, including the recognition criteria.2

 It 

was anticipated that the largest and most important inter-entity costs would be 

identified first. 

3. OMB requested that the Accounting and Auditing Policy Committee (AAPC) provide 

assistance in developing the guidance anticipated by SFFAS 4. The AAPC Inter-entity 

Cost Task Force (task force) was formed and initial research was conducted beginning 

in July 2000. The task force reported its research findings and recommendations to the 

AAPC at its May 2003 meeting. The task force noted that the current limitation3

 on 

recognizing inter-entity costs was an impediment to progress towards full costing. 

However, the task force did not find material non-reimbursed or under-reimbursed interentity costs for which government-wide guidance was warranted. The task force report is 

available on the AAPC website at http://www.fasab.gov/aapc/iecs.html. 

4. This standard follows the extensive research and recommendations by the AAPC task 

force addressing inter-entity cost guidance. Although the task force report 

acknowledged that restricting the recognition of inter-entity costs is an impediment to full 

costing, it recommended continued deferral of SFFAS 4’s inter-entity cost requirements 

while encouraging reimbursable agreements for inter-entity provision of goods and 

services. 

 

1

 SFFAS 4, par. 110 

2

 See SFFAS 4 par. 111-113 for recognition criteria 

3

 To date, OMB has issued guidance for recognizing the following specific inter-entity costs: (1) 

employees’ pension, post-retirement health and life insurance benefits, (2) other post-employment 

benefits for retired, terminated, and inactive employees, which includes unemployment and workers 

compensation under the Federal Employees’ Compensation Act, and (3) losses in litigation proceedings. 

The guidance further states that to ensure consistency, agencies should not recognize costs other than 

those listed until further guidance is provided. See Section 4.3 of OMB Bulletin No. 01-09, Form and 

Content of Agency Financial Statements. 
Introduction 2 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

5. This standard is intended to balance the concerns expressed by the task force and the 

ultimate goals of SFFAS 4 related to full cost. SFFAS 4 clarified that full cost was 

intended to relate resources to outputs regardless of the funding source: 

The full cost of a responsibility segment’s output is the total amount of 

resources used to produce the output. This includes direct and indirect 

costs that contribute to the output, regardless of funding sources. It also 

includes costs of supporting services provided by other responsibility 

segments or entities. (SFFAS 4, par. 89) 

6. Ultimately, attaining full cost is critical to improving performance measurement. SFFAS 4 

states: 

Measuring performance is a means of improving program efficiency, 

effectiveness, and program results. One of the stated purposes of the 

GPRA of 1993 is to “. . .improve the confidence of the American people in 

the capability of the federal government, by systematically holding federal 

agencies accountable for achieving program results.” (SFFAS 4, par. 34) 

Measuring costs is an integral part of measuring performance in 

terms of efficiency and cost-effectiveness. Efficiency is measured by 

relating outputs to inputs. It is often expressed by the cost per unit of 

output. While effectiveness in itself is measured by the outcome or the 

degree to which a predetermined objective is met, it is commonly 

combined with cost information to show “cost-effectiveness.” Thus, the 

service efforts and accomplishments of a government entity can be 

evaluated with the following measures: 

(1) Measures of service efforts which include the costs of 

resources used to provide the services and non-financial 

measures; 

(2) Measures of accomplishments which are outputs (the quantity 

of services provided) and outcomes (the results of those services); 

and 

(3) Measures that relate efforts to accomplishments, such as cost 

per unit of output or cost-effectiveness. (SFFAS 4, par. 35, 

emphasis added) 

Thus, ..., performance measurement requires both financial and non-financial 

measures. Cost is a necessary element for performance measurement, but 

is not the only element. (SFFAS 4, par. 36, emphasis added) 

7. This standard establishes a date certain—reporting periods beginning after September 

30, 2008—for full cost accounting by federal reporting entities. This standard affords 

time to provide needed guidance before the effective date. The Board anticipates the 

release of one or more Technical Releases that will address implementation issues 

during this time. Entities may also use the time period between the issuance of this 

standard and the actual effective date to establish reimbursable agreements, seek 

implementation guidance on specific issues if necessary, and develop internal guidance 

on recognizing inter-entity costs. 
Standards 3 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Standards of Federal Financial Accounting 

Amendments to SFFAS 4 

Amendments to Existing Standards

8. Statement of Federal Financial Accounting Standard (SFFAS) 4, Managerial Cost 

Accounting Standards and Concepts, Inter-Entity Costing, par. 110 is rescinded. 

9. The sentence “Such recognition, however, should be made in accordance with the 

implementation guidance issued by OMB as discussed above” is rescinded from par. 

111 of SFFAS 4. 

Effective Date 

10. This standard is effective for reporting periods beginning after September 30, 2008. 

Earlier implementation is encouraged.

The provisions of this Statement need not be applied to immaterial 

items. 
Appendix A: Basis for Conclusions 4 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Appendix A: Basis for Conclusions 

This appendix discusses factors considered significant by Board members 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. The standards enunciated in this statement---not the 

material in this appendix---should govern the accounting for specific transactions, 

events or conditions. 

Introduction 

11. The inter-entity cost provision in SFFAS 4 provided that each entity’s full cost should 

incorporate the full cost of goods and services that it receives from other entities. 

However, SFFAS 4 provided for gradual implementation of the inter-entity cost provision. 

12. In 1995, the Board provided implementation guidance stating: 

Implementation of this standard on inter-entity costing should be 

accomplished in a practical and consistent manner by the various federal 

entities. Therefore, the Office of Management and Budget [OMB], with 

assistance from the FASAB staff, should identify the specific interentity costs for entities to begin recognizing. OMB should then issue 

guidance identifying these costs. These particular inter-entity costs 

should be specified in accordance with this standard including the 

recognition criteria presented below. The OMB should consider 

information and advice from Treasury, GAO, and other agencies in 

developing the implementation guidance. It is anticipated that the largest 

and most important inter-entity costs will be identified first. As entities gain 

experience in the application of the standard, recognition of other interentity costs may be specified in future guidance or required by future 

standards. (SFFAS 4, par. 110, emphasis added) 

13. OMB requested that the AAPC provide assistance in developing the guidance 

anticipated by SFFAS 4, par. 110. The AAPC inter-entity cost task force was formed and 

initial research was conducted beginning in July 2000. The task force, chaired by James 

Taylor, Deputy Chief Financial Officer of the Department of Commerce, reported the task 

force research findings and recommendations to the AAPC at its May 2003 meeting. The 

task force report is available on the AAPC website at 

http://www.fasab.gov/aapc/iecs.html. 

14. The task force recommended no changes to the current limitations on application of 

SFFAS 4 inter-entity costs provisions. The task force found: 

a) The current implementation guidance (limitation on recognizing inter-entity costs) 

is an impediment to progress towards full costing. 

b) While there likely is under-recognition of costs, government-wide guidance for 

any individual cases is not warranted. 

c) Full costing should be accomplished by encouraging reimbursable agreements. 
Appendix A: Basis for Conclusions 5 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

15. Before implementation of any revision or removal of the limitation on recognition of interentity costs, the task force believed that: 

a) There should be detailed, practical guidance (beyond SFFAS 4 guidance) 

available to agencies on identifying, quantifying, and evaluating inter-entity costs, 

particularly evaluating the inter-entity costs’ significance and materiality. For 

example, guidance could include case studies and examples, and a list of 

examples of inter-entity costs could be issued. 

b) There should be established policies and procedures for the providing agency to 

submit necessary data to the receiving agency (for the receiving agency’s 

evaluation and/or calculation of inter-entity costs). A particular concern is the 

“providing” agencies’ ability and/or willingness to provide the “receiving” agency 

with needed data, and the availability to the receiving agency of alternate data 

when the providing agency cannot or will not provide data to the receiving entity. 

c) There should be adequate consultation among Federal agencies and the Federal 

audit community about the revision or removal of the OMB restriction prior to 

implementation. 

16. The Board appreciates the considerable talents and time volunteered by the AAPC task 

force. The findings and recommendations of the task force suggest that the gradual 

implementation planned for SFFAS 4’s inter-entity cost provisions is or will be 

unnecessary with time due to reimbursable agreements. The task force found that interentity costs are increasingly being reimbursed at full cost. Further, the task force 

believes that entities should continue to increase the use of full-cost reimbursable 

agreements. With these actions, the task force believes the need for implementation 

guidance would be minimized because costs would be captured based on transactions. 

17. While federal entities may continue to pursue reimbursable agreements, the Board does 

not wish to rely solely on that mechanism. The Board does not believe the existence of 

reimbursable agreements for all material4

 inter-entity costs at a point in time would be a 

permanent resolution of the issue. In addition, because there is no guarantee that 

reimbursable agreements would be universally obtainable and consistently pursued over 

time, the barrier to full implementation currently provided in SFFAS 4 must be removed. 

The Board believes that establishing a date for the removal of the barrier is appropriate. 

18. The Board believes the task force’s proposal would (1) defer action to an unspecified 

time and (2) still require future action by FASAB to remove the barrier to full 

implementation of the inter-entity cost to ensure full costing is implemented over time. 

19. Since SFFAS 4 – excluding the inter-entity cost provisions -- was effective in fiscal year 

1998 and the implementation guidance has not progressed, the Board believes 

establishing a date certain for full implementation is appropriate. The task force 

expressed concerns regarding competing priorities for scarce resources and inter-entity 

cost implementation should not begin at this time. Therefore, the implementation date of 

this standard is sufficiently distant to alleviate the concerns expressed by the task force. 

 

4

 SFFAS 4 addresses materiality at length in par. 112 and 113. Nothing in this standard or the AAPC task 

force report alters that guidance. Therefore, terms such as “materiality” and “significance” should be 

evaluated in the context established by SFFAS 4, par. 112 and 113. 
Appendix A: Basis for Conclusions 6 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

20. The Board believes that establishing a date certain for implementation of the inter-entity 

cost provisions of SFFAS 4 would be a more effective and permanent resolution of the 

issue. Acting soon after the task force’s surveys would ensure that deferral of action 

does not result in a need for further surveys or for future action by the Board to remove 

the barrier. In addition, this standard affords time to provide needed guidance (See 

Additional Guidance below). 

21. This standard balances the concerns raised by the task force regarding current priorities 

and resource constraints, and the goals of SFFAS 4. This standard establishes a date 

certain for full cost accounting by federal reporting entities. Further, by permitting early 

implementation entities would be afforded the opportunity to improve full cost recognition 

sooner. For those entities receiving material amounts of non-reimbursed or underreimbursed inter-entity goods and services, full implementation would enhance the 

completeness and comparability of cost information.

22. In addition, this standard is consistent with the initial steps taken by the Board in 

Interpretation 6, Accounting for Imputed Intra-departmental Costs: An Interpretation of 

SFFAS No. 4 and resolves concerns expressed by respondents to the exposure draft 

leading to Interpretation 6. Interpretation 6, issued in April 2003 and effective for periods 

beginning after September 30, 2004, requires recognition of intra-departmental interentity costs. Some respondents to the exposure draft leading to Interpretation 6 

expressed concern regarding the inconsistent treatment of inter- and intra-departmental 

inter-entity costs. The Board then concluded that a gradual reduction of the unrecognized inter-entity costs would be preferable to no action. In addition, the Board 

opined that the experience gained with respect to intra-departmental inter-entity costs 

would be useful in addressing inter-departmental inter-entity costs. (See par. 42 of 

Interpretation 6.) 

23. The Board believes that this standard is essential to attaining the full cost accounting 

envisioned in SFFAS 4. Further, full cost information is essential to effective 

performance measurement. 

Amendments to Standards 

24. To require full implementation of the inter-entity cost provision, this standard amends 

SFFAS 4, Managerial Cost Accounting Standards and Concepts by 

• Rescinding Inter-Entity Costing, par. 110; and 

• Rescinding the sentence “Such recognition, however, should be made in accordance 

with the implementation guidance issued by OMB as discussed above” from par. 

111. 
Appendix A: Basis for Conclusions 7 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Exposure Draft 

25. FASAB published the exposure draft (ED) Inter-Entity Cost Implementation Amending 

SFFAS 4, Managerial Cost Accounting Standards and Concepts on April 26, 2004. 

Upon release of the ED, notices and/or press releases were provided to: the Federal 

Register; the FASAB News, the Journal of Accountancy, AGA Today, the CPA Journal, 

Government Executive, the CPA Letter, and the Government Accounting and Auditing 

Update; the CFO Council, the Presidents Council on Integrity and Efficiency, the 

Financial Statement Audit Network, the Federal Financial Managers Council; and 

committees of professional associations generally commenting on exposure drafts in the 

past. 

26. 21 letters were received from the following sources: 

 FEDERAL 

(internal) 

NONFEDERAL 

(external) 

Users, academics, others 3 

Auditors 2 2 

Preparers and financial 

managers 

14 

27. A public hearing was held on December 16, 2004. Individuals from the Library of 

Congress, Department of Interior, and a representative from the Association of 

Government Accountants Financial Management Standards Board testified at the public 

hearing. 

Responses to the ED 

28. Approximately one-half of the respondents agreed with the Board’s proposal that the 

inter-entity cost provisions of SFFAS 4 should be fully implemented. In other words, 

approximately one-half of the respondents disagreed with the Board’s proposal and 

agreed with the alternative view proposal to implement the inter-entity cost provisions by 

identifying specific costs to be recognized on a step-by-step basis. 

29. Approximately one-half of the respondents believed that there were non-reimbursed or 

under-reimbursed inter-entity costs meeting the recognition criteria in SFFAS 4. 

Additionally, a majority of respondents believed that federal entities would seek 

additional reimbursable agreements or modify existing agreements (e.g., by increasing 

fees) because non-reimbursed or under-reimbursed inter-entity costs may be 

recognized. 

30. Approximately one-half of the respondents believed that additional guidance was 

needed to apply the factors in determining whether an inter-entity cost is material to the 

receiving entity and that additional guidance was needed to apply the broad and general 

support exception. 
Appendix A: Basis for Conclusions 8 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Board Consideration of Comments 

31. The Board determined the main concerns identified by respondents included (1) the lack 

of implementation guidance and (2) costs would not be recognized consistently across 

agencies. 

32. The Board noted that the task force acknowledged that restricting the recognition of 

inter-entity costs is an impediment to full costing. In addition, the task force did not find 

material non-reimbursed or under-reimbursed inter-entity costs for which governmentwide guidance was warranted. However, the task force did note that some costs could 

be material for selected agencies. This finding would be consistent with the comment 

letters to the ED, as approximately one-half of the respondents did believe that material 

non-reimbursed or under-reimbursed inter-entity costs that meet the recognition criteria 

do exist. 

33. The task force reported that there should be detailed, practical guidance (beyond SFFAS 

4 guidance) available to agencies on identifying, quantifying, and evaluating inter-entity 

costs, particularly evaluating the inter-entity costs’ significance and materiality. The task 

force reported that guidance could include case studies and examples, and a list of 

examples of inter-entity costs could be issued. It also reported that there should be 

established policies and procedures for the providing agency to submit necessary data 

to the receiving agency (for the receiving agency’s evaluation and/or calculation of interentity costs). The comment letters to the ED supported the task force recommendations 

regarding the need for guidance. 

34. Therefore, the Board determined that there was a need for additional guidance. The 

Board believes that with the issuance of additional detailed, practical guidance, agencies 

will have the tools necessary to implement inter-entity full costing and capture the costs 

that potentially exist. (See Additional Guidance below.) 

35. Several respondents indicated that costs would not be recognized consistently across 

agencies as reliance on entity’s judgment in identifying costs will result in differing 

interpretations. The Board expects differences will occur as agencies analyze their 

particular potential inter-entity cost against the recognition criteria because it is likely that 

certain costs may be material to one agency and not to another agency. This would 

appropriately occur considering materiality and the recognition criteria. The Board 

believes such expected differences are likely to occur but should not prevent agencies 

from informing financial statement users of material costs incurred. 

36. Additionally, the Board reiterates that the recognition criteria in par. 112-113 of SFFAS 4 

(which provides general criteria to determine which costs should be recognized) apply. 

The accounting and reporting for inter-entity costs that are recognized should be 

consistent and in accordance with par. 108-109 and 114-115 of SFFAS 4, which provide 

specific accounting examples.
Appendix A: Basis for Conclusions 9 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Additional Guidance 

37. As discussed above, the Board determined that there was a need for additional 

guidance. Therefore, the task force has been requested to continue its work in this area 

by developing one or more Technical Releases (TR) that will address implementation 

issues raised by respondents. The Board has also suggested certain operational 

guidance be issued by the Office of Management and Budget (OMB). It should be noted 

that the guidance does offer a venue for agencies to direct agency-specific questions. 

38. The Board believes that the task force could build upon their already extensive survey 

results and research, as well as the comment letters and staff analysis in developing the 

guidance. Specifically, the task force work may include an extensive evaluation of costs 

to determine which ones may be considered “Broad and General” for all entities and if 

possible, a list of the costs that should be considered Broad and General for all entities 

would be included in the TR. The TR may also include additional guidance or discussion 

on the factors Directness of relationship to the entity’s operations and Identifiability as 

used in determining if a transaction should be considered material to the receiving 

entity.5

39. It is also anticipated that the task force will collect individual inter-entity requests for 

guidance on specific cases and determine if general guidance in the area can be 

provided on the issue, and if so, the TR will provide such clarifying guidance. The actual 

cases will be forwarded to OMB with the task force’s recommendation, which will 

reference the general guidance in the TR. However, final disposition of the individual 

entity-specific cases will be determined by OMB. 

40. The task force could utilize existing guidance related to cost accounting in developing 

the guidance. Specifically, the CFO Council’s Cost Accounting Implementation Guide 

and the Joint Financial Management Improvement Program’s System Requirements for 

Managerial Cost Accounting, among others, are good sources of information. 

41. Additionally, the task force may wish to solicit volunteers from the agencies that provided 

comments to the ED for assistance. Also, volunteers could be requested from agencies 

that successfully implement Interpretation Number 6, Accounting for Imputed Intradepartmental Costs: An Interpretation of SFFAS No. 4 considering the effective date for 

this was for periods beginning after September 30, 2004. 

Effective Date 

42. The proposed effective date in the ED was for periods beginning after September 30, 

2007. The Board determined that the effective date of this standard should be delayed 

to periods beginning after September 30, 2008. The Board delayed the implementation 

date to allow the AAPC and OMB to develop the additional guidance detailed above. 

 

5

 See SFFAS 4 par. 111-113 for recognition criteria 
Appendix A: Basis for Conclusions 10 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Board Approval and Dissent 

43. This Statement was approved for issuance by eight members of the Board. Mr. Reid 

dissented. Mr. Anania abstained. 

44. Mr. Reid dissents from this Statement because he opposes rescinding paragraph 110. 

He believes that the inter-entity cost provisions should be implemented on a step-bystep basis. Mr. Reid notes that the basis for conclusions of SFFAS 4 states that the 

Board has expressed the need to take a measured, step-by-step, practical approach to 

implementing the inter-departmental costing standard. He notes that it further explains 

that the Board recommended that 1) OMB, with assistance from the FASAB staff, should 

identify those specific inter-departmental, un-reimbursed or under-reimbursed costs that 

entities should recognize, and 2) OMB should then issue guidance describing those 

costs. The Board anticipated that the largest and most important inter-departmental 

costs would be identified first; then other costs would be identified as entities gained 

experience in the application of the standard. Mr. Reid believes this approach was seen 

as a practical way to ensure uniformity in the application and implementation of the 

standard and to allow time and experience for overcoming any other practical problems 

which arose. 

45. Mr. Reid believes that a better way to proceed is found in the procedure set forth in 

SFFAS 4 for identifying costs to be recognized. He believes that SFFAS 4 never 

contemplated the discontinuance of the procedure but rather held that specific costs 

would continue to be identified. Mr. Reid believes it is a far different approach to open 

the door to all costs. He believes rescinding paragraph 110 of SFFAS 4 defeats the idea 

set forth in SFFAS 4 that the standard be consistently applied and implemented. 

46. Mr. Reid believes that the notion of consistent application is still a valid concern. He 

noted that when charged with identifying other costs to be imputed the Accounting and 

Auditing Policy Committee task force could not suggest additional costs to be recognized 

that were government-wide in nature and met the criteria of SFFAS 4. He believes that 

opening the door to recognition of inter-departmental costs that are not government-wide 

in nature is a new approach since such costs, identified on a case-by-case basis, cannot 

be applied consistently government-wide. Mr. Reid believes that control over the 

implementation of the standard will be lost and uncertainty will result. 

47. Mr. Reid believes that if FASAB is dissatisfied with progress being made to identify 

additional costs, FASAB itself should identify specific costs to be recognized. SFFAS 4 

indicates that FASAB may do this. Such action by FASAB would be compatible with the 

consistency notion and would not result in loss of control or uncertainty. 

48. Mr. Reid believes that losing control over the recognition of inter-departmental costs will 

result in considerable activity with little or no value as agencies try to comply with a 

standard open to different interpretations by the preparer and the auditor. This change 

will expose agencies to possible challenges by auditors over unknown or immaterial 

costs, that cannot be determined with any certainty. In addition uncontrolled cost 

imputation will add significantly to the difficulties of eliminating these costs in 

consolidation. 
Appendix A: Basis for Conclusions 11 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

49. He also believes that this standard will result in uncontrolled imputation of interdepartmental costs and may instigate an iterative process of charges and charge-backs. 

These multiple rounds of cost imputation will provide little benefit and make it difficult for 

agencies to close their books quickly. Mr. Reid believes that as agencies impute costs 

from others, their costs will increase thereby increasing the costs others would need to 

impute from them. He believes this will create multiple rounds of cost imputation which 

will provide little benefit and will not be useful for agency decision making as it relates to 

costing of programs. 

50. Mr. Reid believes this standard is a departure from the ideas of SFFAS 4 as they relate 

to the standard on inter-departmental cost recognition. He is not opposed to recognizing 

additional specific costs, but is opposed to doing so in an uncontrolled fashion. 
Appendix B: List of Abbreviations 12 

Federal Accounting Standards Advisory Board 

Inter-Entity Cost Implementation 

August 15, 2005 

Appendix B: List of Abbreviations 

AAPC Accounting and Auditing Policy Committee 

ED Exposure Draft 

FASAB Federal Accounting Standards Advisory Board 

GAO Government Accountability Office 

OMB Office of Management and Budget 

SFFAC Statement of Federal Financial Accounting Concepts 

SFFAS Statement of Federal Financial Accounting Standards 

TR Technical Release 
FASAB Board Members 

David Mosso, Chairman 

Joseph V. Anania, Sr. (through July 15, 2005) 

Claire Gorham Cohen 

Robert F. Dacey (from August 1, 2004) 

John A. Farrell 

James M. Patton 

Robert N. Reid 

Elizabeth Robinson 

Alan H. Schumacher 

David M. Zavada 

FASAB Staff 

Wendy M. Comes, Executive Director 

Melissa L. Loughan 

 Monica R. Valentine 

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.fasab.gov