**DRAFT**

**DISPOSITION OF BORROWINGS W/CAPITALIZED INTEREST**

(Developed for Bureau of the Public Debt)

**DISPOSITION OF BORROWINGS WITH CAPITALIZED INTEREST**

(Illustrating transactions between the Bureau of the Fiscal Service and the Federal Financing Bank)

**Overview**

Consistency was needed in the accounting and reporting for the disposition of borrowings.  This was particularly the circumstance for the following agencies and fund:   the Bureau of the Fiscal Service (Fiscal Service), the Federal Financing Bank (FFB), the Commodity Credit Corporation, and the Washington Aqueduct Capital Improvements Fund.

This document introduces two new USSGL accounts representing the amount of accrued interest due or owed on non-credit reform loans that have been capitalized.  These new accounts segregate capitalized interest receivable/payable on non-credit reform loans from regular interest on loans receivable. Capitalized interest takes on the characteristics of loan principal and therefore should be tracked separately.  Effective fiscal 2008, the new USSGL accounts are:

1351 Capitalized Loan Interest Receivable – Non-Credit Reform

2511  Capitalized Loan Interest Payable – Non-Credit Reform

Additionally, there was inconsistency in the recording of gains and losses on early repayments of borrowings.  In order to resolve these inconsistencies, two existing USSGL accounts have been modified.  

The scenario that follows illustrates the related transactions.  Effective fiscal 2008, the modifications to USSGL accounts are:

7112 Gains on Disposition of Borrowings

7212  Losses on Disposition of Borrowings

The scenario that follows illustrates the new and modified USSGL accounts, as well as new and existing transactions to be recorded for the disposition of borrowings with capitalized interest.  The scenario is illustrative of FFB borrowings with the Fiscal Service.  Budgetary and financial statement crosswalks are included at the end.

USSGL accounts, transactions, and crosswalks follow TFM S2 07-01 (July 2007), Part 2 Fiscal 2008 Reporting.  However, the Program and Financing (P&F) Schedule crosswalk follows fiscal 2007 reporting.

This scenario uses the following USSGL accounts:

***Approved New USSGL Accounts***

**Account Title**:Capitalized Loan Interest Receivable – Non-Credit Reform

**Account Number**:1351

**Normal Balance**:Debit

**Definition**:  The amount of accrued interest due on a non-credit reform loan that has been capitalized. Capitalized interest, like loan principal, is subject to interest charges until such time as the dept is paid or otherwise settled.  

**Account Title**:Capitalized Loan Interest Payable - Non-Credit Reform

**Account Number**:2511

**Normal Balance**:Credit

**Definition**:  The amount of accrued interest owed on a non-credit reform loan that has been capitalized. Capitalized interest, like loan principal, is subject to interest charges until such time as the debt is paid or otherwise settled.

***Approved Modifications to Existing USSGL Accounts***

**Account Title**:Gains on Disposition of Borrowings

**Account Number**:7112

**Normal Balance**:Credit

**Definition**:  The amount of gain ~~in the Federal Financing Bank~~ on early repayment of outstanding borrowings ~~from the agencies~~. 

**Account Title**:Losses on Disposition of Borrowings

**Account Number**:7212

**Normal Balance**:Debit

**Definition**:  The amount of loss ~~to the Federal Financing Bank~~ on the early repayment of outstanding borrowings ~~from the agencies~~. 

Fiscal Service LOSS ON DISPOSITION OF BORROWINGS WITH CAPITALIZED INTEREST

1.  To record borrowing authority and anticipated collections from non-Federal sources (FFB).

2.  To record budget authority apportioned and available for allotment ($1,000), and budget authority apportioned but not available for use until realized ($5,000).

3.  To record the allotment of authority.

4.  To record the drawing of cash to fund borrowing authority from the Fiscal Service (accomplished via SF 1151: Nonexpenditure Transfer Authorization) (FFB), and to record the establishment of loans receivable and non-custodial liability. 

5.  To record the receipt of previously anticipated collections, and the realization of previously anticipated and apportioned authority.  

6.  To record the accrual of interest expenses incurred, not yet paid (FFB), and to record accrued revenue from Federal sources (Fiscal Service). 

7.  To record the capitalization of loan interest payable (FFB) and receivable (Fiscal Service) on the interest payment due date, pertaining to the accrual in transaction #6.  Net impact to Fund Balance is zero.

8.  To record the accrual of interest expenses incurred, not yet paid (FFB), and to record accrued revenue from Federal sources (Fiscal Service). 

9.****To record the payment of capitalized loan interest from transaction #7.

10.  To record principal repayments to Treasury/Fiscal Service for the $10,000 borrowing in transaction #4, and to record the payment of accrued interest payable/receivable.  This represents a gain to FFB and a loss to Fiscal Service.

11.  To record adjustments for anticipated resources not realized. 

**PRECLOSING ADJUSTED TRIAL BALANCES**

**Closing entries**

12.  To record the consolidation of actual net-funded resources.  

13.  To record the closing of fiscal-year borrowing authority.  

14.  To record the closing of unobligated balances to unapportioned authority for unexpired multi-year and no-year funds.

15.  To record the closing of paid delivered orders to total actual resources.  

16.  To record the closing of revenues and expenses to cumulative results of operations.  

17.  To record the closing of gains and losses into cumulative results of operations.  

**POST-CLOSING TRIAL BALANCES**

# Budgetary Reports

# Budgetary Reports (continued)

# OMB Form and Content Statements

# OMB Form and Content Statements (continued)

� NOTE:  FFB budgetary transactions are under discussion with OMB and Treasury.  Those shown in this scenario follow standard USSGL guidance.

� USSGL account 7500 throughout this scenario may be replaced with new GFR account guidance currently being developed.

� The amount of fund balance (USSGL 1010) that is moved from FFB to repay the loan is $9,100.  That amount is credited directly to a GFR account   For illustrative purposes, this transaction shows the debit and credit movement of fund balance, even though fund balance does not actually flow through the Fiscal Service TAFS.

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