FASAB Federal Accounting Standards Advisory Board

DEFERRAL OF PARAGRAPH 65.2 -- MATERIAL

REVENUE-RELATED TRANSACTIONS

DISCLOSURES

Amending SFFAS No. 7

 Accounting for Revenue and Other Financing Sources

Statement of Federal Financial Accounting Standards Number 13

January 1999
THE FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD

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

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

Office of Management and Budget (OMB), and the Comptroller General. The ninemember Board was created to consider and recommend accounting principles for the

Federal Government.

 The Board communicates its recommendations by publishing recommended

accounting standards after considering the financial and budgetary information

needs of congressional oversight groups, executive agencies, and other users of

Federal financial information. The Board also considers comments from the public on

its proposed recommendations, which are published for comments as "exposure

drafts." The Board's sponsors then decide whether to adopt the recommendations. If

they do, the standard is published by OMB and GAO and then becomes effective.

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

available from the FASAB:

 "Memorandum of Understanding among the General Accounting Office,

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

Federal Government Accounting Standards and a Federal Accounting Standards

Advisory Board"

 "Mission Statement: Federal Accounting Standards Advisory Board"
Background

1. Statement of Federal Financial Accounting Standards No. 7,

Accounting for Revenue and Other Financing Sources including

paragraphs 65.2 became effective for fiscal year 1998. It

included detailed provisions that apply to entities collecting

taxes on behalf of the Federal Government.

2. Paragraph 65.2 of SFFAS No. 7 states:

Entities that collect taxes and duties should disclose:

65.2 Material revenue related transactions. Revenuerelated transactions affecting the beginning and end-of-period

balances of accounts receivable, accounts payable for refunds,

and the allowance for uncollectible amounts should be

disclosed. All material types of revenue transactions which

relate to the custodial responsibilities of the collecting entities

should be disclosed. The disclosure should be comprehensive

enough to include as a minimum: self-assessments by the

taxpayers (or importers); assessments by the entity; penalties;

interest; cash collections applied to taxpayer accounts and

unapplied collections; refunds, refund offsets, and drawbacks;

abatements; accounts receivable written off during the reporting

period as uncollectible; and provisions made to the allowance

for uncollectible amounts.

3. Because of difficulties in preparing the information and

questions as to its usefulness, the Board agreed to consider

deletion of paragraph 65.2. Ultimately, the Board agreed that

more study of the issues was needed. Accordingly, it agreed

that the requirement should be deferred.
 STATEMENT OF STANDARDS

2

Federal Accounting Standards Advisory Board

Statement of Recommended Standards

December 1998

Statement of Standards

4. Paragraph 65.2 of SFFAS No. 7 is deferred three years; it

will be effective for periods beginning after September 30,

2000.

Effective Date

5. This amendment is effective for fiscal periods beginning

after September 30, 1998. Earlier implementation is

encouraged.
APPENDIX A: BASIS FOR CONCLUSIONS 3

Federal Accounting Standards Advisory Board

Statement of Recommended Standards

December 1998

6. Experience gained by IRS and GAO while attempting to

implement the provisions of SFFAS No. 7 provided greater

insight into the difficulties of preparing, analyzing, and

communicating the information described in paragraph 65.2

than was available when SFFAS No. 7 was approved. Based on

that additional experience and insight, the Board proposed that

subparagraph 65.2 should be rescinded. An exposure draft to

accomplish this was published in November 1998. The

exposure draft included the alternative view of one Board

member. He believed that subparagraph 65.2 should be

retained, albeit possibly with some modification.

7. The responses received by the Board which expressed an

opinion on the proposal were approximately evenly divided. 

Respondents supporting the deletion indicated that the

requirements were calling for more detailed analysis than

generally found in accounting standards, were not cost

beneficial, and were potentially misleading because

assessments and associated abatements are often substantially

overstated. Respondents opposing the deletion indicated that

the requirements were essential for proper management and

oversight, necessary to overcome the limitations of the modified

cash basis of accounting for tax revenues, and helpful in

ensuring that systems support evaluations of activity during the

year.

8. After reviewing the comment letters and redeliberating, the

Board agreed that the primary question was the degree to

which the information would be relevant. Some members

believe the information would be relevant to users and that it, or

similar information, is needed to address the objectives of

federal financial reporting. Other members believe that the

information presented by IRS and the GAO staff responsible for

auditing the financial statements of IRS calls into question the
APPENDIX A: BASIS FOR CONCLUSIONS 4

Federal Accounting Standards Advisory Board

Statement of Recommended Standards

December 1998

Board's prior conclusion that the information is relevant.

Responses to the exposure draft that proposed deletion of

subparagraph 65.2 did not resolve this issue. Therefore, the

Board agreed that it should conduct further study regarding the

relevance of the items of information discussed in

subparagraph 65.2.

9. The Board concluded that the effective date for

subparagraph 65.2 should be deferred three years; from fiscal

year 1998 to fiscal year 2001. The Board expects to complete 

the study before the new effective date.

Board Approval

10. The Board approves this recommendation by a vote of

eight members approving its issuance and one member

opposing its issuance.
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FASAB Board Members

David Mosso, Chairman

Linda Blessing

James L. Blum

Philip T. Calder

Donald H. Chapin

Norwood Jackson

Donald Hammond

James E. Reid

Nelson Toye

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FASAB Staff

Wendy M. Comes, Executive Director

Project Director:

Robert Bramlett

____________________________________________________

Federal Accounting Standards Advisory Board

441 G Street NW

Suite 3B18

Washington, DC 20548

Telephone (202) 512-7350

FAX (202) 512-7366

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