Reclassification of Stewardship Responsibilities and 

Eliminating the Current Services Assessment

Federal Accounting Standards Advisory Board

Statement of Federal Financial Accounting Standards No. 25 

July 17, 2003 

____________________________________________________________________ 
 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. These standards are recognized as generally accepted accounting 

principles (GAAP) for the federal 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, and 

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. In some cases, a discussion memorandum, invitation for comment, 

or preliminary views document may be published before an exposure draft is published on a specific 

topic. 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. After review by the three officials who sponsor FASAB, the Board publishes adopted 

standards in a Statement of Federal Financial Accounting Standards. 

Additional background information is available from the FASAB or its website: 

 • 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 

Exposure drafts, Statements of Standards and Concepts, FASAB newsletters, and other items of 

interest are posted on FASAB’s website, at www.fasab.gov. 

Federal Accounting Standards Advisory Board 

441 G Street, NW, Suite 6814 

Mailstop 6K17V 

Washington, DC 20548 

Telephone (202) 512-7350 

Fax (202) 512-7366 

http://www.fasab.gov/
Summary

This Statement of Federal Financial Accounting Standards (SFFAS) changes the classification 

of information about stewardship responsibilities required by federal accounting standards. It 

also eliminates the requirement to present certain information about stewardship 

responsibilities, known as the “Current Services Assessment,” previously required by SFFAS 8. 

Scope of this Statement 

This Statement deals with 

• Risk Assumed information required by SFFAS 5, Accounting for Liabilities of the 

Federal Government 

• The Current Services Assessment (CSA) required by SFFAS 8, Supplementary 

Stewardship Reporting, and 

• Social Insurance information required by SFFAS 17, Accounting for Social Insurance. 

Information about stewardship responsibilities is currently designated Required Supplementary 

Stewardship Information (RSSI), a category unique to federal financial reporting. Pursuant to 

this SFFAS, information about Risk Assumed will become required supplementary information 

(RSI). The Statement of Social Insurance (SOSI) will become a basic financial statement, while 

the remaining information about Social Insurance required by SFFAS 17 will be reported as RSI. 

Reasons for Issuing this Statement

For reasons explained in Appendix A, the Board decided to review the classification of all RSSI 

required by federal accounting standards. The Board eliminated use of RSSI to report 

information about weapons systems when it issued SFFAS 23, Eliminating the Category 

“National Defense Property, Plant, and Equipment.” Classification of other items of information 

currently designated RSSI (stewardship land, stewardship investments, and heritage assets) 

may be dealt with in one or more future exposure drafts. The Board also decided to eliminate 

the requirement to present the CSA now, because timely issuance of federal financial reports, a 

practice that was not possible when SFFAS 8 was published, will make it infeasible to present 

the CSA in the Government’s annual financial report. The same information will, however, 

continue to be publicly available in the Budget of the United States Government. 

How the Changes in this Statement Improve Federal Financial Reporting 

These changes will improve the clarity and significance of federal financial reporting in two 

ways: (1) by defining the SOSI as essential to fair presentation and (2) by using reporting 

categories that are well defined in existing professional literature and familiar to report users. 
The Effective Date 

The requirement to report the CSA will be eliminated effective for reporting periods beginning 

after September 30, 2002. Information about Risk Assumed shall be presented as RSI for 

reporting periods beginning after September 30, 2002. The information required by paragraphs 

27(3) and 32(3) of SFFAS 17 shall be presented as a basic financial statement rather than as 

RSSI for periods beginning after September 30, 2004, with earlier implementation encouraged. 

Other information required by SFFAS 17 shall be presented as RSI rather than as RSSI, except 

to the extent that the preparer elects to include some or all of that information in notes that are 

presented as an integral part of the basic financial statements, for periods beginning after 

September 30, 2004. 
Reclassification of Stewardship Responsibilities 

And Eliminating the Current Services Assessment 

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

STANDARDS OF FEDERAL FINANCIAL ACCOUNTING ............................................... 2

Risk Assumed.......................................................................................................................... 2

Current Services Assessment ................................................................................................. 2

Social Insurance..................................................................................................................... 2

Effective Date ......................................................................................................................... 2

APPENDIX A: BASIS FOR CONCLUSIONS.................................................................. 3

Background ............................................................................................................................ 3

Conclusions Regarding Each Type of Stewardship Responsibility Information ................ 7

Risk Assumed................................................................................................................. 7

Current Services Assessment (CSA) .............................................................................. 8

Social Insurance ............................................................................................................. 9

Conclusions Regarding Effective Date................................................................................ 10

Distinguishing RSI from the Basic Financial Statements and Associated Notes ............. 11

Operational Differences Between the Basic Financial Statements and RSI .................. 11

Footnote vs. RSI Section .............................................................................................. 13

Audit Aspects of Basic vs. RSI...................................................................................... 13

Factors to Consider ...................................................................................................... 14

Board Approval and Dissent ................................................................................................ 17
Abbreviations 

AGA Association of Government Accountants 

AICPA American Institute of Certified Public Accountants 

AT Attestation Standards codified and published by AICPA 

AU Audit Standards codified and published by AICPA 

CBO Congressional Budget Office 

CFR Consolidated Financial Report of the U.S. Government (formerly the “CFS”) 

CMS Centers for Medicare and Medicaid Services (formerly HCFA) 

CSA Current Services Assessment 

FASAB Federal Accounting Standards Advisory Board 

GAAP Generally Accepted Accounting Principles 

GAAS Generally Accepted Auditing Standards 

GAO General Accounting Office 

GASB Governmental Accounting Standards Board 

OAI Other Accompanying Information (also known as “other supplementary 

information” – i.e., supplementary information not required by GAAP) 

OMB Office of Management and Budget 

PCIE President’s Council on Integrity and Efficiency (Inspectors General) 

RSI Required Supplementary Information (as used in SFAS 25 and other accounting 

standards and in AU Section 558) 

RSSI Required Supplementary Stewardship Information (as used in SFFAS 5, 8 and 

17) 

SFAC Statement of Financial Accounting Concepts 

SFFAC Statement of Federal Financial Accounting Concepts 

SFAS Statement of Financial Accounting Standards 

SFFAS Statement of Federal Financial Accounting Standards 

SSA Social Security Administration 
Federal Accounting Standards Advisory Board 

Reclassification of Stewardship Responsibilities and Eliminating the Current Services Assessment 

July 2003 

Statement of Federal Financial Accounting Standards 

Reclassification of Stewardship Responsibilities 

And Eliminating the Current Services Assessment

 

Introduction 

1. Federal accounting standards require the following information to be reported 

regarding stewardship responsibilities: 

• Risk Assumed information required by SFFAS 5, Accounting for 

Liabilities of the Federal Government, 

• The Current Services Assessment (CSA) required by SFFAS 8, 

Supplementary Stewardship Reporting, and 

• Social Insurance information required by SFFAS 17, Accounting for 

Social Insurance. 

2. This information is currently designated Required Supplementary Stewardship 

Information (RSSI). RSSI is a reporting category unique to federal accounting. 

Pursuant to this Statement, Risk Assumed information will become required 

supplementary information (RSI), 1 and the CSA will not be required after FY 

2002. For FY 2005 the Statement of Social insurance (SOSI) will become a 

basic financial statement, essential for fair presentation in conformity with 

generally accepted accounting principles (GAAP). Other Social Insurance 

information required by SFFAS 17 shall be presented as RSI rather than as 

RSSI, except to the extent that the preparer elects to include some or all of that 

information in notes that are presented as an integral part of the basic financial 

statements. Appendix A presents background information and the reasons for 

these changes. 

3. This Statement amends SFFAS 5 and SFFAS 17 by reclassifying Risk Assumed 

information and Social Insurance information. Those standards would remain 

unchanged in all other respects. The requirement in SFFAS 8 to report the CSA 

is rescinded. 

 

1 RSI was added to the accounting literature by Statement of Financial Accounting Standards (SFAS) 25, 

Suspension of Certain Accounting Requirements for Oil and Gas Producing Companies, published by the 

Financial Accounting Standards Board (FASB) in 1979. That Statement has been amended, but the RSI 

category continues to be used in a variety of standards published by the FASB, the Governmental 

Accounting Standards Board (GASB), and the FASAB. The auditor’s responsibility for RSI is discussed in 

section AU 558 of the codification of professional auditing standards published by AICPA. 
2 

Federal Accounting Standards Advisory Board 

Reclassification of Stewardship Responsibilities and Eliminating the Current Services Assessment 

July 2003 

Standards of Federal Financial Accounting 

Risk Assumed 

4. Information about Risk Assumed, required by SFFAS 5 and previously 

designated required supplementary stewardship information (RSSI), shall be 

designated required supplementary information (RSI). 

Current Services Assessment 

 

5. Chapter 8 and paragraphs 14-16 of SFFAS 8 are rescinded, as is the associated 

illustration of the Current Services Assessment in Appendix B of SFFAS 8. 

Social Insurance 

6. The information required by paragraphs 27(3) and 32(3) of SFFAS 17 shall be 

presented as a basic financial statement rather than as required supplementary 

stewardship information (RSSI). Other information required by SFFAS 17 shall 

be presented as RSI, except to the extent that the preparer elects to include 

some or all of that information in notes that are presented as an integral part of 

the basic financial statements, 

Effective Date 

7. Chapter 8 and paragraphs 14-16 of SFFAS 8 are rescinded, as is the associated 

illustration of the Current Services Assessment in Appendix B of SFFAS 8, 

effective for reporting periods beginning after September 30, 2002. Information 

about Risk Assumed shall be presented as RSI for reporting periods beginning 

after September 30, 2002. The information required by paragraphs 27(3) and 

32(3) of SFFAS 17 shall be presented as a basic financial statement for periods 

beginning after September 30, 2004, with earlier implementation encouraged. 

Other information required by SFFAS 17 shall be presented as RSI, except to the 

extent that the preparer elects to include some or all of that information in notes 

that are presented as an integral part of the basic financial statements, for 

periods beginning after September 30, 2004. 

The provisions of this Statement need not be applied to immaterial 

items. 
3 

Federal Accounting Standards Advisory Board 

Reclassification of Stewardship Responsibilities and Eliminating the Current Services Assessment 

July 2003 

Appendix A: Basis for Conclusions 

This appendix summarizes the considerations deemed significant by the Board in 

reaching the conclusions in this Statement. It includes reasons for accepting certain 

approaches and rejecting others. Individual Board members gave greater weight to 

some factors than to others. 

Background 

8. In SFFAS 8, FASAB stated: 

A key aspect of the stewardship objective requires that Federal reporting 

provide information that helps users determine (1) whether the 

Government's financial condition improved or deteriorated over the 

period and (2) whether future budgetary resources will likely be sufficient 

to sustain public services and to meet obligations as they come due. 

Information on ‘stewardship responsibilities’ will aid in these 

determinations. It will provide an essential perspective on the 

Government's commitment to discretionary and mandatory programs.2

 

These objectives have not changed. However, for reasons discussed below, the 

Board believes that information about stewardship responsibilities should be 

reported in the context of the basic financial statements, the associated notes,3

and required supplementary information, rather than as RSSI. The Board 

eliminated use of RSSI to report information about weapons systems when it 

issued SFFAS 23, Eliminating the Category “National Defense Property, Plant, 

and Equipment.” The Board will consider in other projects the proper 

classification of other items that are now classified as RSSI. 

9. The Board originally contemplated that GAO and OMB would provide special 

guidance regarding the audit procedures or “fieldwork” to be performed on RSSI. 

At the same time, the Board expected that the auditor would report on this 

information in much the same way as on the basic financial statements, in the 

sense that the auditor would qualify or disclaim an opinion when the RSSI was 

omitted or materially misstated. The category was seen as a response to the 

unique aspects of the federal accounting and reporting environment, and to the 

broad objectives of federal financial reporting. It was intended to permit flexibility 

 

2

 SFFAS 8, paragraphs 14 and 15. 

3 The notes are regarded as an integral part of the basic financial statements, essential for fair 

presentation in conformity with GAAP.
 Appendix A

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July 2003

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on the part of preparers and auditors that would facilitate reporting relevant, 

reliable information, including nonfinancial and nonhistorical information. 4 

10. Some members became concerned that users: (1) may pay insufficient attention 

to some important information because it is called “supplementary,” and (2) may 

be confused by complicated reports in which information is reported in various 

places. They believed this might impede users’ understanding and reduce the 

credibility of federal financial reports. Some members believed that FASAB’s use 

of the RSSI category invites suspicion of accounting in which items that are as 

important as the basic financial statements are labeled “supplementary.” 

Accordingly, in Preliminary Views on Eliminating the Category “Required 

Supplementary Stewardship Information” (December 2000), the Board proposed 

to eliminate the RSSI category by reviewing and reconsidering the appropriate 

classification of each item classified as RSSI. 

11. In deciding to review the classification of components of RSSI, some members 

were influenced by the fact that existing audit standards do not discuss RSSI. 

Therefore, auditors do not know what to do with respect to information in this 

category without consulting federal publications that provide additional guidance 

on how to conduct or contract for audits of federal financial statements. 

Furthermore, as practice evolved, it was not clear that auditors would qualify or 

disclaim their opinion on the basic financial statements when RSSI was missing 

or misstated, because it was not clear to everyone that the information was 

essential to fair presentation in conformity with GAAP. Some FASAB members 

were concerned that, under these circumstances, even sophisticated users might 

not understand fully the significance of certain information classified as RSSI. 

Some members believed that it would be desirable for FASAB to use categories 

that are widely understood by the broader accounting and auditing professions, 

particularly now that FASAB has been recognized by AICPA as the body that 

promulgates generally accepted accounting principles for the federal 

government. 

12. The Board received 29 written comments on its December 2000 Preliminary 

Views from the following sources: 

• 16 preparers (all federal), 

• 8 auditors (three nonfederal, including AICPA), 

 

4

See the Implementation Guide to Statement of Federal Financial Accounting Standards No. 7: 

Accounting for Revenue and Other Financing Sources, June 1996, paragraphs 22-24, the diagram on 

page 15, and minutes of associated Board discussions. See also SFFAS 8, Supplementary Stewardship 

Reporting, June 1996, paragraphs 21, 34, 111-115, and minutes of associated Board discussions.
Basis for Conclusions 

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Federal Accounting Standards Advisory Board 

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• 5 others. (This category includes academics, retired federal employees, 

and the Association of Government Accountants (AGA), a professional 

association of federal and nonfederal accountants and auditors.) 

13. The comments reflected the views of more than 29 people. Comments from the 

President’s Council on Integrity and Efficiency (PCIE), AGA, federal agencies, 

and AICPA were the work of numerous individuals. Twenty of the respondents 

would have retained the RSSI category, at least for some period. Some typical 

concerns expressed include the following: 

• Elimination of the category would provide less stewardship information to 

users, lead to a qualified opinion that would send a less-clear signal to 

users than is available with current and potential alternatives, and raise 

audit costs. The category provides a clear and unique method to 

prominently display stewardship information essential to meeting 

taxpayer accountability. The category has been successful in 

communicating our financial condition. 

• The separate category and section of the report is an effective and 

practical means of reporting. It is appropriate for the unique environment 

and objectives of federal financial reporting. Approaches to providing 

audit assurance over RSSI are evolving. FASAB should work with 

specialists in the relevant disciplines to define common units of reporting 

for items not expressed in monetary terms. 

• Unique aspects of the federal financial reporting environment and 

objectives led the Board to create the new category. If used properly, 

the category should be a mechanism to provide much-needed 

information to decision makers, including citizens, when they consider 

the consequences of decisions relating to public lands, heritage assets, 

and similar items. 

14. In April 2001 the Board held a public hearing to discuss the Preliminary Views

proposal with interested parties. Fourteen individuals, representing seven 

organizations, made presentations and discussed issues with the Board. 

Comments were similar to those expressed in the 29 comment letters. 

15. After considering these comments, the Board continued to believe that federal 

accounting standards may be able to address the objectives of federal financial 

reporting, including accountability and reporting on stewardship, without a unique 

category. The Board noted that eliminating the RSSI category need not result in 

a reduction of information required by existing standards. (The Board 

subsequently decided to rescind the requirement to present the CSA in the 

annual consolidated financial report of the U.S. Government (CFR) for other 

reasons, which are explained on page 8, but the information will continue to be 

available to the public). Furthermore, the Board noted, preparers will continue to 

have the option of voluntarily presenting supplementary information beyond what 
 Appendix A

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is required. This “other accompanying information” would be unaudited, unless 

special arrangements were made to extend the auditor’s work in the context of a 

particular audit. 

16. The Board continued to believe that avoiding use of the RSSI category where it is 

not essential would eliminate some potential confusion and ambiguity. In 

particular, it should clarify the Board’s expectation that when material information 

that is essential to fair presentation is missing or materially misstated, the auditor 

should consider whether a qualified or adverse opinion is appropriate regarding 

whether the basic financial statements are prepared in conformity with GAAP. 

After consultation with AICPA staff, the Board concluded that this result could 

best be assured by designating such information as an integral part of the basic 

financial statements. 

17. Accordingly, in February 2002, the Board published an exposure draft entitled 

Reclassification of Stewardship Responsibilities and Eliminating the Current 

Services Assessment. The exposure draft proposed to eliminate the Current 

Services Assessment, reclassify information about Risk Assumed as RSI, and 

reclassify all Social Insurance information as an integral part of the basic financial 

statements. The Board received 22 comment letters from the following sources: 

• 11 preparers (all federal), 

• 7 auditors (6 federal and AICPA), 

• 4 others. (This category includes an academic, two former Board 

members, and the AGA.) 

18. Some letters reflected the views of an organization, while others were from 

individuals. Comments generally supported or did not oppose eliminating the 

CSA and reclassifying Risk Assumed information as RSI. Some letters did 

express concern about the feasibility of auditing Social Insurance information as 

an integral part of the basic financial statements and/or questioned whether the 

benefit of doing so would outweigh the cost. In response to these concerns, the 

Board consulted with representatives of AICPA, and decided (1) to designate 

only the SOSI as a basic financial statement, while classifying other Social 

Insurance information as RSI, and (2) to extend the time allowed to implement 

this change. More detailed explanation of the basis for the Board’s conclusions 

follows. 
Basis for Conclusions 

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Federal Accounting Standards Advisory Board 

Reclassification of Stewardship Responsibilities and Eliminating the Current Services Assessment 

July 2003

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Conclusions Regarding Each Type of Stewardship Responsibility Information 

19. Figure 2 on page 14 presents a list of general factors that one or more Board 

members considered relevant for the classification choices. Specific decisions 

on each of the three types of stewardship responsibility information are 

discussed in the remainder of this Appendix. 

Risk Assumed 

20. The Board agreed that information about Risk Assumed should be RSI rather 

than an integral part of the basic financial statements, because the amounts are 

not sufficiently reliable and measurement methods are still experimental. This 

information is potentially valuable, but it is not yet a suitable basis for recognition 

or disclosure.5

 The Office of Management and Budget (OMB), the General 

Accounting Office (GAO), and the Congressional Budget Office (CBO) have 

considered the use of Risk Assumed information as a basis for budgeting for 

insurance programs. These agencies have concluded that more experience is 

needed before the measurements can be regarded as sufficiently reliable for 

budgeting. Similar considerations lead the FASAB to conclude that information 

about Risk Assumed should be included in financial reports as RSI, at least until 

agencies and auditors have more experience with this information. 

21. The Board believes that analogies with insurance offered by private insurers, 

(where, for example, an expected premium deficiency on long-duration contracts 

such as life insurance is recognized), may be misleading due to differences in the 

length of the policy coverage, nature of insured risk, or other relevant variables. 

The Board believes that additional guidance from FASAB on definition and 

measurement of “Risk Assumed” would be necessary before it would be feasible 

to require recognition or disclosure of this information as an integral part of the 

basic financial statements. Developing and promulgating such guidance would 

require a separate project. Before the Board undertakes such a project, it is 

desirable to encourage continued improvement in agencies’ data systems and 

modeling capabilities to support reporting Risk Assumed. The RSI requirement 

has the effect of providing this encouragement in an appropriate, cost-beneficial 

manner. The Board notes that the “state of the art” for such projections is 

constantly evolving. Should the Board in the future decide that it would be 

desirable to develop more specific criteria for reporting Risk Assumed, the Board 

will be able to learn from this ongoing experience. 

 

5 FASAB uses the term “disclosure” to refer to information that is not recognized on the face of the 

basic financial statements but is regarded as an integral part of the basic financial statements, 

essential for fair presentation in conformity with generally accepted accounting principles (GAAP). 

Normally such disclosures are presented in footnotes, but federal accounting standards published 

by FASAB do not currently prescribe the format for presentation of such disclosures. GAAP does 

not prohibit formatting or combining pieces of information in appropriate ways to direct the reader’s 

attention, provided that the results are not misleading. 
 Appendix A

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Current Services Assessment (CSA) 

22. The CSA provides receipt and outlay data on the basis of the President’s 

projections of future activities pursuant to current law. It is relevant for assessing 

the sustainability of programs established by current law; that is, relevant for 

assessing the sufficiency of future resources to sustain public services and to 

meet obligations as they come due. The CSA focuses on the totality of 

government operations rather than on individual programs. It provides an 

analytical perspective on the Government because it shows the short- and longterm direction of current programs. 

23. SFFAS 8 defines the CSA by reference to what is published in the President’s 

Budget. The Board did not then foresee the possibility that the CFR would be 

published before the Budget. Because the Board now expects that within a few 

years the CFR will be published before the President’s Budget is available, the 

requirement to include the CSA in the CFR will expire in FY 2002 (i.e., the CSA 

will not be required in the CFR after FY 2002). In order to continue to require 

something comparable to the CSA as part of the CFR when the CFR is published 

before the Budget, federal accounting standards would need to define the CSA in 

some way other than by reference to the Budget. Developing the criteria for such 

a projection is beyond the scope of this project. 

24. The Board considered the alternative of including OMB’s current services 

estimates prepared for the “midsession review.” The Board concluded that 

certain technical problems would make this alternative problematic. 

Furthermore, supplementary reporting on this basis would not add value, 

because the estimates are publicly available in any event, and because the base 

year actual data published in the budget would not be subject to review by the 

auditor. 

25. The Board notes that OMB, CBO, and others regularly publish similar 

projections; therefore, similar information will continue to be available, regardless 

of whether it is required to be part of the CFR. The Board also notes that the 

“state of the art” for such projections is constantly evolving. Should the Board in 

the future decide that it would be desirable to develop criteria for such a 

projection as a part of federal financial reporting, the Board will be able to learn 

from this ongoing experience. 
Basis for Conclusions 

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Social Insurance 

26. The Board believes that the SOSI should be treated as a basic financial 

statement because it is essential to fair presentation and is important to achieve 

the objectives of federal financial reporting. The related stewardship objectives 

include helping users to assess the impact on the country of the Government's 

activities, determine whether the Government's financial position improved or 

deteriorated over the period, and predict whether future budgetary resources will 

likely be sufficient to sustain public services and meet obligations as they come 

due. In that regard, the multi-trillion dollar obligations associated with Social 

Insurance over the next 75 years could significantly exceed the largest liabilities 

currently recognized in the U.S. Government Balance Sheet. 

27. The Board acknowledges that there is great uncertainty inherent in long term 

projections, but believes that if the uncertainty is suitably disclosed--as is 

required by SFFAS 17--it need not preclude designating the information as a 

basic financial statement, essential for fair presentation in conformity with GAAP. 

The Board rejects the idea that information based on projections cannot be an 

integral part of the basic financial statements. FASAB has not limited the content 

of federal financial statements to historical information. 

28. Even within the context of historical financial reporting, the Board notes that 

accrual-basis “historical” financial statements include many measurements that 

involve assumptions about the future. The distinction between reporting on the 

financial effects of events that have occurred and the effects of future events 

depends, obviously, upon the definition of the event. The information required by 

SFFAS 17 reports on the financial effects of existing law and demographic 

conditions and assumptions, just as the pension obligation at a point in time is 

based on existing conditions. In that sense, Social Insurance information can be 

viewed as reflecting events that have occurred and, therefore, as “historical.” 

29. Measuring the future effects of existing law and conditions for Social Insurance 

involves projections of economic and demographic trends, just as measuring the 

pension benefit obligation at a point in time involves assumptions about future 

salary progression. It is true that SFFAS 5 specifies a different measurement 

method for pensions and retiree healthcare than the method SFFAS 17 specifies 

for Social Insurance. It is also true that Social Insurance measurements are 

more sensitive to assumptions about the most distant years of the projection 

period. Nevertheless, the Board believes that it is appropriate to report the SOSI 

as a basic financial statement, essential for fair presentation in conformity with 

GAAP. 

30. Classifying the SOSI as a basic financial statement will mean that auditors will 

consider a modification of their opinion if this information is materially misstated. 

A modification would send a clear and appropriate signal to users in such a 
 Appendix A

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circumstance. The Board understands that some added audit expense will be 

incurred as a result of this change in status for Social Insurance information, and 

added demands may be made on the accounting and actuarial staff of agencies 

that report Social Insurance information. The Board believes that the benefits in 

this case outweigh the expense. The SOSI is important to those who would 

understand the Government’s financial condition and its impact on the financial 

condition of individual citizens, interesting to the public, and essential to fair 

presentation. 

31. The exposure draft proposed to reclassify all Social Insurance information as an 

integral part of the basic financial statements. In response to concerns 

expressed about the cost and feasibility of auditing this information, the Board 

decided to define only the SOSI as a basic financial statement, and provided 

additional time for implementation. The impact of the change in audit status for 

the SOSI should be mitigated by the fact that preparers and users have 

experience with similar information. Also, much of the actuarial and audit work 

can be done before the end of the fiscal year, if the preparer and auditor prefer. 

SFFAS 17 provides for considerable flexibility in selecting the measurement date. 

Paragraph 26 of SFFAS 17 states: 

All projections and estimates required in these standards should be 

made as of a date (the valuation date) as close to the end of the fiscal 

year being reported upon (“current year”) as possible and no more than 

one year prior to the end of the current year. This valuation date should 

be consistently followed from year to year. 

Conclusions Regarding Effective Date 

32. The standard eliminates the requirement to present the CSA, and does not 

change the definition, presentation guidelines, or audit status for Risk Assumed 

information. (RSSI is currently treated as RSI for audit purposes, pursuant to 

instructions in OMB’s Audit Bulletin.) No delay is needed as a result of the 

changes regarding these two items. Accordingly, these changes are effective 

immediately. 

33. Audit status for the SOSI would change; however, as noted above, the 

information is not new. Most of the relevant agencies have produced similar 

information for several years, and analysts and public officials have routinely 

used this information. Also, the impact of the audit requirement on the auditor 

and preparer should be reduced by the flexibility SFFAS 17 provides in selecting 

a measurement date for Social Insurance. The Board consulted with AICPA 

regarding the time needed to develop appropriate audit guidance. The Board 

also noted that federal agencies will be confronted with a challenging 

requirement for accelerated financial reporting in FY 2004. As a result, the Board 
Basis for Conclusions 

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Federal Accounting Standards Advisory Board 

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concluded that the SOSI should be presented as a basic financial statement for 

reporting periods that begin after September 30, 2004, with earlier 

implementation encouraged. 

Distinguishing RSI from the Basic Financial Statements and Associated Notes 

34. To help readers understand the Board’s deliberations, this section provides more 

details about some practical and conceptual factors that affected the Board’s 

decision whether to designate an item as RSI or as an integral part of the basic 

financial statements. The basic financial statements include the principal 

financial statements and associated notes on which the auditor expresses an 

opinion as to whether the information is presented in conformity with GAAP. 

The terms “basic financial statements” and “principal financial statements” have 

been used synonymously in federal accounting. 

35. FASB tends to use the term “basic financial statements” or simply “financial 

statements” consistent with the definition in FASB Concepts Statement 5, 

Recognition and Measurement in Financial Statements of Business Enterprises: 

 . . . a financial statement is a formal tabulation of names and amounts of 

money derived from accounting records that displays either financial position 

of an entity at a moment in time or one or more kinds of changes in financial 

position of the entity during a period of time. Items that are recognized in 

financial statements are financial representations of certain resources 

(assets) of an entity, claims to those resources (liabilities and owners’ equity), 

and the effects of transactions and other events and circumstances that result 

in changes in those resources and claims. The financial statements of an 

entity are a fundamentally related set that articulate with each other and 

derive from the same underlying data. (SFAC 5, paragraph 5, footnote 

omitted.) 

AICPA tends to use the term “basic financial statements” or simply “financial 

statements” also to encompass footnotes that are regarded as an integral part of 

the basic financial statements as defined in SFAC 5. Depending on the context, 

FASAB may use the term either way. The following discussion focuses on the 

distinction between information on which the auditor expresses an opinion 

(whether reported on the face of the basic statements or in the notes to the 

statements) and supplementary information that is also required by GAAP. 

Operational Differences Between the Basic Financial Statements and RSI 

36. Figure 1 (on page 12) identifies some operational differences under current 

auditing standards. Given these operational differences between basic financial 

statements and RSI, the Board must determine whether it would be more 

appropriate for a given item of required information to be deemed an integral part 

of the basic financial statements or RSI. The appropriateness depends on the 
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particular benefits (based on various federal financial reporting objectives) and 

the costs (preparing, auditing, user processing, other) of making it subject to 

audit (vs. more limited procedures) and varying the potential audit opinion 

treatment (qualification vs. mere mention in the auditor’s report). 

Figure 1 

Comparison Dimension Basic

Financial 

Statements

RSI

Is the information required to be in the financial 

report? (That is, it is either an integral part of 

the basic financial statements or it must 

accompany them.) 

Yes Usually6

Is the information deemed essential if the 

financial statements are to “present fairly” in 

conformity with GAAP? 

Yes No 

What audit fieldwork is required? Audit Limited procedures pursuant to AU 558 

Auditor’s report Positive 

assurance 

regarding 

“fair 

presentation” 

Silent, no explicit assurance unless 

engaged to audit the RSI. However, if 

the RSI is financial information that has 

been subjected to audit procedures in 

connection with auditing the basic 

financial statements, the auditor may 

express assurance “in relation to the 

financial statements taken as a whole.” 

What audit report mention is required if the 

information is missing or not prepared in 

conformity with guidelines? 

Qualified or 

adverse 

opinion 

Mention in report; no qualification of 

opinion on the basic financial 

statements. 

37. It should be noted that the value of information to users and the value added by 

auditing it are separate, though certainly related, considerations. For example, 

some information may be valuable to some users, yet auditing it might add little 

value. On the other hand, some information (e.g., aggregated financial 

information for a federal agency as a whole) may not be used directly by decision 

makers as input to a particular “decision model,” but auditing it might provide 

some degree of valuable assurance about other information (e.g., detailed 

program cost or budgetary expenditure information) or objectives of interest (e.g., 

internal accounting control and finance-related legal compliance). Auditing 

 

6 In some cases, RSI need not physically accompany the basic financial statements in the same 

document; certain GASB standards permit reference to another publicly-available report as an option for 

specified RSI.
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financial statements may also deter fraud and unintentional errors of various 

sorts in other, more timely reports. 

Footnote vs. RSI Section 

38. Although not required by auditing standards, RSI has customarily been located in 

a separate section of the financial report, to aid in distinguishing it from audited 

information.7 This practice has continued with RSSI, evidently in part because 

federal preparers thought it was necessary, or at least desirable, to report 

“stewardship” items together. It is possible that placement of information in 

different sections of the financial report leads some types of readers to pay more 

(or less) attention to the information. Although the magnitude of these 

differences is an open question, research has shown that formatting can matter 

to individual users. 

Audit Aspects of Basic vs. RSI 

39. Both footnote disclosures and required supplementary information are viewed as 

being sufficiently relevant to be required to accompany the basic financial 

statements in financial reports,8

 though only the notes are regarded as required 

for fair presentation in conformity with GAAP. As discussed previously, one 

major difference between the two types of information is the extent and nature of 

the auditor’s scrutiny and responsibility for the information; another is the nature 

of the auditor’s report and the kind of “signal” it sends. Thus, the cost and value 

 

7

 AU 558.10 states: “Ordinarily, the required supplementary information should be distinct from the 

audited financial statements and distinguished from other information outside the financial statements that 

is not required by the FASB, GASB, or FASAB. However, management may choose not to place the 

required supplementary information outside the basic financial statements. In such circumstances, the 

information should be clearly marked as unaudited. If the information is not clearly marked as unaudited, 

the auditor's report on the audited financial statements should be expanded to include a disclaimer on the 

supplementary information.” 

In practice, notes and RSI generally have not been commingled. Indeed, in discussing the 

location of RSI it requires, FASB said, “Reporting specialized information on oil and gas producing 

activities in a single location within a financial report is a desired objective of this Statement so as to make 

the relationship among the different types of information easier to analyze.” (FAS 69, par. 117) 

In theory, RSI might be integrated with related audited information, provided the unaudited 

information was suitably labeled. Whether this would be feasible and desirable in practice may be 

debatable. Concern on the part of independent CPAs about litigation risk has been among the factors 

that encouraged physical separation of audited information from unaudited information. 

Another practical consideration may be introduced by recent guidance from AICPA intended to 

clarify the auditor’s ability to offer some limited assurance “in relation to the financial statements” on 

certain RSI. This could imply a need to distinguish the RSI for which such assurance is offered from other 

types of supplementary information, both required and voluntary. 

Some comments regarding FASAB’s Preliminary Views on Eliminating the Category “Required 

Supplementary Stewardship Information” suggested that some people believe there are conceptual as 

well as practical reasons to report different kinds of information separately. 

8 As noted, certain GASB standards permit reference to another publicly-available report as an option for 

specified RSI.
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added by audit are factors to consider. The main question is: for what types of 

information, users, and objectives would the benefits of making an item an 

integral part of the basic financial statements instead of RSI exceed the 

incremental costs of audit, compared with reviewing pursuant to AU 558’s limited 

procedures? 

Factors to Consider 

40. In deciding whether a given item should be classified as RSI or as an integral 

part of the basic financial statements, one might consider a variety of factors, 

such as those listed in figure 2. They are not listed in any particular order, and 

some “overlap” or convey similar ideas. Different people assign different weight 

to each factor. Some people may not consider some of the factors at all, and 

some people may consider factors that are not listed. Likewise, different people 

may evaluate each item to be reported differently on each dimension. Therefore, 

figure 2 is not a decision tree, hierarchy, or precise algorithm for classifying 

items, but a general framework for each individual’s judgment. 

Figure 2 

-Low (implies RSI) < < < < < < < < < < < < < > > > > > > > > > > > > > +High (implies basic) 

<Relevance to fair presentation> 

< Connection with elements of financial reporting > 

< Use of historical financial data or financial transaction data > 

<Preparers’ discretion in preparing and presenting the information> 

< Strength of signal Board wishes to be sent in the financial report > 

< Significance, relevance or importance of the item in light of Objectives > 

< Strength of the signal the Board wishes to be sent in the auditor’s report > 

< Relevance to measuring financial position or changes in financial position > 

<Extent to which the information interests a wide audience (rather than specialists)> 

<Extent to which there are not alternative sources of reliable information> 

< Agreement on criteria that permit comparable and consistent reporting > 

< Experience among users, preparers, and auditors with the information > 

<Extent to which the information is aggregated (lacking in detail)> 

< Benefit/cost ratio of using resources to ensure accuracy > 

< Connection with basic financial statements > 

< Reliability and/or precision possible > 

< Reliability and/or precision needed > 

-Low (implies RSI) < < < < < < < < < < < < > > > > > > > > > > > > +High (implies basic) 

41. Different people will assign different importance to each factor. However, a 

consensus did emerge during the Board’s deliberations on the proper 
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classification of Social Insurance information that three related factors are 

particularly important for that decision: (1) The Board agreed that the SOSI is 

“essential to fair presentation.” A set of financial statements could not be said to 

“present fairly” when the SOSI is missing or materially misstated. For this 

reason, it is important (2) that this signal clearly be communicated to the reader 

of the financial report and (3) to the reader of the auditor’s report. Other factors 

listed also were deemed relevant, and were deemed consistent with “basic” 

status; for example, a wide audience is interested in this information. 

42. The Board ultimately decided to rescind the requirement to present the CSA for 

reasons discussed on page 8, but not before it considered the proper 

classification of the CSA. The amount of discretion available to the preparer was 

deemed especially important to the decision about how to classify the CSA. If 

there is very little discretion in preparing the information, the value of auditing 

may be modest. An example is SFFAS 8’s requirement to reprint information as 

it was presented in the President’s Budget, without independent criteria for 

evaluating it. On the other hand, if there is great discretion, questions may arise 

about whether the resulting information would be sufficiently reliable, 

comparable, and consistent without auditing. Another factor, relevant both to the 

decision initially to classify the information as RSI and to the decision eventually 

to terminate the requirement, is that there are other, credible sources of similar 

information. As noted, OMB and CBO routinely publish intermediate and longterm projections that are scrutinized by Congress and by analysts in the private 

sector. 

43. Because SFFAS 5 does not include detailed criteria for defining and measuring 

Risk Assumed, preparers have considerable discretion in calculating it. This 

might seem to imply that audit would be desirable. However, auditors may have 

concerns about expressing positive assurance on information for which specific 

definitions and measurement criteria have not been defined. In other words, 

there may not be sufficient agreement on criteria that permit comparable and 

consistent reporting to permit classifying Risk Assumed as an integral part of the 

basic financial statements. Another example where this concern has affected 

classification is information about the condition of stewardship assets and 

deferred maintenance of property, plant and equipment. Even when auditors do 

provide assurance, in some cases they may wish to express special 

qualifications, explanations, or caveats in their report. An example might be an 

auditor’s report on an examination of prospective financial information where 

there is great inherent uncertainty, or an examination of other assertions by 

management about matters where management has great discretion. 

44. Concerning the “significance” factor: The basic financial statements (including 

notes that are regarded as an integral part of the financial statements) and RSI 

are both important enough to be required items in financial reports. With respect 

to the audit status of the information, it would seem that, by itself, the importance 
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of an item need not automatically imply that the information should be audited. 

Rather, one would also consider the extent of the information-preparer’s 

discretion as well as the cost of auditing the information item. However, it does 

seem that the more important the item, the more likely it should be audited, if the 

information preparer had a significant degree of discretion. One would be willing 

to incur more audit costs to avoid misstatement of very important information 

items that could affect users’ decisions. Furthermore, the more important the 

item, the more likely it would be deemed essential to fair presentation, thus 

implying a need to qualify the auditor’s opinion if the information were missing or 

misstated. 

45. Concerning the “reliability and/or precision” factors: These factors are 

intertwined, and all affect the extent to which one would prefer audited 

information to RSI. “Reliability and/or precision needed” asks one to evaluate the 

users’ tolerance for imprecise measures of a relevant item. Since auditing is 

likely to increase precision (either through inducing more precise measures by 

the preparer or by reducing the variance in the measures by audit procedures), 

the less tolerance for imprecision that users have concerning an information item, 

the more likely that the Board would want to make the item a required note 

disclosure instead of RSI. 

46. “Reliability and/or precision possible” deals with the very nature of the information 

item being reported. Precision about measures of past events seems inherently 

more possible than precision about estimates of future events. To the extent that 

there is a fundamental minimum amount of imprecision in certain information 

items, the cost of increasing audit effort might not be justified. For some Board 

members, this consideration was among the factors (along with others such as 

cost/benefit) that imply “Risk Assumed” information should properly be classified 

as RSI at this time. At the same time, however, uncertainty need not preclude 

classifying information as an integral part of the basic financial statements when 

other factors indicate this is appropriate, as is the case with the SOSI. 

Uncertainty should be disclosed and described to the extent feasible. 

47. Some other listed factors also relate to the nature of the information. For 

example, some people may define the domain of accounting and/or financial 

reporting (or categories within that domain) in terms of the nature of information 

involved (e.g., as limited to “historical” financial information or to certain defined 

“elements” of financial reporting, or to certain concepts such as “financial 

position”). FASB has emphasized the role of “elements of financial reporting” in 

defining the financial statements and notes. FASB and GASB also emphasize 

the concept of net assets or financial position in defining financial statements and 

notes. 
Basis for Conclusions 

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48. Other people may define financial reporting, and its component categories, in 

terms of the comparative advantage unique to reporting based on the information 

system for processing financial transactions. SFAC 5, Recognition and 

Measurement in Financial Statements of Business Enterprises, says that the 

“financial statements . . . articulate with each other and derive from the same 

underlying data (par. 5). Some believe this idea is rooted in the basic 

“bookkeeping” paradigm of accounting (see SFFAC 1, Objectives of Federal 

Financial Reporting, paragraphs 166-168). Such a definition might be expected 

to lead to accounting standards that would define the basic financial statements 

in a narrow or traditional way, with other kinds of information (e.g., performance 

indicators or management’s assertions about internal control) being reported as 

RSI. 

49. Others may define the domain of financial reporting, and categories within that 

domain, more broadly. A broader definition might, for example, be expressed in 

terms of the objectives of federal financial reporting, or the comparative 

advantage of the annual reporting and audit cycle, which assures the production 

and examination of information that GAAP say is essential to fair presentation, 

where GAAP reporting is mandated by law, contract, or market forces. This kind 

of broader definition might be expected to lead to standards that would define 

more types of information (e.g., performance indicators or management’s 

assertions about internal controls) as a part of the basic financial statements. 

50. More generally, the “benefit/cost ratio of using resources to assure accuracy” 

asks one to assess the costs of producing auditable information and auditing it 

versus the benefits that could be achieved by merely preparing the information 

as RSI and applying the procedures specified at AU 558. Other things being 

equal, one would avoid auditing where the cost of auditing is quite high. 

Similarly, to the extent that alternative, credible sources of information exist, the 

cost of auditing the information may exceed its benefits. 

Board Approval and Dissent 

51. This Statement was adopted by the affirmative votes of seven members of the 

Board. Mr. Anania dissented. Mr. Kull abstained. 

52. Mr. Anania dissents from this Statement because he believes the Board's 

decision to have the information required by Par. 27(3) and 32(3) of SFFAS l7 

presented as a basic financial statement is premature and is not supported by a 

change in circumstances or appropriate technical considerations by the Board. 

53. The Board issued SFFAS 17 in August 1999 after more than four years of debate 

and consideration of many major issues including: (1) definition of a federal 

liability with weight given to the unique circumstances of the Federal 

Government, including its sovereign powers, (2) nature of Social Insurance laws 
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and practices, (3) significance of Social Insurance programs to individual 

taxpayers, and (4) long-term sustainability of the programs as currently 

constructed. 

54. In SFFAS 17, Appendix A - Basis for Conclusions - Section 2, the arguments are 

presented for (Par. 73-79) and against (Par. 65-72) recognition, disclosure or 

supplementary reporting of Social Insurance programs. The Board's conclusion 

(Par. 80-83) acknowledges there were two polarized views. These sentences 

from SFFAS 17 summarize those views and the Board's decisions related to 

disclosure and measurement of Social Insurance obligations: 

. . . On the one side are those who believe that social insurance 

programs - especially Social Security and Medicare - constitute a liability 

of the Federal Government that should be recognized on the 

consolidated balance sheet and that the closed group is the best 

measure of it.... At the opposite pole are those who firmly believe that the 

closed group measure is meaningless or even potentially misleading and 

should not be disclosed at all in the financial report (Par. 80). 

. . . Although both sides make strong arguments, no empirical evidence 

has been offered that would prove one side right and the other wrong. 

The Board believes the best approach to resolve this issue is for the 

closed group data to be reported off the balance sheet as a part of a 

balanced RSSI package of disclosures about the Social Security and 

other social insurance programs (Par. 81). 

The Board believes that a more complete picture of the financial 

condition of the government can be provided by a forward-looking 

assessment of whether it can ‘sustain public service and meet 

obligations as they come due’ (Par. 85). . . . 

55. Mr. Anania believes the key issues debated by the Board prior to the issuance of 

SFFAS 17 remain significant and unresolved. He believes the Board should 

reconsider the technical aspects of the Social Insurance programs from an 

accounting and reporting perspective before making the change that is called for 

by this Statement. He cites the following issues as some, but not all, of the 

issues the Board should deliberate while keeping the original SFFAS 17 

requirements in place: (1) whether the distinction between exchange and nonexchange transactions in the Board's concepts is relevant to a liability 

recognition, (2) whether the closed group (current participants) population is the 

most meaningful focus for either recording a liability or for disclosure, and (3) 

whether the notions of a constructive liability or an "in substance" plan concept 

require consideration. 

56. Further, he is concerned that not enough consideration and debate in connection 

with the issuance of this Statement was focused on the uncertainty inherent in 
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the open group population (current and future participants) actuarial present 

values required by Par. 27 (3) (c), (f) and (g). While he acknowledges that the 

use of assumptions and estimates is accepted in the recording and/or disclosure 

of financial information, he has serious reservations as to whether the open 

group actuarial projections that include estimates for future participants in the 

plans can meet the reliability test. Those projections include receipts and outlays 

for people expected to be born or immigrate to the U.S. during the projection 

period (currently 75 years), as well as individuals under 15 years of age at the 

time of the projection. He believes it is imperative that this issue be fully 

considered before the Statement of Social Insurance (SOSI) is reclassified as a 

basic financial statement. 

57. Mr. Anania also points out that audit coverage of the SOSI and other information 

required by SFFAS 17 has been discussed with members of the American 

Institute of Certified Public Accountants (AICPA) FASAB Liaison Taskforce and 

Social Insurance Taskforce. To date, there is no clear indication from the AICPA 

as to the nature of the audit coverage and audit report that would be forthcoming 

from the independent accountants engaged to audit the Social Security 

Administration (SSA) financial statements, including the SOSI information. He 

believes there is a direct correlation and linkage between the reliability of 

measurement for recognition purposes and the independent auditor's ability to 

render a meaningful report on those elements in financial statements. The links 

include the use of relevant empirical data, reasonability of and support for 

assumptions used, and the extent to which the information used can be 

objectively verified. The reliability of the projection methodology should be 

further explored before the results of those calculations are made an integral part 

of the basic financial statements. 

58. The open group projection that is used to estimate the future financing shortfall in 

Social Insurance programs is inherently more sensitive to assumptions about the 

distant future than is true for the closed group calculations that are used to 

account for employee pensions and retiree healthcare costs. This is inevitably 

true, despite the best efforts of actuaries, economists, and other professionals 

involved in making these projections. This is mainly caused by the fact that a 

closed group dwindles over time, so that uncertainty about what will happen in 

the distant future has less impact than is the case for an open group that grows 

larger during the projection period. Currently, the SOSI is presented in the SSA 

financial report and in the Consolidated Financial Report of the United States 

Government (CFR) based on 75-year projections under the intermediate 

assumptions (sometimes referred to as the “best estimate”) of the Board of 

Trustees of the Federal Old-Age and Survivors Insurance and Disability 

Insurance Trust Funds (generally referred to as Social Security) and 

corresponding assumptions of the other Social Insurance programs for which the 

SOSI is required. 
 Appendix A

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59. Mr. Anania observes that FASB Statement of Financial Accounting Concepts No. 

7 provides a distinction between estimated cash flows and expected cash flows. 

The latter refers to the sum of probability-weighted amounts in a range of 

possible estimated amounts; the estimated mean or average. It is believed by 

some, including Mr. Anania, that a probability-based approach is a more effective 

measurement tool in many situations. SSA is currently experimenting with 

methods that might better incorporate and communicate probabilities and 

uncertainties, as has been recommended by its technical review panels.9 Mr. 

Anania believes that FASAB should study this further in consultation with others, 

including actuaries from SSA and the Centers for Medicare and Medicaid 

Services, before elevating the SOSI as currently defined to the status of a basic 

financial statement. Mr. Anania believes that the open-group projections that are 

the basis of the SOSI are more sensitive to assumptions about uncertain future 

events than is true for most, if not all, long-term liabilities and basic financial 

statement disclosures in both private and governmental financial reporting today. 

60. Mr. Anania believes there is a further, significant issue that requires 

consideration before the SOSI is reclassified as a basic statement. The concept 

is articulation of the elements of the required financial statements. Articulation 

refers to the linkage of an item in one financial statement to an item reported on a 

different financial statement. Articulation demonstrates the interrelationships of 

the various financial statements. That linkage is demonstrated in Appendix 1- A 

thru 1- F of SFFAC 2, Entity and Display. The concept of linkage (described 

therein as "the order and flow of Data in the financial statements") is also very 

clearly depicted in a chart on page 43 of the 2001 Consolidated Financial Report 

of the United States Government (CFR). Since the other statements outlined in 

SFFAC 2 are prepared on an accrual basis, there is no linkage (articulation), as 

 

9

 For example, the report of the 1999 Technical Panel includes the following observations (available at 

http://www.ssab.gov/Rpt99_III.html#pgfId-1005309) under the heading, “Illustrating Uncertainty”: 

 “The current system of presenting low- and high-cost alternatives to the intermediate assumptions is 

inadequate. The alternatives are useful in demonstrating the sensitivity of the forecast to the underlying 

parameters (section II.G of the Trustees Report). However, without any model of the probabilities of the 

underlying parameters taking on the alternative values, there is no way to use the alternatives to form a 

distribution of possible outcomes. It is inadequate to show any forecast without an indication of the 

uncertainty that surrounds it. We follow previous panels in strongly recommending efforts toward 

stochastic modeling or similar techniques that are better able to capture the interrelationship among 

assumptions. We are not dogmatic in the recommendation, as we recognize that even stochastic 

modeling requires some set of assumptions about the variance in future outcomes--for example in fertility 

rates--that are hard to estimate. However, the assumptions are in some way embedded in current 

methods of projection in any case. 

 “Some modeling techniques allow for graphical presentations that are better at displaying the range of 

uncertainty. What we seek is a method of displaying to policy makers and the public just how uncertain is 

some average cost outcome or date of exhaustion of the Trust Funds, and what are the probabilities that 

events will be close to or far from that result. That the system might have a very high probability of being 

out of balance by 2 or more percent of taxable payroll, for instance, may be worth knowing regardless of 

whether it has attained actuarial balance under some set of intermediate assumptions.” 
Basis for Conclusions 

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traditionally understood, between the basic financial statements described in 

SFFAC 2 and the SOSI. While that condition may be tolerable in a compromise 

standard that requires disclosure as Required Supplementary Stewardship 

Information (RSSI), Mr. Anania does not believe that condition is technically 

sound or tolerable in basic financial statements. 

 

61. Finally, Mr. Anania does not believe the users of the SSA and CFR financial 

reports, particularly citizens and citizen intermediaries, will be better served by 

the change required by this Statement. He is concerned that the lack of linkage 

to the other basic statements will not be easily understood by users willing to 

study the information with reasonable diligence. Elevating the SOSI information 

to become a basic financial statement without accruing a liability or recognizing 

an expense based on that information might increase confusion of users of 

Government reports. 

62. Mr. Anania does not dissent to Par. 4 of this statement in which the information 

about Risk Assumed is reclassified from RSSI to required supplementary 

information (RSI) or to Par. 5, which rescinds the current requirements for the 

Current Services Assessment. 

63. Mr. Kull will abstain from voting on this statement. He will not dissent, as he 

believes that social insurance information should be included in the basic 

financial statements and notes and should be subject to audit. However, he 

shares Mr. Anania's concerns, and further believes these and other concerns 

need to be resolved before full implementation takes effect, including the 

development of appropriate audit standards, and the need for items in the 

financial statements to be grounded in appropriate definitions of the elements of 

financial reporting. His abstention from voting is intended as an expression of his 

assessment that the Board has not completed work on this matter. 
[blank] 
FASAB Board Members

David Mosso, Chairman 

Joseph V. Anania, Sr. 

Philip T. Calder 

Claire Gorham Cohen 

John A. Farrell 

Joseph L. Kull 

James M. Patton 

Robert N. Reid 

Alan H. Schumacher 

FASAB Staff 

Wendy M. Comes, Executive Director 

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
FASAB 

Federal Accounting Standards Advisory Board 

U.S. General Accounting Office 

441 G Street, NW, Suite 6814 (6K17V) 

Washington, DC 20548 

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 Postage & Fees Paid 

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