**USSGL Scenario for Implementation Guidance on the Accounting for the Disposal of General Property, Plant and Equipment -**

**Federal Financial Accounting Technical Release**

**Accounting for the Disposal of General Property, Plant and Equipment from FFATR, No. 14**

**Effective FY 2013**

**Note: This accounting guidance applies to capitalized GPPE only.**

**Prepared by:**

**United States Standard General Ledger Advisory Division**

**Government wide Accounting**

**Bureau of the Fiscal Service**

**U.S. Department of Treasury**

**Background:**

The technical release clarifies the difference between permanent and temporary removal of General Property, Plant, and & Equipment (GPP&E) from service. 

In order for removal to be considered permanent two business events are necessary:

1) Asset’s use is terminated.

2) There is evidence of management’s decision to permanently remove, retire and/or dispose of the asset.

If only one of two business events has occurred, the removal from service is considered temporary and there is no change in the GPP&E value and the depreciation continues (FFATR, No14, paragraph 10).

Recognition of the cleanup expense and accumulation of the liability begins on the date that the GPP&E is placed into service, continues in each period that GPP&E is in operation, and is completed when the GPP&E ceases to be in operation (FFATR, No 14, paragraphs 6 and 15).  For assets permanently removed from service, any unallocated/unamortized portion of the total cleanup cost estimate associated with the disposal, closure, and/or shutdown of the GPP&E should be recognized in full.  If removal is temporarily, the liability and associated cleanup cost expense shall continue to accumulate (FFATR, No14, paragraph 14).  

**New USSGL Account**

**Account Title:**General Property, Plant, and Equipment Permanently Removed but Not Yet Disposed

**Account Number:**199500 

**Normal Balance:**Debit

**Definitions:**The net realizable value of general property, plant, and equipment that is permanently removed from service but not yet disposed and is reclassified in accordance with Federal Accounting Standards Advisory Board (FASAB), Federal Financial Accounting Technical Release No. 14, paragraphs 10 and 12.  

**Justification:**  The new account is needed to segregate permanently removed GPP&E from the GPP&E used for agency operations. This account is assigned in the “Other Asset” account number series.  According to SFFAS No. 6, paragraph. 17, PP&E is defined as follows:

“Property, plant, and equipment consists of tangible assets, including land, that meet the following criteria:

• they have estimated useful lives of 2 years or more;

• they are not intended for sale in the ordinary course of operations; and

• they have been acquired or constructed with the intention of being used, or being available for use by the entity.”

 Once GPPE is permanently removed but not yet disposed it is not used in the agencies’ operation.

**Listing of USSGL Accounts Used In This Scenario**

Note: This scenario follow USSGL TFM S2-12-03(July 2012), Part 2 Fiscal 2013 crosswalks, and Part 3 “GTAS Implementation Testing”  Fiscal 2014 format of USSGL accounts. 

**USSGL Account Attribute**

**Impact on Crosswalks**

A beginning trial balance is not applicable in this scenario.

**Assumptions**

· The Treasury Account Symbol (TAS) is a no year fund and is a discretionary program**.**

· The purchased equipment has a five year useful life with no salvage value.

· The straight line depreciation method is used.

· The total estimated cleanup cost associated with purchased equipment is estimated to be $5,000.

**Year 1**

1) To record the receipt of an appropriation, apportionment, and allotment.

2) To record the purchase of two pieces of equipment on October 2, Year 1 for a total of $15,000. Equipment A was purchased for $10,000 and Equipment B was purchased for $5,000.

3) To record depreciation of the equipment at fiscal year end.  

Annual Depreciation Calculations:  

Equipment A:  $10,000/5=$2,000 per annum

Equipment B:  $  5,000/5=$1,000 per annum

3) The total estimated cleanup costs associated with the purchased equipments A and B determined to be $5,000.  Assume useful life of the both equipment (5 years) was used for systematic and rational recognition of expense and accumulation of the cleanup cost liability.

Annual clean up costs

Equipment A: $700 per annum

Equipment B: $300 per annum

   $1,000 per annum

# PRE-CLOSING TRIAL BALANCE

# YEAR 1

**CLOSING ENTRIES FOR END OF YEAR 1**

C1. To record the consolidation of net-funded resources, Section III.

C2. To record the closing of unobligated balances to unapportioned authority. Section III.

C3. To record the closing of expended authority – paid. Section III.

C4. To record the closing of fiscal year activities to unexpended appropriation. 

C5. To record the closing of revenue, expense and other financing sources to cumulative results of operations. 

# POST-CLOSING TRIAL BALANCE

# YEAR 1

**SF133: REPORTING ON BUDGET EXECUTIONS AND BUDGETARY RESOURCES**

**AND BUDGET PROGRAM & FINANCING (P&F) SCHEDULE**

**YEAR 1**

###### USSGL 2108 Year-End Closing Statement

###### YEAR 1

Column 5 (101000E)5,000

Column 10 (490100E)       0

Column 11 (461000E)5,000

###### BALANCE SHEET

**YEAR 1**

**Assets**

Intragovernmental

1. Fund Balance with Treasury (101000E)       5,000

Assets with Public

13. General Property, Plant and Equipment, Net (175000E+175900E)  12,000

15. Total Assets  17,000

**Liabilities**

25. Environmental and disposal Liabilities (299500E)    1,000

28. Total Liabilities    1,000

**Net Position**

31. Unexpended Appropriation – Other Funds (310000E)     5,000

33. Cumulative Results of Operations - Other Funds (331000E)  11,000

34. Total Net Position  16,000

35. Total Liabilities and Net Position   17,000

**STATEMENT OF NET COST**

**YEAR 1**

Program Costs

Program A:

1. Gross Cost :

 (671000E) 3,000

 (680000E) 1,000

2. Less: Earned Income          0

3. Net Program Costs  4,000

6.Costs Not Assigned to Programs

7.Less: Earned Revenues Not Attributable to Programs

8.Net Cost of Operations 4,000

##### STATEMENT OF CHANGES IN NET POSITION

###### YEAR 1

**Cumulative Results of Operations**

1. Beginning Balance         0

2. Adjustments

3. Beginning Balances, as Adjusted         0

**Budgetary Financing Sources**

4. Other Adjustments

5. Appropriations Used (570000)15,000    

6. Nonexchange Revenue

7. Donations and Forfeitures

8. Transfers in/out without reimbursements      

9. Other

**Other Financing Sources:**

10. Donations and Forfeitures

11. Transfers in/out without reimbursements

12. Imputed Financing

13. Other (599400) 

14. Total Financing Sources      

15. Net Cost of Operations(4,000)   

16. Net Change

17. Cumulative Results of Operations11,000

**Unexpended Appropriations**

18. Beginning Balance         0

19. Adjustments

20. Beginning Balance, as adjusted         0

**Budgetary Financing Sources**

21. Appropriations Received (310100)20,000   

22. Appropriations Transferred in/out

23. Other Adjustments

24. Appropriations Used (310700)15,000    

25. Total Budgetary Financing Sources

26. Total Unexpended Appropriations   5,000

27. Net Position16,000

**Year 2**

1) To record a depreciation expense for the equipment at the end of a fiscal year.  Assume the equipment has a useful life of 5 years, and it is depreciated using straight line method.

2) To record estimated cleanup costs associated with the purchased equipment.  

# PRE-CLOSING TRIAL BALANCE

# YEAR 2

**CLOSING ENTRIES FOR END OF YEAR 2**

C1. To record the closing of expense to cumulative results of operations.

# POST-CLOSING TRIAL BALANCE

# YEAR 2

**SF133: REPORTING ON BUDGET EXECUTIONS AND BUDGETARY RESOURCES**

**AND BUDGET PROGRAM & FINANCING (P&F) SCHEDULE**

**YEAR 2**

###### USSGL 2108 Year-End Closing Statement

###### YEAR 2

Column 5 (101000E)5,000

Column 10 (490100E)       0

Column 11 (445000E)5,000

###### BALANCE SHEET

**YEAR 2**

**Assets**

Intragovernmental

1. Fund Balance with Treasury (101000E)       5,000

Assets with Public

13. General Property, Plant and Equipment, Net (175000E+175900E)    9,000

15. Total Assets  14,000

**Liabilities**

25. Environmental and disposal Liabilities (299500E)    2,000

28. Total Liabilities    2,000

**Net Position**

31. Unexpended Appropriation – Other Funds (310000E)     5,000

33. Cumulative Results of Operations - Other Funds (331000E)    7,000

34. Total Net Position  12,000

35. Total Liabilities and Net Position  14,000

**STATEMENT OF NET COST**

**YEAR 2**

Program Costs

Program A:

1. Gross Cost :

 (671000E) 3,000

 (680000E) 1,000

2. Less: Earned Income (520000E)          0

3. Net Program Costs  4,000

6.Costs Not Assigned to Programs

7.Less: Earned Revenues Not Attributable to Programs

8.Net Cost of Operations  4,000

##### STATEMENT OF CHANGES IN NET POSITION

###### YEAR 2

**Cumulative Results of Operations**

1. Beginning Balance11,000

2. Adjustments

3. Beginning Balances, as Adjusted11,000    

**Budgetary Financing Sources**

4. Other Adjustments

5. Appropriations Used (570000)    

6. Nonexchange Revenue

7. Donations and Forfeitures

8. Transfers in/out without reimbursements      

9. Other

**Other Financing Sources:**

10. Donations and Forfeitures

11. Transfers in/out without reimbursements

12. Imputed Financing

13. Other (599400) 

14. Total Financing Sources      

15. Net Cost of Operations(4,000)   

16. Net Change

17. Cumulative Results of Operations  7,000

**Unexpended Appropriations**

18. Beginning Balance  5,000

19. Adjustments

20. Beginning Balance, as adjusted  5,000

**Budgetary Financing Sources**

21. Appropriations Received (310100)         0   

22. Appropriations Transferred in/out

23. Other Adjustments

24. Appropriations Used (310700)         0

25. Total Budgetary Financing Sources

26. Total Unexpended Appropriations  5,000

27. Net Position12,000

**Year 3**

1) At the beginning of a year 3, Equipment A (originally purchased in year 1) broke down and the asset use is terminated.  Management decided to permanently remove Equipment A (FFATR, No14, paragraph 12).  The net realizable value of Equipment A was determined to be $5,000.  

2) The remaining estimated cleanup cost is recognized in full for Equipment A (FFATR, No14, paragraph 15). $700 x 5 = $3,500- 1,400 = 2,100. Assume the funding for cleanup will be provided in the next fiscal year and the cleanup will commence at that time.

3) At the end of the 3rd year, disposal of Equipment A was completed.  The agency sold Equipment A for $4,000 to a nonfederal entity (FFATR, No14, paragraph 12).  The actual disposition amount of equipment A was less than the previously recorded estimated net realizable value. 

4) To record a depreciation expense for Equipment B at the end of a fiscal year.  

5) To record estimated cleanup costs associated with the purchased equipment.  

# PRE-CLOSING TRIAL BALANCE

# YEAR 3

**CLOSING ENTRIES FOR END OF YEAR 3**

C1. To record the consolidation of net-funded resources.

C2. To record the closing of expenses to cumulative results of operations. 

C3. To record the closing of losses to cumulative results of operations. 

# POST-CLOSING TRIAL BALANCE

# YEAR 3

**SF133: REPORTING ON BUDGET EXECUTIONS AND BUDGETARY RESOURCES**

**AND BUDGET PROGRAM & FINANCING(P&F) SCHEDULE**

**YEAR 3**

###### USSGL 2108 Year-End Closing Statement

###### YEAR 3

Column 5 (101000E)9,000

Column 10 (490100E)       0

Column 11 (445000E)9,000

###### BALANCE SHEET

**YEAR 3**

**Assets**

Intragovernmental

1. Fund Balance with Treasury (101000E)     9,000

Assets with Public

13. General PPE, net (175000, 175900)    2,000

14.Other (199500)           0

15. Total Assets  11,000

**Liabilities**

25. Environmental and disposal Liabilities (299500E)     4,400

28. Total Liabilities     4,400

**Net Position**

31. Unexpended Appropriation – Other Funds (310000E)      5,000

33. Cumulative Results of Operations - Other Funds (331000E)     1,600

34. Total Net Position     6,600

35. Total Liabilities and Net Position   11,000

**STATEMENT OF NET COST**

**YEAR 3**

Program Costs

Program A:

1. Gross Cost :

(671000E, 680000E) 3,400

(721000E, 729000E) 2,000

2. Less: Earned Income(711000E, 719000E)  0

3. Net Program Costs 5,400

6.Costs Not Assigned to Programs

7.Less: Earned Revenues Not Attributable to Programs

8.Net Cost of Operations 5,400

##### STATEMENT OF CHANGES IN NET POSITION

###### YEAR 3

**Cumulative Results of Operations**

1. Beginning Balance7,000

2. Adjustments

3. Beginning Balances, as Adjusted7,000    

**Budgetary Financing Sources**

4. Other Adjustments

5. Appropriations Used (570000)    

6. Nonexchange Revenue

7. Donations and Forfeitures

8. Transfers in/out without reimbursements      

9. Other

**Other Financing Sources:**

10. Donations and Forfeitures

11. Transfers in/out without reimbursements

12. Imputed Financing

13. Other (599400) 

14. Total Financing Sources      

15. Net Cost of Operations            (5,400)   

16. Net Change

17. Cumulative Results of Operations  1,600

**Unexpended Appropriations**

18. Beginning Balance  5,000

19. Adjustments

20. Beginning Balance, as adjusted  5,000

**Budgetary Financing Sources**

21. Appropriations Received (310100)         0   

22. Appropriations Transferred in/out

23. Other Adjustments

24. Appropriations Used (310700)         0

25. Total Budgetary Financing Sources

26. Total Unexpended Appropriations  5,000

27. Net Position  6,600

Permanent Removal of GPP&E

No depreciation is taken

Business Event:

1) Asset’s use is terminated

Business Event:

2) Evidence of management’s decision to permanently remove, retire and or dispose the asset.

Removal of GPP&E from service other than permanent

No changes in accounting requirements 

(GPPE value stays the same and the depreciation continues, see paragraph 10 and 14).

You must have both business events 1 AND 2

If you only have business event 1 OR 2

The asset is recorded at its net realizable value with offsetting gain or loss - USSGL accounts 719000 and 729000 (see paragraphs 5, 10)

Once asset is disposed any difference between the net expected net realizable value of the GPPE and the actual realized disposition amount should be recognized as a gain or loss - USSGL accounts 711000 and 721000. (See paragraph 12)

� 2012 information was used to assign the line numbers on the Reclassified Balance Sheet crosswalk. Financial Reports Division may change the line numbers in 2013.

� Typically USSGL account 406000, Anticipated Collections from Nonfederal Sources is recorded when account 426600 is recorded as budgetary resource.  To keep the illustration simple, assume anticipated collections were not previously recorded.

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