FASAB Federal Accounting Standards Advisory Board

AMENDMENTS TO DEFERRED MAINTENANCE

REPORTING

Amending

SFFAS No. 6 Accounting for Property, Plant and Equipment

and SFFAS No. 8 Supplementary Stewardship Reporting

Statement of Federal Financial Accounting Standards No. 14

April 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 becomes authoritative and is published by OMB and GAO.

 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"
TABLE OF CONTENTS

Executive Summary i

Introduction 1

Accounting Standards 2

Appendix A: Basis for Conclusions 3

Appendix B: Amended Standards 7
EXECUTIVE SUMMARY i

I. Deferred maintenance reporting is a required disclosure per

Statement of Federal Financial Accounting Standards No. 6,

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

is referenced in SFFAS No. 8, Supplementary Stewardship

Reporting. This amendment does not modify the information to be

provided users of federal financial statements. It does, however,

modify the status of that information and thus the level of its review

by financial statement auditors.

II. When SFFAS No. 6 was issued, the Board indicated that

deferred maintenance reporting would evolve as preparers gained

experience. The Board provided maximum flexibility to preparers

noting that management would determine “acceptable condition”

against which deferred maintenance would be assessed. (see

SFFAS No. 6, par. 78, footnote 58) In addition, the Board noted that

acceptable condition might vary between entities and between sites

within the same entity. To ensure that readers would understand the

deferred maintenance disclosures, the Board required that

management’s method of measuring deferred maintenance and

management’s requirements for acceptable condition be disclosed

with the estimated amounts. 

III. After the statement became effective, questions arose about

whether this flexibility was appropriate given the status of the

information as basic information (i.e., an integral part of the financial

statements). The Board agreed that a change in status was

warranted.

IV. This statement amends SFFAS No. 6 and SFFAS No. 8 to

define deferred maintenance information as required supplemental

information (RSI) rather than within the financial statements and the

notes thereto.

V. As required supplementary information, the deferred

maintenance information will be subject to the audit procedures

prescribed in AU Section 558.07, Codification of Statements on

Auditing Standards. These procedures include inquiries to

management and comparisons of the information for consistency. In

addition, the auditor should consider whether the RSI should be

covered in management’s representation letter. The auditor may

need to apply additional procedures required by other guidance, and

to make additional inquiries if necessary based on the outcome of

the required procedures. Readers should refer to the most current

auditing standards for relevant guidance.
INTRODUCTION 1

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

Purpose

1. The purpose of this amendment is to change the status of

deferred maintenance information required by Statement of Federal

Financial Accounting Standard No. 6, Accounting for Property, Plant,

and Equipment. Before amendment, this information would have

been presented in association with the statement of net costs. As

amended, the standards require that deferred maintenance

information be included as required supplemental information (RSI).

Thus, a line item for “deferred maintenance” would no longer be

required on the statement of net costs with a reference to a note

disclosure.

2. The Basis for Conclusions presents the reasons for these

amendments.

Scope

3. The statement amends both SFFAS 6 and 8 with regard to

information on deferred maintenance.

Effective Date

4. This amendment is effective for periods beginning after

September 30, 1998 with earlier implementation encouraged.
STATEMENT OF ACCOUNTING STANDARDS 2

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

Amendments to SFFAS No. 6

5. Paragraph 79 and the heading "RECOGNITION" that precedes it

are deleted.

6. The section heading "DISCLOSURE REQUIREMENTS" which

appears before paragraph 80 is deleted. Paragraph 80 is amended

by replacing "disclosed" with "reported."

7. The section heading "Disclosures" before paragraph 83 is

replaced with "Required Supplementary Information."

8. Paragraph 83 is amended by adding the phrase "as required

supplementary information" between the phrases "shall be

presented" and "for all PP&E." The requirement to report a range

estimate when using the condition assessment survey method is

modified by inserting “or a point” after the words “and a range.”

9. The section heading "Optional Disclosures" before paragraph 84

is replaced with "Optional Information." In the second sentence, the

word "disclose" is replaced with “report” and the word "disclosure" is

replaced with "information."

Amendments to SFFAS No. 8

10. Bullet 4 of paragraphs 50, 68 and 81 are amended by replacing

"a note to the financial statements in which case a reference to the

note will suffice" with "with the deferred maintenance information

included elsewhere in the report in which case a reference to the

information will suffice."

11. Bullet 5 of paragraphs 50, 68 and 81 are amended by replacing

"a note to the financial statements" with "the information.” Footnote

15 is amended by adding "as amended by SFFAS No. 14" to the end

of the footnote.
APPENDIX A: BASIS FOR CONCLUSIONS 3

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

12. The Board believes that the experience gained in implementing

SFFAS Nos. 6 and 8 provides greater insight into the required

deferred maintenance disclosures. In recommending the deferred

maintenance standards, the Board recognized that experimentation

would be needed before high quality information on deferred

maintenance was available throughout the federal government.

However, the implementation experience brought to light concerns

regarding the degree of flexibility afforded during the experimentation

period and audit issues.

13. In December 1998, the Board issued an exposure draft proposing

amendments intended to address the concerns being raised. The

concerns included:

a) the ability of preparers to disclose an extremely large range

estimate; and

b) users perceptions regarding the nature of the information1

being presented.

14. The exposure draft proposed that deferred maintenance

information be moved from being associated with the Statement of

Net Cost to Required Supplementary Stewardship Information

(RSSI). The Board believed that this was consistent with the

importance of the information as well as the experimental nature of

the information. The Board explained in the exposure draft that the

information would be audited as if it were required supplemental

information (RSI).

__________________________

1 While deferred maintenance information as required under the SFFAS 6 provisions is very relevant, implementation demonstrated that it

may not be reliable or comparable. The Board is concerned that placement of this information in notes would be a disservice to users.
APPENDIX A: BASIS FOR CONCLUSIONS 4

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

15. There were 20 respondents to the exposure draft. The

respondents were from the following groups:

Federal Nonfederal Total

Users and others 2 2

Preparers 9 9

Auditors 9 9

 Total 18 2 20

16. One respondent opposed the proposal and stated a preference

for a delayed effective date. Seventeen respondents supported the

proposal and two did not directly indicate support or opposition.

17. Respondents noted the need for more detailed guidance on

preparing estimates as well as specific issues such as overseas

facilities which have differing facilities standards. One respondent

suggested that guidance be developed for small agencies for which

deferred maintenance reporting may be unnecessarily burdensome.

Many respondents acknowledged the importance of the disclosures

and the need to address auditing standards for deferred

maintenance as well as accounting standards.

18. A number of respondents suggested that moving deferred

maintenance disclosures to stewardship reports would be

appropriate because doing so would:

a) lower the profile of the information,

b) prevent distortion of financial data,

c) reduce the resources needed to prepare and audit the data,

and

d) resolve audit concerns.

19. The Board is concerned that stewardship reports – required for

the first time for fiscal year 1998 reports – may be considered of
APPENDIX A: BASIS FOR CONCLUSIONS 5

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

lesser significance than “financial statements” and the associated

notes. In fact, stewardship reports were intended to facilitate

presentation of highly important financial and non-financial

information about complex aspects of federal government operations

and responsibilities. Thus the Board plans a review of the results of

the implementation of stewardship reporting requirements. That

review is expected to take place during calendar year 1999.

20. The Board does not believe that adding deferred maintenance

information to stewardship reports would be appropriate in light of the

planned review. In addition, deferred maintenance information

presents measurement issues not currently experienced in

stewardship reports.

21. The Board believes that a period of experimentation is desirable

for deferred maintenance information and that classifying it as RSI is

appropriate during the experimentation period. The use of RSI for

experimentation is consistent with the practices of other standard

setting bodies. For example, the Financial Accounting Standards

Board (FASB) conducted a five year experiment in reporting on

changing prices through RSI. During the experimentation period,

FASB permitted flexibility in measuring the effects of changing prices

22. The Board believes that experimenting with deferred

maintenance reporting is vitally important to improving its usefulness.

 The current standards for estimating deferred maintenance are

intentionally flexible in the following ways:

a) either life cycle costing or condition assessment may

serve as the basis for the estimates;

b) management determines the “acceptable condition” of

PP&E and may vary the acceptable condition by site and type of

property; and

c) engineering and/or maintenance standards are not

referenced.

23. The Board intends that the Accounting and Auditing Policy

Committee (AAPC) work with government-wide groups such as the

Chief Financial Officers Council and the Presidents Council on

Integrity and Efficiency to review the first year reports and identify

areas requiring further guidance. At a minimum, the Board expects

to develop guidance on determining acceptable condition. The Board
APPENDIX A: BASIS FOR CONCLUSIONS 6

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

plans to revise the standards based on experience gained during the

experimentation period.

Board Approval

24. This recommended statement was approved by the Board with a

vote of seven members in favor of its issuance and one member

opposing its issuance. (Only eight members voted on this

recommendation due to a vacancy on the Board.)
APPENDIX B: AMENDED STANDARDS 7

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

AMENDMENTS TO SFFAS 6

DEFINITION

77. "Deferred maintenance" is maintenance that was not performed

when it should have been or was scheduled to be and which,

therefore, is put off or delayed for a future period.

78.For purposes of this standard, maintenance is described as the

act of keeping fixed assets in acceptable condition. It includes

preventive maintenance, normal repairs, replacement of parts and

structural components, and other activities needed to preserve the

asset so that it continues to provide acceptable services and

achieves its expected life.58 Maintenance excludes activities aimed at

expanding the capacity of an asset or otherwise upgrading it to serve

needs different from, or significantly greater than, those originally

intended.

RECOGNITION

79. A line item for "deferred maintenance amounts"59 shall be

presented on the statement of net cost with a note reference in lieu

of a dollar amount.60 No amounts shall be recognized for deferred

maintenance.

DISCLOSURE REQUIREMENTS

Measurement

80. Amounts disclosed reported for deferred maintenance may be

measured using:

• condition assessment surveys,

• or life-cycle cost forecasts.61

81. Condition assessment surveys are periodic inspections of PP&E

to determine their current condition and estimated cost to correct any

 

58

 Acceptable services and condition may vary both between entities and among sites within the same entity. Management shall

determine what level of service and condition is acceptable.

59

This requirement applies to all four categories of PP&E.

60

 If management determines that there are no material amounts of deferred maintenance, this line item need not appear.

61Other methods may be used which are similar or identical to condition assessment survey or life-cycle costing. These methods would

also be acceptable sources of information on deferred maintenance.
APPENDIX B: AMENDED STANDARDS 8

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

deficiencies. It is desirable that condition assessment surveys be

based on generally accepted methods and standards consistently

applied.62

82. Life-cycle costing is an acquisition or procurement technique

which considers operating, maintenance, and other costs in addition

to the acquisition cost of assets. Since it results in a forecast of

maintenance expense, these forecasts may serve as a basis against

which to compare actual maintenance expense and estimate

deferred maintenance.

DisclosuresRequired Supplementary Information

83. At a minimum, the following information shall be presented as

required supplementary information for all PP&E (each of the four

categories established in the PP&E standard should be included).

• Identification of each major class63 of asset for which

maintenance has been deferred.

• Method of measuring deferred maintenance for each major class

of PP&E.

• If the condition assessment survey method of measuring deferred

maintenance is used, the following should be presented for each

major class of PP&E:

• description of requirements or standards for acceptable

operating condition,

• any changes in the condition requirements or standards, and

• asset condition64 and a range or a point estimate of the

dollar amount of maintenance needed to return it to its

acceptable operating condition.

 

62Management shall determine what methods and standards to apply. Once determined, it is desirable but not required that methods and

standards be applied consistently from period to period.

63"Major classes" of general PP&E shall be determined by the entity. Examples of major class include, among others, buildings and

structures, furniture and fixtures, equipment, vehicles, and land.

64Examples of condition information include, among others, (1) averages of standardized condition rating codes, (2) percentage of assets

above, at or below acceptable condition, or (3) narrative information.
APPENDIX B: AMENDED STANDARDS 9

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

• If the total life-cycle cost method is used the following should be

presented for each major class of PP&E:

• the original date of the maintenance forecast and an

explanation for any changes to the forecast,

• prior year balance of the cumulative deferred maintenance

amount,

• the dollar amount of maintenance that was defined by the

professionals who designed, built or manage the PP&E as

required maintenance for the reporting period,

• the dollar amount of maintenance actually performed during

the period,

• the difference between the forecast and actual maintenance,

• any adjustments to the scheduled amounts deemed

necessary by the managers of the PP&E,65 and

• the ending cumulative balance for the reporting period for

each major class of asset experiencing deferred

maintenance.

Optional Information Disclosures

84. Stratification between critical and noncritical amounts of

maintenance needed to return each major class of asset to its

acceptable operating condition. If management elects to report 

disclose critical and noncritical amounts, the information disclosure

shall include management's definition of these categories.

The provisions of this statement need

not be applied to immaterial items.

 

65Adjustments may be necessary because the cost of maintenance foregone may not be cumulative. For example, if periodic painting is

skipped twice it is not necessarily true that the cost would be double the scheduled amount.
APPENDIX B: AMENDED STANDARDS 10

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

AMENDMENTS TO SFFAS 8

Paragraphs 50, 68 and 81 of SFFAS 8 as amended with respect to

condition reporting are shown below:

Heritage Assets

50. (fourth bullet) Condition of the assets14 unless it is already

reported in required supplementary information deferred

maintenance information included elsewhere in the report in which

case a reference to the information will suffice. a note to the financial

statements in which case a reference to the note will suffice.

(fifth bullet) A reference to the information a note to the financial

statements if deferred maintenance is reported for the assets.15

National Defense PP&E

68. (fourth bullet) Condition of the assets21 unless it is already

reported required supplementary information deferred maintenance

information included elsewhere in the report in which case a

reference to the information will suffice a note to the financial

statements in which case a reference to the note will suffice. 

(fifth bullet) A reference to the information the applicable note to the

financial statements if deferred maintenance is reported for the

assets.

Stewardship Land

81. (fourth bullet) Condition26 of the stewardship land, unless it is

already reported in required supplementary information deferred

 

14

 Examples of condition information include, among others, (1) averages of standardized condition rating codes; (2) percentage of

assets at, or below acceptable condition; or (3) narrative information.

15

 For guidance relating to deferred maintenance reporting, see the Deferred Maintenance standard in Accounting for Property, Plant,

and Equipment, SFFAS No. 6.

21

 Examples of condition information include, among others, (1) averages of standardized condition rating codes; (2) percentage of

assets at, or below acceptable condition; or (3) narrative information.

26

 Examples of condition information include, among others, (1) averages of standardized condition rating codes; (2) percentage of

assets at, or below acceptable condition; or (3) narrative information.
APPENDIX B: AMENDED STANDARDS 11

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999

maintenance information included elsewhere in the report in which

case a reference to the information will suffice. a note to the financial

statements in which case a reference to the note will suffice.

(fifth bullet) A reference to the information a note to the financial

statements if deferred maintenance is reported for the assets.27

______________________

27For guidance on deferred maintenance reporting, see the Deferred Maintenance standard Accounting for Property, Plant, and

Equipment, SFFAS No. 6.
APPENDIX B: AMENDED STANDARDS 12

Federal Accounting Standards Advisory Board

Amendments to Deferred Maintenance Reporting

April 1999




FASAB Board Members

David Mosso, Chairman

Barry Andersen (from February 25, 1999)

Linda Blessing (through February 26, 1999)

Jim Blum (through January 31, 1999)

Philip T. Calder

Donald H. Chapin

Norwood Jackson

Donald Hammond

James Reid (through December 31, 1998)

Nelson Toye

Kenneth Winter (from February 25, 1999)



FASAB Staff

Wendy M. Comes, Executive Director

____________________________________________________

Federal Accounting Standards Advisory Board

441 G Street NW

Suite 3B18

Washington, DC 20548

Telephone (202) 512-7350

FAX (202) 512-7366


FASAB

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